1. How US put India in spot after branding RCEP ‘Chinese effort’

How US put India in spot after branding RCEP ‘Chinese effort’

In trying to save the TPP, the US might have dealt a major blow to multilateral trade efforts in the Asia-Pacific

By: | Published: June 10, 2016 6:23 AM

The anti-TPP discourse in the US presidential elections is not showing signs of abating. As presidential hopefuls bash the trade deal for the ‘harm’ it might inflict on the US economy, the Obama administration is working hard to stop the Trans-Pacific Partnership (TPP) from sinking. The unfavourable sentiments towards free trade agreements (FTAs) in the current political discourse have forced the US administration to justify the TPP on the most bipartisan compelling ground in the current political climate of the US: an anti-China posture.

None other than president Obama himself has taken the lead in rationalising the TPP as a trade deal that would allow the US to exploit economic opportunities in the Asia-Pacific by writing the trade rules for the region. Failure to ratify the TPP, he warns, would allow China to do so. “The world has changed. The rules are changing with it. The United States, not countries like China, should write them. Let’s seize this opportunity, pass the Trans-Pacific Partnership and make sure America isn’t holding the bag, but holding the pen”. (‘President Obama: The TPP would let America, not China, lead the way on global trade’; The Washington Post, May 2, goo.gl/XhN3kd)

It is ironical that the TPP—supposedly a 21st century gold standard trade agreement—is ultimately being justified for containing China. During the TPP negotiations, the China containment angle was kept as peripheral as possible. Despite arguing the TPP as symbolising the US’s pivot to the Asia-Pacific, it was not branded by the US administration as brazenly anti-China as now. The shift might have occurred due to the Obama administration’s realisation that China-bashing is perhaps the only way for obtaining bipartisan support for seeing the TPP through.

The anti-China branding of the TPP has several implications. China, which from the beginning of the TPP negotiations had been wary of the TPP, is now convinced about the US’s intention to displace it from the trade rule-writing space in the Asia-Pacific. This might result in China revisiting its strategy towards TPP and trade regionalisation in the Asia-Pacific. During the last couple of years, the Chinese leadership had given enough signals of a positive interest in the TPP. Joining the TPP could have been China’s next big opportunity to carry out large-scale domestic reforms, as it did after joining the WTO in 2000. The positive perception might change with China realising that even if it joins the TPP in the foreseeable future it is unlikely to be in a position to be able to contribute meaningfully to the governance of the agreement as the US would want it to play second fiddle. China might also begin looking firmly at the TPP as a long-term geostrategic alliance of the US and its partners in the Asia-Pacific. With more US strategic partners like Korea and Taiwan slated to join the TPP in the next round, such an impression on part of China is bound to strengthen.

While branding the TPP as an effort to keep China away from trade rule-making in the Asia-Pacific, president Obama also took a dig at the Regional Comprehensive Economic Partnership (RCEP). He marked it as China’s effort to stitch a competing deal in the Asia-Pacific for snatching away ‘some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk’. The concern reflects the US unhappiness with the RCEP. The RCEP might be a far less ambitious agreement than the TPP in coverage and the degree of ‘deep’ liberalisation it aims to achieve among domestic policies of members. Nonetheless, for China, it means getting more preferential access than what it currently gets from existing FTAs in some major TPP member markets. These include Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam that are also negotiating the RCEP. American manufacturing exports—whose revival appears uppermost among the concerns prevailing in the current US discourse on trade—might not be able to benefit from the wide-ranging tariff eliminations in TPP in these markets, if the RCEP allows China similar tariff-free access on the same exports.

The US’s branding of the RCEP as a ‘Chinese’ effort creates strategic awkwardness for countries that are part of the RCEP and TPP. Most of current TPP members are strategic allies and partners of the US. Their presence at the RCEP was as it is taken as a channel for allowing the US and TPP influence on the RCEP negotiations. Now, the TPP group within the RCEP might get more prominently marked for serving US interests with its positions considered specifically anti-China. Strategic balancing would also become more delicate for a major RCEP member like India. While not being a member of the TPP, India enjoys strategic proximity to the US. On the other hand, despite outstanding territorial disputes, its engagement with China has expanded manifold with China becoming India’s largest trade partner. At RCEP, India needs to be careful in sending the right signals to China. On the whole, many negotiating positions at the RCEP now might be interpreted more from the geopolitical perspective of denying negotiating partners market access due to pressure from a major non-negotiating actor like the US, rather than on economic grounds.

The anti-China labelling of the TPP is also likely to weaken the efforts of the Asia-Pacific to consolidate into a free trade for the Asia-Pacific (FTAAP). The US and China are now unlikely to work with each other on any trade project that involves space sharing in rule-making. By trying to save the TPP the way it has, the US might have dealt a major blow to trade multilateralisation efforts in the Asia-Pacific.

The author is senior research fellow and research lead (trade and economic policy) at the Institute of South Asian Studies, National University of Singapore. E:mail: isasap@nus.edu.sg.
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