Asian Editors Circle

The TPP's demise sounds no death knell

The final doomsday countdown has begun for the Trans-Pacific Partnership (TPP).

Mr Donald Trump will take the oath to become the 45th president of the United States in one week.

In an announcement that sent shock waves across the world, the President-elect said on Nov 21 last year that, on his very first day in office, he would kill the agreement that 12 nations had negotiated for years.

Without its major driving force, the US, as a member, the trade pact - said to be the biggest breakthrough in global trade liberalisation - simply cannot pull its weight.

Under the agreement's rules, the TPP can only come into force if it is ratified by at least six members representing 85 per cent of the group's combined gross domestic product (GDP). By itself, the US accounts for nearly 60 per cent of the group's GDP.

Mr Trump, a businessman and a hawkish "America first" advocate, repeatedly slammed the TPP for not giving the US any direct and profound economy-wide benefits and for taking jobs away from American people.

However, Jan 20 is yet to come and it may be too soon to pronounce the TPP dead, because it remains uncertain if Mr Trump meant that he could do it or he would do it.

If some trade experts or even politicians are still clinging to hopes that the landmark pact, combining 36 per cent of world GDP, can be brought back to the negotiation table, there is no need to call them delusional.

Stranger things have happened. Just look at how things unfolded during the 2016 US election. At the outset, not many people gave Mr Trump even an outside chance at being the US president. Now he is on the verge of being sworn in.

Mr Trump may reconsider his own TPP decision because perspectives are different from the driver's seat of the US economy. He has to consider not just foreseeable economic benefits but also the merits and demerits of his country's global trade leadership role in the years to come.

Anyway, here in Vietnam, a TPP member long hyped as its largest beneficiary, the agreement is no longer an issue of major concern. The focus is on how trade liberalisation will move in the coming months and years, with or without the US, and what the new directions are for smaller TPP members, especially export-driven economies like Vietnam.

For all the touted benefits, the TPP's collapse is not likely to be devastating for its member nations, fortunately.

"Do not expect any dramatic economic consequences from the TPP's demise," said Mr Stephen Olson, a visiting scholar at the Hong Kong University of Science and Technology. "Trade is already open and flowing at robust levels among many TPP partners and that will continue."

According to the Asian Development Bank, from 2000 onwards, nearly 100 new free trade agreements (FTAs) have been signed in Asia alone. Within the TPP group, the game leader - the US - has FTAs in place with six of the group's 11 members.

Vietnam, a comparatively small economy, has signed 12 FTAs with powerful blocs like the European Union, and large economies like Japan and South Korea.

Prominent economist Vo Tri Thanh, chairman of Vietnam's Asia-Pacific Economic Cooperation (Apec) forum organising committee, said: "The TPP's demise is disappointing, but with or without the TPP, the global trade liberalisation trend is irresistible.

"I think it is human nature to be eager to explore new things, learn new ways and get connected. In business, the production and trade capacity of each country is so huge and diverse, it can't satisfy its own demand without international trade connectivity."

Dr Thanh said the benefits of free trade's lower tariffs, better connectivity and larger markets encourage businesses to exploit gains from global specialisation and develop value chains.

"The TPP's dissolution may cause some fluctuations in the global market, but it definitely can't reverse the free trade trend. Free trade will remain the mainstream (form of) economic cooperation in the world," he said.

His observations seem to match what the remaining TPP signatories have been doing over the last couple of months.

Following Mr Trump's statement, there have been clear signals that TPP members in Asia are shifting their attention to other trade opportunities. The Regional Cooperation Economic Partnership (RCEP), a proposed trade initiative including the 10 Asean members and China, Japan, South Korea, India, Australia and New Zealand, has been the most talked about recently.

Negotiations on the RCEP started in 2012 and 16 rounds have been completed so far, covering trade in goods and services, competition policies and dispute settlement, among other things. Even though some economists have said the RCEP does not match the TPP in terms of the level of liberalisation, it is now an alternative choice for many TPP members.

If adopted, the RCEP would be the largest free trade bloc in the world, accounting for 40 per cent of global trade and 45 per cent of the world's population, with a combined GDP of US$22 trillion (S$31.4 trillion).

When one country is said to benefit most from a pact, it also stands to lose the most from its demise, as several experts have remarked. But a spectre of gloom, with falling foreign investment and limited export markets, is uncalled for.

"With or without the TPP, the Vietnamese economy will stay on a positive note because all the preparatory work and reforms in the lead-up to the TPP have been under way, leading to new, positive changes beneficial to the business community and national sustainable development," Dr Thanh said.

Over the last three months, Prime Minister Nguyen Xuan Phuc has consistently sent out a firm message in response to people's concerns: "With or without the TPP, we will move on with our open-door policy and our ongoing reform process."

Those who are familiar with Vietnamese politics know that the country's independent policy is not a newfound thing, but a consistent pursuit for the last 30 years.

Vietnam has entered into trade agreements with 55 nations. It is currently home to 21,666 foreign direct investment projects worth US$293 billion, with investors from more than 100 different countries.

Its enthusiastic involvement in the TPP negotiation process over the last seven years and its readiness to ratify the agreement signals its strong commitment to international integration and trade liberalisation.

But one additional fact can be highlighted here. Vietnam is also one of the first TPP members that put the agreement's ratification on hold, even before Mr Trump's video statement was released. This caution shows Vietnam's adaptability and flexibility amid global fluctuations.

Over thousands of years, Vietnam has faced unexpected situations galore and has always managed to land on its feet. The "secret" is traditional: adaptation.

As a Vietnamese saying goes: Live in a gourd, you grow round. Live in a tube, you grow long.

  • This is a series of columns on global affairs written by top editors from members of the Asia News Network and published in newspapers across the region.
A version of this article appeared in the print edition of The Straits Times on January 14, 2017, with the headline 'The TPP's demise sounds no death knell'. Print Edition | Subscribe