The TPP-11 and the challenge for China

By Jorge Heine Source:Global Times Published: 2018/3/7 22:11:08

Illustration: Liu Rui/GT

If you thought the Trans-Pacific Partnership (TPP) was dead after being unceremoniously ditched by US President Donald Trump a few days after taking office in January of 2017, think again. It is very much alive and kicking, albeit in a somewhat toned-down way, and was signed in Santiago, Chile, on March 8. Now rebranded under the somewhat pompous title of "Comprehensive and Progressive Agreement for Trans-Pacific Partnership," with 11 member states from three continents (Asia, Australasia and Latin America), a GDP of over $10 trillion, representing 13 percent of world product and 15 percent of global trade, it is an inter-regional trade agreement to be reckoned with. Yes, it is much smaller than it would have been with the US - in which case it would have made up 40 percent of global product - but its significance lies not just in its size, but also in the sheer diversity of its member states. Five of them hail from the developed world - Australia, Canada, Japan, New Zealand and Singapore - five from the developing world - Brunei, Chile, Malaysia, Mexico and Peru - and one of them is a socialist country: Vietnam.

At a time when protectionism and isolationism are raising their heads in the North Atlantic, when the US has announced a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports, when the WTO is stuck in neutral and the Doha Round has spent a decade in full paralysis mode, this is good news. The world economy in general and the Asia-Pacific zone in particular will benefit from the breath of fresh air brought by the commitment to further trade liberalization of such diverse and fast-growing economies as these. Policy is all about signals, and this is a potent signal of some of the most dynamic economies in the world that their commitment to free trade and globalization does not waver.

In this new incarnation, the TPP-11 brings to the table the central features of its older and bigger brother: its commitment to comprehensive market access; a regional approach to the development of production and supply chains; the addressing of new trade challenges like the digital economy, while also aiming at inclusive trade.

How does it differ from the TPP?

Basically in the fact that some 20 provisions of the original agreement whose negotiations concluded in October 2015 have been suspended until further notice. These reflect some of the conditions that US business fought hard for, including in the controversial chapter on intellectual property rights, which triggered strong opposition from civil society groups around the world. In short, provisions that were seen as too ambitious and far-reaching were left out, notably in terms of additional time for patents, as well as those referring to highly elaborate ways to protect technology and information.

In its day, the TPP-in-the-making was denounced as a sort of ramrod of US imperialism. Now that the US is no longer part of it, that becomes a bit more difficult to argue. There is also quite a change of atmospherics. The real challenge for the global economy now is how to move forward and reinvigorate world trade, that has been growing at half the rate it did before the financial crisis. The Asia-Pacific, the world's most dynamic and fast-growing region - by 2050, Asia will represent half of the world's production - plays a key role in this, and the TPP-11 can act as an important catalyst in this direction.

Some observers would undermine the significance of a trade agreement that does not include the world's two largest economies: the US and China. Yet, that would be a mistake. Building up free trade across the Pacific entails many tasks and making progress across many fronts. We don't know what the US will do in the future and whether it would try to rejoin the TPP - though last January Trump said at Davos that he might reconsider his decision. What should be obvious is that China, one of the great beneficiaries of free trade and globalization in the course of the past three decades, has a vested interest in continuing to push for these in the Asia-Pacific, and elsewhere.

China has championed a different agreement, the Regional Comprehensive Economic Partnership (RCEP), part of whose membership - including Australia, Japan, Malaysia and New Zealand - overlaps with the TPP-11, and whose negotiations have made progress in the course of the past few years. For China, there is the temptation to see the TPP-11 as some sort of competitor of the RCEP, and thus distance itself from the agreement. That would be short-sighted. The very overlap in membership between both entities reflects what we might call the variable geometry of trans-Pacific trade dynamics.

Rather than looking at the much-needed effort to regain the momentum of trade and investment flows across the world's biggest ocean as a zero-sum game, China should look at it as it does at much of its foreign policy - as a win-win proposition. The end-game in this endeavor is the Free Trade Area of the Asia-Pacific (FTAAP), a long term objective of the Asia-Pacific Economic Cooperation Forum (APEC), and whose feasibility study was delivered to the heads of state assembled at the 2016 APEC Lima Summit, and something China has championed for some time.

In the final analysis, the never-ending task of sustaining and promoting free trade across the Pacific Basin should be seen as one in which its various building blocks - the TPP-11, the RCEP, and the FTAAP - feed on and complement each other in unexpected ways, thus bringing the progress and development that peoples in Asia, the Americas and Australasia expect and deserve.

The author is a public policy fellow at The Wilson Center in Washington DC, a non-resident senior fellow at the Center for China and Globalization in Beijing, and a former ambassador of Chile to China.




Posted in: VIEWPOINT

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