Trump Walks Away from the TPP


The Trans-Pacific Partnership (TPP) would have been President Obama’s crowning achievement linked to America’s ‘pivot’ toward Asia. The TPP itself is a trade pact between 12 countries in the Asia-Pacific region. The aim is to cut any remaining tariffs, reduce non-tariff barriers and harmonize regulations in order to increase trade and lower costs among members of the trade agreement. The trade pact’s would-be members account for approximately 40% of global GDP.

President Trump, only recently inaugurated, has other plans. On Monday, January 23rd, 2017, Trump signed an executive order withdrawing the United States from the TPP negotiating process. Promising to protect American workers, he favors a bilateral approach to trade agreements and will pursue new trade agreements on a country-by-country basis.

America’s withdrawal from the TPP negotiations will have few, if any, immediate economic impact. However, it leaves the other negotiating members of the TPP in an awkward position. Greater access to the American market provided a strong incentive for countries—such as Japan and Vietnam—to carry out difficult reforms in their effort to meet the requirements of the trade pact. Now some leaders, such as Japanese Prime Minister Shinzo Abe, feel they’ve wasted valuable political capital. The United States’ withdrawal also dents its reputation as a reliable economic and political partner.

This offers China a unique opportunity to lead on economic and trade policy in the region. The Chinese government will probably make a renewed push for negotiation and passage of the Regional Comprehensive Economic Partnership (RCEP). First put forward in 2011, the RCEP is less ambitious than the TPP, making it less impactful but more palatable to potential members. It would include 16 countries accounting for 30% of global GDP.

Although China has been a major beneficiary of the American-led international economic system, it has never seemed fully comfortable with it. Ratification of the RCEP—or similar China-led multilateral trade agreements—will allow China to set new rules. In time, this could allow the country to redefine the international trade system, quietly upending the system that has been in place since the end of World War II.

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