Asia Presses on with Free Trade, Without Trump

by Venu Katta

March 22, 2017

Cover Photo Credits

Throughout the 2016 election campaign, Donald Trump never missed an opportunity to rail against U.S. participation in the Trans-Pacific Partnership agreement. The proposed trade pact, the result of negotiations during the Obama administration between the United States and 11 other Pacific nations, was slammed by Trump and others for perceived weakening of U.S. regulatory standards and fears that it would accelerate the pace of decline of the American manufacturing sector. Indeed, gutting the TPP has become one of the few campaign promises the President seems to have been able to follow through on, with relatively minor, if any, pushback. The question remains, though, on what the American exit from TPP means for the Asia-Pacific region economically.

First and foremost is the likely death of the agreement itself. Textually, the TPP requires ratification among at least six signatories representing 85% of the combined gross domestic product of the 12 TPP nations. Given the U.S. withdrawal (with America constituting 69% of the GDP of the 12 nations), it is textually impossible for the deal as written to be implemented. While changing the rules of ratification for the treaty would be relatively simple, continuing the underlying agreement without American participation is a non-starter for Asian nations. Many of the TPP’s provisions – including far more protections for labor rights and environmental standards than the average free trade agreement – were consented to by nations to specifically secure U.S. participation – and, by extension, the enormous enlargement of the deal’s economic impact. Without U.S. ratification of the TPP, it is unlikely nations would want to agree to any version of the deal similar to the previously agreed upon terms.

However, there is a second reason that Asia-Pacific nations may not be racing to prop the TPP back up: the Regional Comprehensive Economic Partnership (RCEP). The RCEP – first began in 2011 – is a series of ongoing negotiations between 16 Asia-Pacific nations to create a free trade agreement. Two economic powerhouses which were not in TPP – China and India – are party to the negotiations as well.

This inclusion represents the first key difference between RCEP and the TPP. Indeed, Chinese exclusion from the TPP negotiations was certainly no happenstance: U.S. officials such as former Vice President Biden routinely pointed to the geopolitical reasoning for a Pacific trade deal to blunt Chinese power in the region and lock-in a trading system favorable to Washington as Beijing begins to increasingly set terms of trade with its neighbors. A major forward push on RCEP towards a possible agreement would, from the perspective of American geopolitical counterbalancing, represent a clear disaster for the United States.

A second major difference between RCEP and TPP is the scope of the agreement. Noticeably off the negotiating agenda for RCEP are discussions of labor and environmental standards which Asian nations were skeptical of conceding to in the first place under TPP. The scope of the negotiation in terms of other economic areas – such as intellectual property, dispute settlement, etc. – is similar between the two trade deals.

While RCEP has yet to show significant signs of a breakthrough – and free trade agreements of such a nature can notoriously take several years to hammer out – upcoming ministerial talks for the deal in Manila this May will signal the likely path nations are set on. Nations who had previously counted on the TPP to boost their industries and grow their economies may be more anxious than previously to see RCEP negotiations progress closer to a workable agreement.

Until then, however, there is one clear takeaway: the Asia-Pacific region has not turned away from regional cooperation and trade liberalization, despite the actions of President Trump. Time will tell what the pace, nature, and terms of that liberalization will take.

Venu Katta is a 2nd year MPP Student at the College of William & Mary and the Student Editor of the William & Mary Policy Review.