What the new TPP means for US influence in the Pacific

Despite the Trump administration severing ties with the Trans-Pacific Partnership, it still lives on in a modified form. Originally a 12-country partnership, the new TPP 11 is a planned trade partnership between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The withdrawal from the TPP was just the first step for the United States in creating barriers with the Asia-Pacific region. At the Asia-Pacific Economic Cooperation forum held in Hanoi this May, the new U.S. Trade Representative Robert Lighthizer promoted a U.S.-focused trade agenda. He ruffled the feathers of Asia-Pacific representatives, including former TPP partners, resulting with no joint statement released on pathways for economic growth and development — a common practice at any such forum. Experts are warning this will negatively impact the ability for the U.S. to be a political, economic and social influence in the Pacific region. Impact on developing economies The economic impact of the withdrawal of the U.S. from the TPP is still unknown. “Market access to the U.S. was a key part of the interest,” Christopher Findlay, executive dean of the Faculty of the Professions at the University of Adelaide, told Devex. “Take Vietnam as the best example.” Original projections by the World Bank suggested Vietnam’s gross domestic product would grow 10 percent faster by 2030. Malaysia was additionally expected to see high growth acceleration of 8 percent by 2030. But it appears that there has been no updated modelling since these projections were released in January 2016. Justin Brown, deputy secretary for the Department of Foreign Affairs and Trade, revealed under questioning from Labor senator Alex Gallacher at Australia’s Senate Estimates on June 1 that this was Australia’s sole source of information on the economic benefit of the TPP. With the projections focused heavily on U.S. market access, it appears likely that the economic growth would not be the same. There is concern that there will be further flow-on effects to developing countries through reduced aid, on top of the aid budget cuts forecast. “Without the TPP, it is highly unlikely that the United States would still offer the significant ‘capacity building’ aid that was being discussed in the TPP context,” said Ed Gerwin, senior fellow for trade and global opportunity with the Progressive Policy Institute. The impact on U.S. political influence Without a strong economic influence, the ability of the U.S. to sway the politics and social development of the Asia-Pacific region will be dramatically reduced, opening the door to increased influence of China, India and Europe. It is a missed opportunity to advance human rights, according to Gerwin. “Without the ‘carrot’ of increased access to the U.S. market, countries like Vietnam will have little incentive to listen to the United States on issues like labor rights.” --— Ed Gerwin, senior fellow at the Progressive Policy Institute “Abandoning the TPP has seriously reduced the ability of the United States to advance its values in the region, including values like protection of the environment, advancement of labor rights, and the rule of law,” he said. “Without the ‘carrot’ of increased access to the U.S. market, countries like Vietnam will have little incentive to listen to the United States on issues like labor rights.” With the Trump Administration’s roll-back of a whole host of other domestic and international initiatives, including U.S. participation in the Paris Agreement on climate change, Gerwin says there’s serious question about exactly what values the current U.S. government would actually seek to advance. But there are further concerns on the impact U.S. politics could have on other donor countries. “It concerns me that the U.S. rhetoric emboldens others with protectionist interests,” Findlay said. “The impact is then via the domestic political economy process within each country.” Institutions such as APEC, Findlay believes, will be important in continuing to demonstrate a commitment to openness. “It would be good for APEC to continue its recent work in the Economic Committee on the value of structural reform — great work there.” Impact on U.S. economic development On the home front, Gerwin believes there will be a negative impact on businesses seeking new opportunities to grow and support their workforce. “America’s withdrawal from the TPP — and the U.S. government’s disagreeable conduct in other forums — will seriously erode access and influence for U.S. business in the Asia-Pacific,” Gerwin warned. “The benefits of the Trump administration’s transactional approach to expanding market access, as seen in its ‘100-day’ initiative with China, will pale in comparison with the broad and comprehensive market access that the TPP would have provided.” He said the advancement of other countries in the region continue who pursue deals and open markets to new trade partnerships will mean U.S. business will lose significant opportunities in the market and in influencing regional and global trade for digital commerce, state-owned enterprises, transparency and the rule of law. It also undervalues the years of work by political and business leaders who have provided information and education on trade and its importance in growing new markets. “A significant portion of the American public, especially Democrats and younger Americans, understands the importance to the U.S. economy of engaging in the global economy,” Gerwin said. “However, as the 2016 election showed, a significant portion of the American electorate is still engaged in magical thinking about trade, believing that disengagement from the global economy will somehow ‘bring back’ the middle class jobs of yesteryear, most of which were lost to technology, not trade.” Gerwin’s advice is clear — the U.S. should reconsider its abandonment of TPP. “A TPP with U.S. participation, even with unwise tweaks to address some of the Trump administration’s unfounded concerns, would likely be far better than no TPP,” he said. What are the next steps for TPP 11? The actions of the U.S., Findlay says, is creating a “challenging time” for the Asia-Pacific region — especially the developing and emerging economies. For the remaining 11 countries in the TPP, he urges strong engagement and open dialogue with interest groups in the U.S. to support an open policy. “These might include this business sector with strong value chain networks in the region,” Findlay said. “Other interests, which we should all be working on anyway, relate to services reform and the digital economy. I think these remain big interests in the U.S. APEC is a very good place to work on these issues, given their nature.” In addition, working hard on other trade agreements such as the Regional Comprehensive Economic Partnership, he says, is the “main game in the short term.” Though the survival of the TPP is still in doubt due to its reliance on the U.S. market, there is hope the agreement will continue. “I hope that the TP 11 conclude the agreement,” Gerwin said. “Even without the United States, the agreement should provide significant new market access to the remaining members and would include important new trade disciplines that would benefit the region and, potentially, serve as templates for other regional and global agreements. And, if the TPP enters into force, there may well be future opportunities for the United States to join it.” Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you free every business day.