TPP's uncertain future: Countries make efforts to salvage the pact

US President Donald J. Trump signs the first of three Executive Orders, one of which concerns the withdrawal of the United States from the Trans-Pacific Partnership (TPP).
US President Donald J. Trump signs the first of three Executive Orders, one of which concerns the withdrawal of the United States from the Trans-Pacific Partnership (TPP).PHOTO: EPA

Several countries swung to making efforts to salvage the Trans-Pacific Partnership after President Donald Trump's decision to dump the pact left its future in doubt.

Japan - Abe still hoping to persuade Trump

TOKYO • Japanese Prime Minister Shinzo Abe said yesterday that he would continue advocating free trade and try to convince US President Donald Trump of the importance of the Trans-Pacific Partnership (TPP) despite Mr Trump's decision to withdraw from the deal.

The leader of the world's third- largest economy has been one of the strongest flag bearers for the TPP, having invested much political capital for its ratification.

Trade is expected to be a key issue when Mr Abe and Finance Minister Taro Aso meet Mr Trump, likely early next month.

Government spokesman Koichi Hagiuda said yesterday that it was "meaningless" for the TPP to proceed without the United States. He added: "Without the US, there is no balance in fundamental benefits."

Mr Abe told the Diet yesterday that Tokyo will pursue other multilateral trade deals, but will ensure they have terms similar to the TPP's "gold standard", which he said was "the model for the 21st century".

  • Ambitious 12-nation pact aimed at boosting investment and economic growth

  • One of the most ambitious free trade agreements ever attempted, the Trans-Pacific Partnership (TPP) involves 12 countries - the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

    The pact aims to deepen economic ties among these nations and is expected to substantially reduce tariffs, even eliminating them in some cases, and help open up trade in goods and services.

    It is also expected to raise investment flows between the countries and boost their economic growth.

    For the US, the TPP represents 40 per cent of world trade and a destination for more than 60 per cent of US exports.

    Initial estimates claim the TPP would add US$305 billion (S$433 billion) in exports per year globally, with nearly half accounted for by an increase in US exports by an additional US$123.5 billion.

    The TPP is also a strategic arrangement using free trade as an anchor.

    As China is not among the participants, the pact provides an economic counterweight to Beijing in the region by securing preferential access to Asia's markets for US companies over Chinese firms.

These deals are the Economic Partnership Agreement with the European Union and the 16-nation Regional Comprehensive Economic Partnership (RCEP), which involves China.

Mizuho Research Institute senior economist Hidenobu Tokuda told The Straits Times that while the TPP without the US is an option, such an arrangement lacks bite.

He noted that Mr Abe sees it as his objective to "persuade the US to return to the TPP" to restrain China's expanding influence.

Mr Duncan Innes-Ker, regional director for Asia at the Economist Intelligence Unit, added that the EU is "likely to be more receptive to building key elements from the TPP" into a trade treaty with Japan.

Moody's Analytics associate economist Faraz Syed, who covers the Japan market, also noted that with US trade policy becoming more restrictive, "rising consumer markets in China could offer an alternative".


Australia - Canberra floats a recast pact without US

SYDNEY • Australia said it was working to recast the Trans-Pacific Partnership without the US and opened the door for China to sign up, after President Donald Trump ditched the huge trade pact.

The deal included a dozen Asia-Pacific nations which together account for 40 per cent of the global economy.

But Mr Trump declared on Monday he had "terminated" it in line with election pledges to scrap the "job killer" pact.

Canberra is floating a "TPP 12 minus one", with Prime Minister Malcolm Turnbull saying that his government was in "active discussions" with other signatories, including Japan, New Zealand and Singapore, on how to salvage the agreement.

"It is possible that US policy could change over time on this, as it has done on other trade deals," Mr Turnbull told reporters in Canberra, adding that the nominee for US secretary of state, Mr Rex Tillerson, and Republicans supported the TPP.

"There is also the opportunity for the TPP to proceed without the United States," he added.

"Certainly there is the potential for China to join the TPP."

The agreement was seen as a counter to China's rising economic influence. It was signed last year, but has not gone into effect.

Beijing has chosen to back an alternative trade pact, the Regional Comprehensive Economic Partnership.

