The Pacific Trade Scramble

With a stroke of the pen, President Donald Trump withdrew the United States from the Trans-Pacific Partnership (TPP) yesterday, sending the trade agreement’s members scrambling to pick up the pieces. With the U.S. out of the picture, the Pacific’s major powers are already making their opening pitches on how a trade deal could be salvaged. FT:

Malcolm Turnbull, prime minister of Australia, vowed to keep TPP alive and said he was open to China joining the pact instead of the US — a sign of how withdrawal could damage American interests in the region, even with its closest allies.

But trade negotiators from several countries said it would be hard to sustain TPP in its current form. Instead, big players such as China and Japan are likely to engage in intensive diplomacy as they try to shape a new regional deal. […]

On Tuesday, China’s foreign ministry declined to say whether Beijing would consider any invitation to join the TPP. A ministry spokesperson instead cited two rival trade pacts, saying that the rival Regional Comprehensive Economic Partnership, which unlike TPP includes Beijing, “should be concluded at an early date”. The ministry also said the Chinese government would continue to promote a free trade area of the Asia-Pacific.

Amid all the competing proposals, some initial battle lines are being drawn. Japan and Australia both want an agreement that preserves TPP’s high standards on labor, the environment, and intellectual property rights, but they disagree on how to pursue that goal. Australia, which has been making friendly noises toward Beijing for some time now, wants to keep TPP and invite China in. Japan, by contrast, has called the agreement “meaningless” without the United States and is wary of having China take over the American leadership role.

China, for its part, hopes that with some minor tweaks around the edges, Pacific countries will buy into its preferred, less ambitious trade frameworks, like the 16-member Regional Comprehensive Economic Partnership (RCEP). Beijing wants reduced tariffs and greater access to other markets, but it has no interest in upholding stringent protections on human rights or intellectual property. If other countries stick to those priorities, China may have difficulty seizing the free trade mantle that it has been publicly jockeying for in the wake of Trump.

It’s clear that the Pacific trade debate is far from over. If anything, free trade is likely to become an issue of intensified geopolitical competition as China seeks to capitalize on the U.S. withdrawal. Given Beijing’s own substantial trade barriers and opposition from countries like Japan, however, its success in doing so is by no means guaranteed.

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