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News analysis

Consequences of TPP demise go beyond trade

Trade pact's collapse hurts US' credibility, undermines its Asia rebalance: Analysts

The now near-certain demise of the Trans-Pacific Partnership (TPP) free trade deal will have long-lasting ramifications for US foreign policy, said Asia experts in Washington, reiterating warnings from world leaders about the fallout from the deal's failure.

At a time when some Americans are holding out hope that the US President-elect might end up deviating from his campaign rhetoric, few see much hope in the one issue where he has been most consistent.

While the impending failure of the TPP does not appear to have had an impact on global markets, experts stress that the problems are just beginning for the United States.

Unlike most other trade deals, the TPP had some unusual provisions on things like labour standards, governance and transparency standards, environmental regulation and intellectual property protections. Countries like Vietnam and Malaysia, that made substantial compromises on issues like labour rights, will now move on to other deals.

"Obviously, the failure of the TPP has no significant immediate economic impact. It wasn't in force so these were just prospective rules, but it is still a very costly failure," said Mr Edward Alden, a senior fellow at the Council on Foreign Relations who recently authored Failure To Adjust, a book about the US government's handling of trade.

He, and many others, say the TPP debacle hurts US credibility, undermines the Asia rebalance and leaves a leadership vacuum in shaping the standards of future trade deals. "The US philosophy since the end of World War II was that trade liberalisation is a good thing for the US and it is a good thing for the world.

"But we have moved from a world where the US believed that trade was largely positive sum to a world in which the US believes that trade is zero sum," added Mr Alden.

People demonstrating against the Trans-Pacific Partnership agreement in Washington, DC, on Monday. The Obama administration said last week that it would no longer try to get the trade deal through Congress, leaving the issue to President-elect Trump.
People demonstrating against the Trans-Pacific Partnership agreement in Washington, DC, on Monday. The Obama administration said last week that it would no longer try to get the trade deal through Congress, leaving the issue to President-elect Trump. PHOTO: AGENCE FRANCE-PRESSE

And with President-elect Donald Trump also talking about going back on the deal that scaled back Iran's nuclear programme in exchange for sanctions relief, it is questionable how much effort countries will continue to put into negotiations with the US.

The TPP was the result of five years of intense negotiation by its 12 member nations, including Singapore. The deal was signed last year but requires ratification by all 12 domestic legislatures before coming into force.

 

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Last week, the Obama administration announced that it would no longer try getting it through Congress, leaving the issue to Mr Trump.

Whatever the fate of the TPP, perhaps one key thing that will die with it is what US President Barack Obama called the 21st century components. He had constantly stressed that for the US to turn its back on the deal would be to allow China to write the rules of the road.

Unlike most other trade deals, the TPP had some unusual provisions on things such as labour standards, governance and transparency standards, environmental regulation and intellectual property protection. Countries such as Vietnam and Malaysia, which made substantial compromises on issues such as labour rights, will now move on to other deals.

A China-led free trade deal named the Regional Comprehensive Economic Partnership (RCEP) will receive a boost with the end of the TPP. Japan has already said that it intends to focus on the RCEP if the TPP fails.

Mr Murray Hiebert, senior adviser at the Centre for Strategic and International Studies, said the RCEP would have none of the special provisions of the TPP.

"RCEP is mainly a tariff reducing, rule harmonisation kind of a trade agreement. There won't be any emphasis on things the TPP has, like protecting intellectual property, allowing free flow of information or levelling the playing field between the private sector and state-owned enterprises," he said.

"And if the US comes back later with these demands, people will still consider it because they want market access, but there will be some pause given how the US failed to deliver."

Analysts say there is a chance the incoming Trump administration will take a pragmatic approach to Asia, even if it cannot undo the damage done by the TPP failure.

Said Dr Patrick Cronin, a senior adviser at the Centre for a New American Security: "Is there a path forward to make sense out of this?

"The answer is yes. We can recover a lot of our trade economic strength; we cannot trash all the good things that exist and have been done... The politics is just as poisonous as ever but we can hope that the pragmatism, the actions, are much more aligned than they are apart - until proven otherwise."

A version of this article appeared in the print edition of The Straits Times on November 16, 2016, with the headline 'Consequences of TPP demise go beyond trade'. Print Edition | Subscribe