Trade winds are quickly shifting, as Australia moves to embrace China’s alternatives to the Trans-Pacific Partnership (TPP). Financial Times reports:
Australia is throwing its weight behind China’s efforts to pursue new trade deals in the Asia-Pacific region amid a growing acknowledgement the US-led Trans-Pacific Partnership agreement is dead in the wake of Donald Trump’s election victory.
Steven Ciobo, Australia’s trade minister, told the Financial Times that Canberra would work to conclude new agreement among 16 Asian and Pacific countries that excludes the US.
He said Australia would also support a separate proposal, the Free Trade Area of the Asia-Pacific, which Beijing hopes to advance at this week’s Asia Pacific Economic Co-operation summit in Peru.
“Any move that reduces barriers to trade and helps us facilitate trade, facilitate exports and drive economic growth and employment is a step in the right direction,” Mr Ciobo said Wednesday.
As we noted this past week, the election of Donald Trump and the imminent demise of TPP have given China an opening to pitch its own trade deals. Australia is the first major U.S. ally to peel off and publicly announce its intention to sign on to China’s deals. Others may soon follow suit, as China makes a renewed push to finalize the Free Trade Area of the Asia-Pacific (FTAAP), which has been under discussion for over a decade, and the Regional Comprehensive Economic Partnership (RCEP), which China has been developing since 2012.
The United States will be present at discussions about FTAAP in Peru this year, but given the current circumstances it is unlikely to join in. If China does negotiate a successful deal, it will be a major economic and diplomatic achievement for Beijing, potentially allowing Beijing to set the rules of the road for Pacific trade for the foreseeable future.
Throughout his campaign, Donald Trump took a harsh rhetorical stance against free trade, much to the delight of his base, while the Left has been animated by a protectionist backlash as well. Yet the abdication of U.S. leadership on free trade is set to give Beijing a major victory at Washington’s expense. The Trump Administration will need to pursue an alternative strategy to restore U.S. credibility and ensure that the United States remains relevant in the Pacific.