11 countries want to press on with TPP despite US pullout

US President Donald Trump holds up an executive order withdrawing the US from the Trans-Pacific Partnership after signing it on Jan 23, 2017. PHOTO: AFP

TOKYO • When United States President Donald Trump pulled out of his predecessor's signature trade deal on his first day in office, the 11 other countries that had negotiated the pact were left wondering if years of work had just gone down the drain.

Those countries have now indicated they want to press ahead with the Trans-Pacific Partnership (TPP), a sweeping multinational trade agreement that had been sold as a way to tie the US more closely to East Asia and to create an economic bloc capable of standing against an increasingly muscular China.

At a meeting in Hakone, south of Tokyo, Japan led trade negotiators from the 11 countries - including Australia, Canada, Malaysia and Vietnam - in discussions about reviving the complex web of trade rules that would improve labour conditions and increase protections for intellectual property in some countries, while opening more markets to free trade in farm products and digital services around the region.

The Japanese effort to salvage the deal reflects a growing recognition that countries that have previously counted on US leadership will have to forge ahead on their own.

In Japan, officials are particularly eager to pre-empt China's attempt to forge a rival trade pact, the Regional Comprehensive Economic Partnership. That deal would bring together 16 countries, including the ones in the TPP, albeit under considerably less stringent rules.

Mr Kazuyoshi Umemoto, Japan's chief negotiator, told reporters that the group of 11 "achieved mutual understanding on a path forward" without the US. "We need a new international agreement," he said. "I think we have reached a rough picture of what it will be like."

Momentum for such deals has built in recent weeks, as big US allies pledged their commitment to globalisation.

On the eve of the recent Group of 20 summit meeting in Germany, Japan and the European Union announced the outlines of a broad agreement that would create a trading bloc encompassing US$20 trillion (S$27 trillion) in combined economic output.

The deal was announced as the US appeared increasingly isolated on issues like free trade and the environment.

Mr Trump has repeatedly made clear his antipathy towards free trade, vowing to protect American workers and rebalance trade deficits with other countries.

Last Wednesday, US Trade Representative Robert Lighthizer sent a letter to the South Korean government saying that the administration was eager to revise a trade agreement between the two countries that has been in force for five years.

If Japan and the 10 other signatories are to keep the TPP alive, they would need, at the very least, to revise a clause that says the deal will come into effect only when ratified by six countries representing 85 per cent of the combined economic value of the 12 original members.

Without the US, that threshold cannot be reached.

Japan, which has the largest economy among the remaining trade partners, is pushing to preserve most of the ambitious rules that negotiators originally hammered out, as are Australia and New Zealand.

"The hope of Japan, of course, is to maintain the status quo of the already agreed framework, including the details," said Professor Tomohiko Taniguchi, a foreign policy adviser to Prime Minister Shinzo Abe.

While optimistic that Japan could lead the group towards consensus, Prof Taniguchi, who referred to the remaining TPP countries as the "Ocean's 11", acknowledged that the discussions would be challenging.

"Negotiations, once started, could turn in all sorts of different directions," he said.

"It's a gathering of 11, after all, self-centred, even selfish, countries. All sorts of negotiations are likely happening."

Developing countries such as Vietnam and Malaysia may want to renegotiate some of the tougher requirements that they accepted in exchange for the promise of access to US markets. The agreement, for example, requires developing nations to reform child labour laws as well as improve the transparency of state-owned companies. Some of the developing countries may protest that such requirements are too onerous without the incentive of being able to export to US consumers.

Japan's goal is to preserve as much of the original deal as possible in the hope that the US will eventually rejoin. Some observers, however, see those hopes as naive.

Former US deputy commerce secretary Bruce Andrews sees another reason for the TPP countries to maintain the tough trade rules: to push China towards reform.

"If the TPP had gone into force, the Chinese, by necessity, would eventually have wanted to be part of it to enjoy its benefits," he said.

"In order to get into the TPP, China would have had to do some serious economic reform and open its market from its current closed state. If the TPP does not go forward as the model, China will likely get better terms from other countries without having to open its market."

Japan has indicated it wants to secure an agreement between the remaining 11 TPP countries by November, when many of them will gather in Vietnam for the Asia-Pacific Economic Cooperation summit. Most analysts say any agreement is unlikely to be completed that quickly.

Still, said professor of economics Shumpei Takemori of Keio University, the reopening of negotiations allows Japan and its allies to "show the US administration that we have alternatives".


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A version of this article appeared in the print edition of The Sunday Times on July 16, 2017, with the headline 11 countries want to press on with TPP despite US pullout. Subscribe