DONALD Trump has announced his intention to withdraw the United States from a Trans-Pacific Partnership deal.
Donald Trump has announced his intention to withdraw the United States from a Trans-Pacific Partnership deal.
In a video declaration, the President-elect vowed to implement this from his first day in office on January 20.
“On trade, I am going to issue our notification of intent to withdraw from the Trans-Pacific Partnership, a potential disaster for our country,” he said.
“Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores.”
Instead, Mr Trump, who had long flagged he would dump the TPP, said he would pursue “fair” bilateral trade agreements.
The pact basically aimed to deepen economic ties between these countries, with open trade relationships ideally seeing every country involved get richer.
If all went well, this could have led to a shared single market similar to that of the European Union.
President Barack Obama has long supported the deal. Just yesterday, he made the case that the agreement would be “a plus for America’s economy, for American jobs” and warned that failure to sign on to it “undermines our position across the region”.
In the lead-up to the US election, both Mr Trump and his rival Hillary Clinton pledged to scrap it. Consequentially, during his final days in power, Mr Obama gave up on trying to pass the deal through Congress.
Without US ratification, experts say the deal is extremely unlikely to come into effect.
Mr Trump’s latest move has opened up a huge potential opportunity for Beijing to fill the void in the region.
Beijing — which was not part of the TPP — has been pursuing an alternative Asia-Pacific free trade accord.
Already the world economy’s largest source of growth, China has accounted for more than 60 per cent of all global growth over the past 15 years.
At the annual summit of the Asia-Pacific Economic Co-operation group, President Xi Jinping declared his country open for business.
“Openness is vital for the prosperity of the Asia-Pacific,” he said. “China will not shut the door to the outside world but will open it even wider.”
In stark contrast to Mr Trump, Mr Xi said China will “fully involve ourselves in economic globalisation”.
This could most likely be achieved through the Regional Comprehensive Economic Partnership, a 16-member regional trade agreement that also includes Australia.
Its focus would be on loosening rules on cross-border investment and freeing up market access by getting rid of tariffs.
If China was to pursue and succeed the country will successfully upstage the US as the leader of regional economic order, solidifying its strategic power on a global scale.
But according to Adam Lockyer, a senior lecturer in security studies at Macquarie University, this is a long way off — if feasible at all.
He told news.com.au that multilateral agreements are quite difficult to get through, and China makes the world much more nervous than the US.
“The problem with multilateral agreements is that everyone needs to agree to them,” he said.
“Although the TPP was further down the road than any China-centric free-trade agreement, most countries were more comfortable with American leadership.
“This is partly because of familiarity, but also perceptions of intentions. Most people perceive the United States as a status quo country. A country like Australia, Japan or New Zealand basically wants things to stay the way they are.
“They see China as a revisionist country — they see it as wanting to overthrow the existing international order. If Beijing gains this post, it will say the current rules are outdated, that things have changed since the end of World War II, and that we should revise the rules to reflect this new distribution of power.
“This makes countries like Australia really uncomfortable.”
This means China will likely face difficulties trying to push through a new multilateral free-trade agreement.
Even as the US is likely to continue regressing under a Trump presidency, Dr Lockyer predicts China will be careful not to rock the boat and risk provoking the unpredictable leader.
“Trump is less likely to keep a close eye on the region, but if things boiled up it would be difficult to predict what would happen without a cool head in the White House,” he said.
WHAT DOES THIS MEAN FOR AUSTRALIA?
According to Dr Lockyer, the loss of the TPP will more or less mean business as usual for Australia.
With China’s multilateral ambitions unlikely to take off any time soon, not much is expected to change.
Also, Australia already has free trade agreements with some of the larger countries that made up the TPP, such as the US, Japan and New Zealand. Therefore, the effects will be minimal.
Experts previously told news.com.au the TPP could have had numerous benefits for Australian exporters, including increased productivity, access for Australian industry to parts of Asia that are currently closed to it, and making it easier for professional services firms to set up operations overseas.
Australia was pushing to gain access to Canada’s dairy market, which the government has traditionally restricted to keep prices high.
Prime Minister Malcolm Turnbull, who once described the TPP as a “gigantic foundation stone” for the economy, was optimistic that Mr Trump would change his mind.
He’s previously expressed his desire for Australia to have as much access to global markets as possible.
“From Australia’s point of view the more markets and access we can get for our exports the better,” he told reporters in Lima.
Over the past few days, the Prime Minister has been in talks with world leaders on how to rescue the partnership.
But an analysis from the World Bank provided earlier this year likewise stated that we stood to gain next to nothing from the agreement.
It said highly-developed nations like Australia were already fairly free of trade restrictions, or else reliant on other factors for their economic growth.
The study found that while some countries stood to make substantial gains, Australia’s economy was projected to boost by just 0.7 per cent by the year 2030 through the TPP.
America’s projected gains were even lower, at just 0.4 per cent.
But while Mr Trump has declared the TPP gone for good, he may be open to renegotiation if he can secure a better deal for the country.
Only time will tell on that one.
Source:Gavin Fernando- The Mercury