A GROUP of 11 countries have committed to resurrecting a sweeping multinational trade agreement, the Trans-Pacific Partnership, without the United States. A new deal, which would have to be signed and ratified by each country, would include major US allies like Japan, Canada and Mexico, and collectively account for about a sixth of global trade.
The other eight are Australia, Singapore, Malaysia, Vietnam, Chile, Peru, New Zealand and Brunei.
The agreement, announced last Saturday, would “serve as a foundation for building a broader free-trade area” across Asia, Japanese Foreign Minister Taro Kono said.
Pointedly, the potential members of what is now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came to an early agreement on the broad outline of a deal while many of their leaders were meeting US President Donald Trump in Vietnam — itself a potential member of the new trading group.
Some details of a new deal, such as when rules would be phased in, need to be determined, and prospective member states like Canada raised last-minute concerns. But, some experts said a new deal could be announced as soon as early next year.
Other countries are slowly but surely making progress on their own sweeping trade deals, without any participation from US. China is negotiating a potential deal with 16 Asia-Pacific countries, including Japan, India and South Korea. The European Union and Japan hope to strike separate trade pacts with a group of South American countries, including Brazil and Argentina.
From tough talk on China (“they took our jobs”) to casting doubt on the decades-old North American Free Trade Agreement (“the worst trade deal ever made”), Trump has threatened to lob a grenade at an increasingly integrated global economic system.
That means questioning many years of efforts to lower global trade barriers and tolerance of trade restrictions from less developed countries, believing they hurt American workers and led to big trade deficits. It also means dealing with nations one-on-one and rejecting the regional and global pacts his predecessors pursued.
But, other factors are pushing the rest of the world to fill the void left by US. China’s rise as a regional and economic power is driving other nations either to join with it or to join together to counter it. Fast development in places like Southeast Asia means potential new markets for all kinds of products. The absence of US means potential opportunities for others.
“At some point, the administration may begin to see that this was a strategic mistake and that dropping out of trade is not in the interest of American workers,” said Rufus Yerxa, president of the National Foreign Trade Council, a lobbying group that represents companies like Walmart, Ford and Microsoft.
“We’ve got to compete and be a winner in global markets — and the danger is, the strategy is divisive.”
More worrying for some is the possibility that the Trump administration is ceding its position as global leader to China.
“US has lost its leadership role. And, China is quickly replacing it.” said Jayant Menon, an economist at the Asian Development Bank.
Under CPTPP, members would enjoy tariff-free trade with one another. That means companies in the member countries could have faster and better access to other markets than their US rivals.
But, there are challenges ahead of the group, and not all prospective member states were in complete accord over the finer details of a new deal.
“We are pleased that progress is being made towards a possible agreement, but there is work to be done,” Canadian International Trade Minister François-Philippe Champagne said.
He said Canada would sign a deal only once its interests had been addressed.
Even without US, the deal would be the largest trade agreement in history. It is designed to increase protection for intellectual property in some countries, while opening more markets to free trade in agricultural products and digital services around the region. It also has provisions on improving working conditions, although there is debate about the likely results.
The Australian government said the agreement in principle demonstrated the 11 countries’ “commitment to open markets, to combat protectionism and to advance regional economic integration”.
The new agreement has been crafted with the hope that US will one day participate. Some of the provisions — among them ones that the US lobbied for — could ultimately be suspended, including some on copyright protection.
Given the intensity with which Trump excoriated the original deal, it seems unlikely that his administration will come back to the table.
But, other countries like Korea, the Philippines and Thailand are expected to join once the deal is ratified.
For members, the pact could offer a sense of security at a time when a number of politicians around the world are questioning the impact of trade and globalisation. -- NYT