The triple-T conundrum: Trump, trade and the TPP

By Jeremy Garlick Source:Global Times Published: 2016/11/27 20:18:39

Illustration: Luo Xuan/GT

Illustration: Luo Xuan/GT

With the election of Donald Trump as US president it is now obvious that the Trans-Pacific Partnership (TPP) trade agreement has totally collapsed. The TPP includes the US and eleven other Pacific Rim nations in a complex trade agreement. However, Trump has stated he won't support the TPP.

The TPP has been one of the Obama administration's key initiatives. It was supposed to be part of the so-called "pivot to Asia" pioneered by former Secretary of State Hillary Clinton. China has not at any stage been a participant in TPP or a supporter of it. Beijing has made it clear that it is not supportive of a trade agreement it sees as favoring the US, and has set out to propose its own trade and investment projects, most notably within the overarching framework of the Belt and Road (B&R) initiative.

The B&R, consisting of the overland Silk Road Economic Belt and the 21st century Maritime Silk Road at sea, was launched by President Xi Jinping in 2013, after the advent of the Obama administration's Spivot to Asia. This development suggests that Beijing intends the B&R to be a Chinese-led alternative to what President-elect Trump has dubbed "Obamatrade."

Now that the TPP is no more, the B&R and its complementary projects such as the Asian Infrastructure Investment Bank and the New Silk Road Fund appear to be the best horse to back in terms of offering a workable vision of how to develop regional trade in Asia and beyond. Yet with a new US president taking office there is an element of wait and see, since Trump's idea of America's global role is far from clear at this stage.

In short, the TPP has gone up in smoke and a Trump-sized question mark hangs over Asia-Pacific relations. It is not at all obvious where this leaves China.

The failure of the TPP at first looks like a victory for Beijing, since the Chinese government never wanted it. But with Trump entering the picture, there is no certainty about what (if anything) will replace Obama's deal. This means, from China's point of view, that it is too early to celebrate.

On the other hand, there is certainly no need to panic. After all, China's vision for a new trade zone stretching westwards towards Europe and Africa does not have to involve the US at all. It is intended to develop regional infrastructure and a framework for trade among mainly developing countries. It is also solid enough to ride over unexpected bumps in the road, such as changes of administration in Washington.

For the moment though, US-Asia and US-China relations are in a grey area. As Washington transitions to a new administration, the status quo remains in place. With China's economy continuing to grow at solid rates, and certainly faster than the US', a continuation of the existing trade conditions seems to favor China. Yet since Trump expressed dissatisfaction with the US economy during the campaign, it is plain that he intends to shake things up to stimulate growth.

Trump has repeatedly stated that he wants to bring jobs back to America. How he intends to accomplish this in a globalized and interdependent marketplace is not clear.

If China has taken jobs away from the US, it is because of the ineluctably shifting dynamics of globalization. Competition within the system of capitalist free trade has already moved the centre of economic gravity to Asia. It is difficult to see industrial production and employment going back to the US in any substantial way.

Another factor hobbling new initiatives from Trump is the US national debt. This currently stands at around $20 trillion. The management of this massive debt acts as a brake on the US economy already, and it is hard to see how any policy shift can turn this situation around in a short time.

In essence, if Trump is serious about making America great again by transferring American jobs back to the US, he has a Sisyphean task on his hands. In fact, all China needs to do in the face of Trump is to continue going in the same direction, with the same long-term goals. In practical terms, there is very little that Trump can do to alter the laws of economics and halt the US' decline.

China's best policy is to continue patiently with its current policies, construct trade and investment agreements as it has been doing. In the meantime, Beijing will watch to see what Trump can come up with, while anticipating that there is not likely to be much of substance to back up the electoral promises of the new president.

The author is a lecturer in international relations with the Jan Masaryk Centre for International Studies at the University of Economics in Prague.

Posted in: INSIDER'S EYE

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