US President Donald Trump has handed China a gift on a silver platter. By signing an executive order this week that scrapped US participation in the Trans-Pacific Partnership (TPP) he has in effect paved the way for China to write the rules on global trade.
The general consensus is that this is a huge win for China, which is set to play a greater leadership role in Asia and the world.
One has to wonder whether Trump has any conception of global power projection. It seems his only concern as president is to make himself the champion of American workers, and to ensure big business in America scores big.
As China steps out, the US recoils. This protectionism on the part of the US was likened to “locking oneself in a dark room,” by China’s President Xi Jinping at the World Economic Forum in Davos this month. With the US proving itself to be an unreliable partner in East Asia, China has positioned itself as the future of the security and economic system in the region.
Trump’s bullish move has reversed a free trade strategy adopted by presidents of both parties dating back to the Cold War.
The TTP was the cornerstone of Barack Obama’s strategy to reassert American influence in Asia, and to counter China. The Obama administration saw the trade pact as a way to permanently tie the US to East Asia and create an economic bulwark against China.
It represented Obama’s signature trade achievement after eight years of negotiations. With the stroke of a pen, Trump succeeded in unravelling that legacy this week, which ironically will reduce America’s power and influence in the world.
If the US had any meaningful leverage in East Asia to begin with, the abandonment of the TTP has largely destroyed that. Recognising the TTP as a vehicle through which to further US interests in the region, Obama’s defence secretary Ash Carter had noted that “the TTP would be more strategically valuable than another aircraft carrier battle group in the Pacific”.
Erstwhile US allies like Japan are no doubt extremely frustrated by the US’s abandonment of the 12-nation trade pact which Japanese Prime Minister Shinzo Abe had lobbied hard for, managing to get it ratified in the Japanese parliament just last Friday. Trump’s recent barbs against what he claims are Japan’s unfair trade practices also do not bode well for future relations.
Trump has taken issue specifi- cally with the vehicle trade with Japan, saying Japan charges too much tax on US products.
This may have the effect of pushing Japan towards joining China’s alternative to the TTP – the Regional Comprehensive Economic Partnership (RCEP). China is seeking to unite 10 members of the Association of South East Asian Nations (Asean) with Japan, South Korea, Australia, New Zealand, and India. This can be seen as China’s chance to tilt the geo-political balance in Asia in its favour.
Trump’s electoral victory had seen the Philippines, Singapore and Malaysia shift towards the RCEP. Even countries like Australia, which had championed the TTP following Trump’s election, have now signalled they will shift attention to RCEP.
This 16-nation trade pact could reach a deal by the end of the year, and will position China as the driver of trade liberalisation.
The objectives of RCEP will be to keep markets open, deepen economic integration, and narrow the development gap among members.
While the TTP would have been a free trade zone for 40% of the world’s economy, RCEP will create a market that accounts for 30% of the global economy. While reducing tariffs, it will also redirect trade China’s way. As more countries gravitate towards China, the US will look increasingly isolated as it makes bilateral trade agreements the cornerstone of its strategy going forward. With the US left out of an Asian trade pact, it will also become more difficult for US companies to penetrate Asian supply chains in the future.
Trump has appointed a leading China critic – Peter Navarro – as Trade Council director, and given the rhetoric already being used, it could potentially lead to a trade war with China down the line.
If this transpires, the US will be going up against a major power that has significant economies in its camp
Perhaps the most significant aspect of RCEP in terms of the interests of developing countries is the fact the partnership will take on board the development concerns of its members. This could lead to RCEP being a model for integrating the least developed countries with developing and developed economies.
This is a key aspect of furthering the agenda of the global South that would not have been a concern of the TTP.