TPP Signatories Eye New Deals After U.S. Withdrawal

On his first full day in office, President Donald Trump withdrew the United States from the trans-regional trade deal known as the Trans-Pacific Partnership (TPP). Trump had repeatedly criticized the deal during his campaign, along with other free-trade deals like NAFTA and had pledged to exit the proposed partnership as soon as possible.

The agreement encompassed 12 nations on the Pacific Rim, including the U.S., but it notably excluded China. According to the New York Times, the nations in TPP accounted for 40 percent of global GDP and one-third of world trade. Viewed as a major Obama administration policy achievement, the final version of the deal received the signatory nations’ approval in 2015 and was set to receive ratification by each member nation.

Proponents of TPP said it would have led to greater free trade between the signatories and would have addressed environmental and labor issues, among other challenges. However, the TPP also faced criticism from both sides of the political spectrum. As the BBC reports, opponents believed the deal favored businesses over American jobs and U.S. sovereignty.

Although the deal has not officially been scrapped, common sentiment has been that moving forward without the U.S. poses an insurmountable barrier.

So, what impact will the collapse of TPP have on political and economic relations in Asia and beyond?

For one, it has renewed expectations that China will attempt to assert dominance in the region. TPP had been designed to counter some of the growing regional power of the world’s second-largest economy. Yet it also sought to create norms of economic engagement which might bring China into step with others in the region in the future. With TPP shelved, China may find greater room to maneuver and to increase its geoeconomic and geopolitical power.

For example, China leads current negotiations to establish the Regional Comprehensive Economic Partnership (RCEP), a plan for a free-trade zone encompassing the ASEAN countries plus six others. As CNN’s TPP vs. RCEP comparison notes, RCEP would become one of the world’s largest free-trade zones but would not include the complex and far-reaching regulations that champions of TPP touted as some of its strongest and most innovative components. These regulations tackled challenging issues like labor conditions, environmental standards, and intellectual property law. Without these provisions, RCEP will give China the opportunity to assert dominance by setting its own rules and norms—or perhaps lack thereof—for trade in the region, without any U.S. influence on the terms of the deal.

As Bloomberg reports, RCEP leaders must now decide the speed with which to press forward; a decision linked to political and economic optics in an increasingly anti-free trade global climate but also dependent upon ironing-out the important kinks in the final agreement. RCEP’s trade negotiating committee chief has also warned member nations against attempting to incorporate outside aspects of TPP.

Moving forward, TPP nations must navigate between multilateral and bilateral approaches. On one hand, nations may use their TPP connection as a jumping-off point for future partnerships, even a RCEP-based one. As noted by Voice of America, the TPP countries recently met in Chile, a move indicating that the nations could be exploring that path. In fact, the Chilean minister of foreign affairs published an opinion piece in the New York Times in which he claims, “Multilateral trade and Pacific integration are alive and kicking.”

Yet bilateral or very limited multilateral approaches could also prove tempting—and perhaps more stable—as nations seek economic gains and institutionalized trade relationships. For example, Forbes reports that following the TPP collapse, Vietnam has tried to shore up its free trade deal with the EU. Though it has run into difficulties, the attempt represents an acknowledgement that limited multilateral approaches with other nations or trade blocs could supplement the loss of the benefits TPP would have provided. Yet Forbes reports that even in these smaller agreements, concepts from TPP will influence the final details.

Of course, a series of bilateral agreements provides no guarantee of the same sweeping integration of TPP, arguably its most defining feature. If nations remain unsatisfied with these agreements, they may move further into the arms of China’s RCEP, devoid of the norms that TPP had designed to pressure China in the first place. China’s long-term interest lies in regional dominance, and RCEP provides a major step in that direction. China can ensure that whatever agreement arises, it helps China most of all. Yet too much self-aggrandizement could alienate potential partner nations, scuttling RCEP as well. After walking away from the negotiating table, it becomes difficult to dictate policy to former partners from afar. The U.S. walked away from TPP, a decision influenced by complex domestic politics. But from an international perspective, barring individual bilateral agreements, the decision means the U.S. will unfortunately have little to no influence over potential regional trade frameworks in the near term. That is, unless it comes back to the table—or starts a new table altogether.