The US needs TPP as much as TPP needs the US
Abandoning TPP by the US, which seems increasingly likely after the victory of Donald Trump in the US presidential elections in November, will be a huge blow to American economic interests abroad and a golden opportunity for China to wield greater influence in the Asia-Pacific. President-elect Trump needs to rethink his campaign promises and embrace a more liberal foreign economic policy agenda both for the sake of America and the world.
The signing in February 2016 of the Trans-Pacific Partnership (TPP), the largest regional trade accord in history between twelve Pacific Rim countries that comprise 40% of the world economy, was a major achievement for globalization that was largely made possible by US leadership in promoting liberal trade agenda in the Asia-Pacific. If the Trump administration backtracks on TPP and other regional trade agreements (RTAs), as the president-elect's campaign promises indicate, it will have serious implications both for the US and the world. Firstly, changing the course of the US foreign trade policy of the last quarter century will be a serious setback to globalization. The US has been not only a champion of free trade, especially after multilateral trade negotiations within the WTO came to a stalemate in the 2000s, but also a catalyst in triggering competitive liberalization in various corners of the world. As the US kept signing RTAs, the inherent discriminative nature of these agreements put pressure on other countries that had to join the bandwagon, as being left out while competitors gain preferential access to the US market was virtually a no option.
Secondly, America's backtrack will not only abort Barack Obama's much-trumpeted "pivot" to Asia, but will also constitute a valuable opportunity for rising powers, such as China, that will not hesitate to fill the void left by the US in the Asia-Pacific. In fact, one of the distinctive features of TPP was that it excluded China. Although China's eventual accession to the club was not impossible, it would have been possible only on terms and trade rules set up by the US. In fact, to comply with these rules, China would have to undergo heavy domestic reforms and ease the state's grip of the economy. Meanwhile, China is currently pushing for its own agenda within a competing trade pact called the Regional Comprehensive Economic Partnership (RCEP), which includes China, India, Japan, Australia, New Zealand, South Korea, and the ten ASEAN countries. RCEP, a more shallow agreement than TPP, is set to be more in line with China's preferences, as it could postpone painful domestic reforms and help expand China's economic influence in the region.
China seems poised to expand its web of agreements in the region, as President Xi Jinping talked during the 2016 Asia-Pacific Economic Cooperation (APEC) forum in Peru about an ambitious free trade agreement between APEC's 21 members as an alternative to TPP. If the Trump administration keeps the protectionist sentiment of his election campaign, China's deeper involvement in the Asia-Pacific may boost the prospects of RCEP as a viable alternative to TPP.
America does not need to abandon the pro-free trade policies implemented by Republican and Democratic presidents during the last quarter century. The US foreign trade policy should maintain America's proactive stance as a champion of free trade, to further expand its economic influence abroad. The ratification of TPP, not abandoning it, is the way to restate America's leading economic role in the Asia-Pacific. Although international trade does not have to be a zero-sum game, it deserves the liberal trade practices championed by the US, as it was also voiced by a number of liberal governments during the 2016 APEC summit in Peru. Domestic discontent about US trade policies can and should be addressed through fairer and more efficient redistribution mechanisms at home for a better allocation of gains from free trade domestically. It should not be done through protectionism that will leave the country worse off in the long run.
Davit Sahakyan is a PhD in International Political Economy from the University of Trento (Italy). Dr. Sahakyan's articles on regional trade agreements have been published in international peer-reviewed journals and this think tank. He currently works as an independent analyst based in New York.
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