Perhaps no trade deal has been agreed to more
times than the Trans-Pacific Partnership (TPP) has, firstly in 2005 taking the
form of the Trans-Pacific Strategic and Economic Partnership, and then in 2016
as the enlarged U.S.-led TPP-12, and (hopefully) finally in November 2017 with
the renamed “Comprehensive and Progressive Agreement for Trans-Pacific
Partnership” (CPTPP). The CPTPP, once a legal text is fully worked out, will
take effect when six of the eleven remaining countries ratify it.
Staring at some still-born, historical arrangements like the Asian Monetary
Fund, the Free Trade Area of the Americas and Transatlantic Free Trade Area,
one would marvel at the pertinacity of the deal itself and the perseverance of
policy makers this time to press on with trade integration despite growing
sentiments in many participating economies that call on government to “protect”
rather than to “liberalize.”
Economic success in
today’s competitive environment requires countries to proactively reduce trade
barriers and win over mobile international capital that flows to freer and more
secure markets. But the interlocking nature of modern economic relations and domestic
oppositions to unilateral trade disarmament often render that national
interests are best served through coordinated and reciprocal regional efforts.
The CPTPP is such a mega-scale free trade agreement (FTA) that aims to leverage
the collective economic potential of more than eleven countries around the
Pacific Rim, whose trade totaled about $350 billion in 2016.
Our updated simulations using the multiregion, multisector GTAP model suggest
that a deal without the United States in it would raise the combined real gross
domestic product (GDP) of the eleven countries by about 0.7 percent in the long
run. More importantly, as a “natural trading bloc” with intra-FTA trade share
exceeding the groupings total share of the world’s GDP, the CPTPP’s trade diverting
effects are not as alarming as some have feared. The net global welfare amounts
to approximately $57 billion according to our analysis.
With respect to content, suspension of some twenty provisions
inserted only at the demand of the United States (e.g. extended protection for
biologics) and addition of revised articles on withdrawal, accession and review
procedures notwithstanding, the reworked CPTPP preserves all the core elements
of the TPP-12. It remains a high standard regional trade liberalization
blueprint that set regionally acceptable standards and write enforceable trade
rules in emerging policy areas, such as digital economy, public procurement,
competition and regulatory coherence, in a forward-looking manner.
Country-specific benefits of the CPTPP, too, are worth highlighting. For
instance, the value of the deal as an insurance policy against anypotential
breakdown of the
North American Free Trade Agreement (NAFTA) renegotiation are increasingly
picked up on by Canadian and Mexican leaderships. Japanese and Vietnamese liberal
reformers would stay relieved that the prize of locking in difficult domestic
structural reforms, whether it is in agriculture or state-owned enterprises, is
still within grasp. Above all, the withdrawal of the United States seems to
have made the CPTPP a more equitable grouping wherein partners, instead of
dictating the terms, show more sensitivity to each other’s concerns and
interests.
Denouncing the TPP as a
job killer, Donald Trump pulled his country out of the deal three days into his
administration, invoking economic reasons. Trump’s newly announced Asia
strategy enshrining a “free and open Indo-Pacific region,” however, makes the scrapping of the TPP
more emblematic of his firm departure from the Obama administration’s “Pivot to
Asia,” that defined Asia more narrowly as “Asia-Pacific.”Ostensibly, the catchphrase is a political
shorthand to reflect India’s rising role in Asian and global affairs and tightening U.S.-India bilateral ties since Narendra Modi
took office in 2014. Rhetoric aside, it is clear that the new strategy, in so
many aspects, shares the pivot’s fundamental goal of dealing with the swelling
influence of China. Through outlining a single geoeconomic and geopolitical
space bookended by the United States and India, Washington stretches the
boundary of the region, and therefore economic
center of gravity, westwards. In
effect, this dilutes China’s overwhelming economic dominance.Trump wants to promote trade and prosperity
in the Indo-Pacific theater and this will require multilateral infrastructure
financing for roads and ports. After all, it is no coincidence that key players
in Trump’s Indo-Pacific vision—Japan, Australia, India, and to a lesser extent
South Korea and Thailand—are those who are either sidelined by or unsympathetic
to China’s massive Belt and Road Initiative.
Source: High Plains Journal, U.S.A Thursday, 30 November 2017