Insights into Editorial: US exit from TPP to impact security architecture in Asia-Pacific
US President-elect Donald Trump’s has resolved to undo the Obama administration’s recalibration of Asia-Pacific strategic equations by pulling out of the Trans Pacific Partnership (TPP) Agreement. The agreement was signed this year after seven years of protracted negotiations between 12 Pacific Rim countries.
Background:
With more than five years of negotiation, TPP, one of the most ambitious free trade deals negotiated between developing and developed countries, officially entered into an agreement in February.
- Countries have two years to ratify this more than 2,000-pages pact, involving higher labor standards, intellectual property rights, environmental rules and other issues.
- None of the 12 countries have completed the ratification process so far. Japan, the second-largest economy after the U.S in this treaty, voted to ratify the deal this month.
What’s good about TPP?
Those in favour say this trade deal will unleash new economic growth among countries involved. It is being said that the TPP has high potential to promote economic growth and improve people’s living standards by facilitating the free cross-border movement of key factors of economic activity, such as goods, people, money, and information. Failure to bring the TPP into force would be a great loss to not only the TPP countries such as Japan and the US but also the global economy they argue.
Criticisms:
- Those against TPP fear it could mean jobs will move from the US to developing countries. They also do not like the fact the five-year talks were held largely in secret.
- The TPP would also have extensive negative ramifications for users’ freedom of expression, right to privacy and due process, as well as hindering peoples’ abilities to innovate.
- The TPP suffers from a serious lack of transparency, threatens to impose more stringent copyright without public input, and pressures foreign governments to adopt unbalanced laws.
- Some critics also claim that TPP paves the way for companies to sue governments that change policy on, say, health and education to favour state-provided services.
- The TPP will also intensify competition between countries’ labour forces.
Why Trump is against this deal?
Although Trump’s policy statements have been, at best, contradictory, he has been consistent in his opposition to TPP. He thinks such deals will hurt American workers and undercut US companies. His stance on trade is protectionist: he has vowed to shield Americans from the effects of globalised trade by slapping hefty tariffs on cheap Chinese imports of up to 45%.
Trump says, “The TPP creates a new international commission that makes decisions the American people can’t veto, making it easier for our trading competitors to ship cheap subsidised goods into US markets – while allowing foreign countries to continue putting barriers in front of our exports.”
However, this pullout could threaten the US’ Asia rebalancing.
Good News for China?
The U.S-led TPP is an important initiative under President Obama’s Asia pivot strategy, where it seems to have more strategic implications for the U.S. than economic benefits. The aim was to counter China’s growing clout by bringing together its neighbours and reduce their dependence on Chinese trade. With US’ exit, China now has more space to flex its muscles in the region.
Implications for India:
Walking out from TPP threatens the US strategy of rebalancing Asia, which amounted to India-Japan-US security cooperation. This will force India — where US anchored its Asia-Pacific policy — to rethink its Look East Initiative.
- India was not part of the TPP, but it has been an important instrument of realpolitik for Washington and New Delhi as they sought to counter the rise of an assertive China without hurting their economic equations with the country.
- In the rebalancing of its resources in Asia-Pacific, the US saw India’s role as the “lynchpin” of the strategy.
- The US’ “Pivot to Asia” and India’s “Act East” policies conflate. Washington sees India as having a greater role in providing security and stability in the region.
- The two strategies have been shaping the security order in the region as India was reinvigorating its ties with Asian powers like Japan and Australia that has rattled China greatly.
- Now, India should not be complacent because of the current uncertainty surrounding TPP. We must fully understand the implications of the various TPP disciplines and how we should strategise ourselves in response to the very many ways they can impact us.
What next?
The text of the agreement has to be signed and then ratified by all 12 signatories. Details of how the deal will be implemented would be argued out in individual countries’ legislatures.
- To take effect, the deal has to be ratified by February 2018 by at least six countries that account for 85% of the group’s economic output. And this means that Japan and the US will need to be on board.
- But Mr Trump’s comments suggest Congress will be directed to clearly reject it – if they get to vote on it at all.
- Some countries, including New Zealand, have suggested some sort of deal may be possible without the US. There has been loose talk of changing some of the conditions to let Mr Trump approve it without losing face. But given the rhetoric coming out of Trump Towers, that looks unlikely.
- The TPP’s two biggest economies are the US and Japan, and if Trump follows through on his promise to withdraw from the pact it would send remaining states scrambling to salvage it.
Conclusion:
Now the way forward from an uninterested US could be strengthening economic ties between ASEAN countries. Alongside, the way forward for Asia is to intensify efforts towards a Regional Comprehensive Economic Partnership (RCEP). RCEP is seen as a counter to TPP as it would include more than 3 billion people or 45% of the world’s population, and would have a combined GDP of about $21.3 trillion, accounting for about 40% of world trade.
