TPP goes ahead in principle, but faces big challenges without US participation

By Wang Jiamei Source:Global Times Published: 2017/11/12 19:03:39

While trade ministers of the 11 countries that remain in the Trans-Pacific Partnership (TPP) agreed on Friday to push ahead with the free-trade pact without the US, it will still be challenging for the various parties to make the deal work in the absence of the huge US market.

Since the US pulled out of the TPP, Japan has been playing the lead role in reviving the deal. Although Japan has its own political reasons for spearheading the negotiation efforts, the intention of the smaller TPP economies that are seeking new rules of trade should not be ignored. After decades of development, a number of emerging economies have growing demand to participate in global trade and set their own rules of trade.

It is worth mentioning that the TPP was initially signed by Brunei, Chile, Singapore and New Zealand in 2005 with the vision of creating a more seamless environment for trade and investment in the Asia-Pacific region. Under the old version of the TPP, smaller nations could obviously gain the most from the deal, but for the US, the deal has pros and cons, which is why US President Donald Trump pulled out of the pact. While the TPP could allow the US to set high-standard trade rules in the region, it would have to open the domestic market in exchange as smaller economies are all keen to have better access to the US market.

As such, the US withdrawal from the TPP deprived the deal of its best selling point - the US market. The original TPP with the US would have represented countries generating 38.2 percent of world GDP, as opposed to 13.5 percent without the US. Japan may be able to replace the US in taking the lead in pulling off the TPP, but it can never offer a consumer market as big as the US.

Without the big US market for exports, the best scenario under the new TPP is that smaller TPP economies may move up the production value chain with help from Japan, but they still need to turn to other, bigger economies like the US and China to export their final products. In this sense, the lack of a consumer market will be the key weakness of the new TPP. Moreover, without the US, TPP members may encounter more competition for market share than complementary economic assistance within the multilateral network. Maybe that's why Canadian Prime Minister Justin Trudeau avoided signing the deal by claiming that "still more important work needs to be done to ensure we reach the best deal for Canada and Canadian people," according to a Reuters report.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON THE ECONOMY

blog comments powered by Disqus