Australian Trade Minister Steven Ciobo said Australia, Canada, Mexico and others had canvassed for a pact without the US at a World Trade Organisation ministerial meeting in Davos.

"There would be scope for China if we were able to reformulate it to be a TPP 12 minus one, for countries like Indonesia or China or, indeed, other countries to consider joining," Mr Ciobo told the Australian Broadcasting Corporation.

"This is very much a live option."

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China - Join TPP? Beijing not saying no to idea

BEIJING • China is non-committal on whether it will join the Trans- Pacific Partnership (TPP), now that the US will be out of the picture.

Asked by the BBC at a regular press briefing yesterday about joining the free trade pact, Foreign Ministry spokesman Hua Chunying said China has "always advocated the building of an open, transparent and mutually beneficial region through free trade arrangements".

 

Beijing has been suspicious of the TPP, worried that the US, which had been leading the initiative, might use it to isolate China from other economies in the region.

Ms Hua said China was ready to work with all parties to "continue the process (of economic integration) and bring new impetus to the development of the Asia-Pacific region and the global economy".

But Dr Teng Jianqun of the China Institute of International Studies said at a forum yesterday that China would like to join the TPP as it wanted to cooperate with all states.


Malaysia - Focus may switch to RCEP, S-E Asia

KUALA LUMPUR • Malaysia will focus on the China-backed Regional Comprehensive Economic Partnership (RCEP) should the Trans-Pacific Partnership trade deal collapse following US President Donald Trump's decision to withdraw from the agreement.

Although International Trade and Industry Minister Mustapa Mohamed said the remaining 11 countries would assess their options, Malaysia would have to look for other avenues to boost trade given the importance of the United States as its third-largest trade partner.

"Should the TPP fail to enter into force, it will be a missed opportunity for Malaysia since a number of research houses have singled us out as a clear winner in the (agreement)," he said in a statement yesterday.

In such an event, he added, Malaysia would focus on enhancing South-east Asian economic integration, pursuing bilateral free trade agreements with TPP members and "push for the timely conclusion of the RCEP".

Datuk Seri Mustapa also said that despite the US decision to exit the TPP, Malaysia would continue to engage US colleagues bilaterally on trade and economic relations.

The Malaysian government has been a staunch supporter of the TPP despite protests at home over fears that the trade deal may lead to rising costs, loss of sovereignty and diffusion of the pro-Malay affirmative action policies.


Trump's moves could hurt firms, say experts

WASHINGTON • President Donald Trump's first moves on trade have cast a pall over US trade relations and could hurt US businesses, said trade experts.

 

Mr Trump's first order of business on Monday was to sign an executive order officially withdrawing from the 12-nation Trans-Pacific Partnership (TPP).

"It is a sign of a brake on global integration," said International Monetary Fund official Alejandro Werner, who heads the Western Hemisphere Department.

The withdrawal followed Mr Trump's threat in a meeting with corporate chief executives on Monday to impose "a substantial border tax" on products coming into the United States, to encourage firms to move manufacturing into the country.

But trade experts caution that such moves risk retaliation and, in an extreme event, a trade war.

Discriminatory tariffs are "just chaos", said Mr Barry Bosworth, chair of international economics at the Brookings Institution, a Washington think-tank. "They always respond," he said of China. "Then we have the significant risk of trade war, because there is no underlying principle, it is just, does Donald Trump like them or not?"

That would impose "a high cost to American companies" like Boeing, as China would switch to Airbus, he said. "How is that going to help us?"

On Sunday, Mr Trump repeated his pledge to begin renegotiating the North American Free Trade Agreement (Nafta) in talks with the leaders of Mexico and Canada.

Trade experts said they are at a loss to understand his aims, warning that manufacturing in the region is highly interconnected, and change could be disruptive.

Mr Chad Bown, a senior fellow at the Peterson Institute for International Economics, said Mr Trump did not invoke the Nafta article governing renegotiation, which would have "triggered a ticking clock" dissolving the treaty in six months unless an agreement was reached.

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A version of this article appeared in the print edition of The Straits Times on January 25, 2017, with the headline 'Abe still hoping to persuade Trump'. Print Edition | Subscribe