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America Last: Asia-Pacific Trade Negotiations Under Trump

America Last: Asia-Pacific Trade Negotiations Under Trump
By Anthony Rowley

Aggressive bilateralism has been the hallmark of US president Donald Trump's approach to foreign trade deals from the day he entered the White House. So why his apparent about-face now with regard to the multilateral Trans Pacific Partnership agreement that he previously shunned?

Coming on the eve of Trump's decision to bomb Syria the decision by Trump to have his officials reexamine the case for US participation in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), as the TPP has now been re-named, could be seen as a "conversion on the road to Damascus."

But if the surprise move means anything beyond the US leader’s penchant for toying with ideas, throwing them away and then expecting others to pick up after him, it signals a belated realization that multilateralism can be useful even to a president who puts "America first" in everything.

There is strength in numbers. By quitting the original twelve-nation TPP agreement Trump robbed himself of support from Japan and others on key issues such as demanding better protection of intellectual property rights by China. But this is only one part of a much larger story.

The TPP was more than simply a free trade agreement or even a broader economic partnership agreement. Promoted aggressively by former US President Barrack Obama and by Japan's Prime Minister Shinzo Abe, it was in effect a device to manage the rise of China as an Asia-Pacific power.

Its membership would have included two of the world's biggest economies – the US and Japan – along with Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. And it would have accounted for more than 40 per cent of global gross domestic product, or value added.

More than just that, the TPP would have been a powerful rule-setting body in everything from trade and investment to labor rights, foreign investment, the environment and intellectual property. It was designed to be a super-sovereign body with power to enforce its rules.

In his zeal to undo just about anything done by his predecessor Obama and to practice "the art of the deal" with individual countries, Trump overlooked the fact that the US would have been in a powerful position to call the shots within the TPP and in Asia.

Instead, he created a kind of power vacuum into which was drawn the rival Regional Comprehensive Economic Partnership composed of the ten member states of the Association of Southeast Asian Nations plus Japan, China, India, Australia, New Zealand and South Korea.

For many Asian nations (Vietnam and Indonesia, to take just two examples) that RCEP is an attractive proposition in that its rules do not demand handing over large chunks sovereign power to a newly created authority in the way that the original TPP would have done.

China, a critically important trade and investment partner of many Asian countries, likes this looser arrangement too, as its freedom to continue operating a state-dominated economy would remain intact under RCEP (which is now at an advanced stage of negotiation).

Meanwhile, to Trump's surprise and chagrin, Japan and ten other Asia Pacific economies did not fold in response to his decision to quit the TPP, did not agree to stick to bilateral trade and investment as he proposed. Instead, they decided to push on with a revamped TPP.

This means that the Asia Pacific region now has two viable regional trade and economic groupings – one of which, the RCEP, has the potential to serve as a regional security arrangement also. The only power left out of both is, ironically, the United States itself.

Instead of admitting his error in making such hasty moves in this politico-economic chess game and attempting new diplomacy, Trump threatened trade wars centering on the imposition of US import tariffs. He riled China and Japan in this regard and they are now making common cause against him.

China's President Xi Jinping, meanwhile, has deftly sidestepped confrontation by offering to review tariffs on some Chinese imports and to reexamine the issue of intellectual property rights. Such diplomacy seems aimed at cooling the US leader's ardor for impetuous action.

It also appears aimed at calming the waters while China moves ahead with building economic, military and diplomatic might in Asia and beyond. As some policy experts note, China is bent on achieving the position of regional hegemon in Asia and Trump appears to be aiding this objective.

The US president now has reason to fear that his country is being pushed to the sidelines as he seeks to overturn his predecessor's "pivot toward Asia," which saw the TPP as a critical instrument in achieving this goal. Under Trump, the US has been wishing itself into the wilderness.

Trump may have picked up on the fact that the US is unlikely to receive an open-arms welcome from all eleven other members of the original TPP if it insists on a "substantially better" deal than Obama negotiated as a condition for re-entry. New Zealand for one is cool toward accommodating the US.

The CPTPP in its diluted form could be one that appeals to more Asian countries (including China) that were not so keen as the former Obama administration on a so-called "high level" agreement. This could mean that the CPTPP and RCEP end up looking not so different from each other.

In that case, China for one could end up being a player in both, or even a merged version of the two, while the US finds itself on the outside of both the CPTPP and RCEP. If so, Trump will have only himself to blame for tearing up the original TPP agreement.

Even Japan's trade minister, Toshimitsu Motegi, has cautioned that it would be difficult to renegotiate the TPP to suit the US (even though Abe, the prime minister, appears ready to accommodate any wish of Trump’s).
What's more, Abe is looking increasingly like a lame duck leader in the light of recent revelations of alleged cronyism on his part. So, even if Abe does promise to smooth the way back in for Trump he may have difficulty selling the idea to the Japanese parliament and people.

The US could also find greater resistance than Mr Trump has expected in persuading Japan to give it greater access to agricultural and motor vehicle markets under a prospective bilateral trade deal between the two countries – especially in the event we soon see a post-Abe administration.

There are plenty of reasons why Trump should be casting glances at the CPTPP again. But he should not expect to demand reentry on his own terms after spurning the arrangement with haste and derision the moment he came to office.

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Anthony Rowley is a former Business Editor and International Finance Editor of the Hong Kong-based Far Eastern Economic Review and has spent some 40 years writing on Asian affairs from Singapore, Hong Kong and Tokyo. He currently writes for the Singapore Business Times, among other publications.

Published in: May 2018

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