Date posted: 15/05/2017 3 min read

Changing fortunes of the Trans-Pacific Partnership

Why hope remains for the future of the Trans-Pacific Partnership in the Trump era.

In brief

  • While the US remains out, some of the Trans-Pacific Partnership’s other signatories are stepping up to the plate.
  • There are a number of reasons why we should want to see Trans-Pacific Partnership 2.0 entered into force.
  • It’s important that the remaining Trans-Pacific Partnership players keep the door open to US participation.

Donald Trump’s electoral success in November 2016 was thought to be the beginning of the end for the Trans-Pacific Partnership (TPP). During the course of the bitter battle for the White House, the 12-nation free trade agreement roused the ire of isolationists and America First-ers; even Hillary Clinton found herself cutting down the deal – one she had championed as Secretary of State.  

In his first official act as US president, Trump withdrew the US from the trade pact, unilaterally nixing hopes that the Obama-era text would be ratified and entered into force. In one moment, nine years of negotiations and an ambitious deal covering 40% of global GDP and 26% of world trade was relegated to the scrapheap.  

The disappointment was palpable. The 11 remaining TPP countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam) had signed up to the deal in support of regional trade integration and in the hope of increased access to the mammoth US market.  

It was easy to see the move through a strategic lens wherein Trump, his presidency only days old, had undermined US interests in Asia and presented an enormous gift to China. Without the TPP, the considerably less comprehensive Regional Comprehensive Economic Partnership (RCEP) was suddenly the only trade game in town.  

In his first official act as US president, Trump withdrew the US from the trade pact.

In eschewing plurilateralism in favour of one on one trade deals, the new US president appeared to have missed a chance to proliferate beneficial trade terms across the Pacific.  

The TPP lives on

With the passage of the Trump administration’s first 100 days, it appears that things are actually looking up for the TPP. While the US remains out, some of the TPP’s other signatories are stepping up to the plate. Australia has continued to be a strong advocate for the deal, pushing for TPP 2.0 and proposing creative ways to keep it alive by including China and Indonesia.  

Recent comments from Australian Trade Minister Steve Ciobo place Canada and New Zealand shoulder to shoulder with Australia in leading discussions to revive the agreement. And while Japanese Prime Minister Shinzo Abe had previously painted the TPP without the United States as “meaningless”, Tokyo now appears to have warmed to the idea of TPP 2.0 – a move that shows the ever-pragmatic Abe is dealing with the world as it is, not as he wants it to be.  

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TPP challenges

Countries pushing for progress on the TPP face a couple of significant challenges. The first is the easiest to deal with: under the current text the TPP will only enter into force if it has been ratified by at least six of the signatory countries accounting for 85% of the combined GDP of the TPP-12 countries.  

As the GDP of the US made up a whopping 60% of that combined GDP, it is going to be necessary to reduce the activation threshold. The second challenge looms larger: how many of the remaining TPP signatories are still keen to sign up for a deal that fails to afford them increased access to the world’s biggest market? Thrashing out those and other issues is the only way TPP will get across the line.  

There are a number of reasons why we should want to see TPP 2.0 entered into force. The first is that the TPP is a high-quality agreement. Where the RCEP is a less ambitious deal with limited coverage, the TPP dives into provisions covering more sophisticated modern issues including e-commerce, intellectual property, the environment and labour standards.  

As the GDP of the US made up a whopping 60% of that combined GDP, it is going to be necessary to reduce the activation threshold.

With TPP talks underway once more, we can reasonably expect some manoeuvring to change or water down certain terms. But such moves should be resisted as maintaining high standards in the TPP creates pressure for similar standards to feature in the RCEP.  

The second is reason is leadership. Throughout his election campaign, Trump derided many of America’s allies as free-riders who were not pulling their weight when it came to sharing the security burden. Now that Trump is in office, those allies are looking to highlight and boost their contribution to assuage the president’s concerns and keep him on side. With Washington now neglecting efforts to liberalise global trade, an obligation rests on countries like Australia to make even greater contributions to maintain and mature Asia’s trading system.   

Trump’s flexibility

The third reason is tied to the apparent flexibility of President Trump’s policy positions. Since moving to 1600 Pennsylvania Avenue, President Trump has reversed course on a number of issues. For instance, he no longer believes that NATO is “obsolete” and he has not followed through with branding China as a currency manipulator.  

While backing out of the TPP was his first official act of putting “America first”, no one can know whether the president will stay tightly wedded to his anti-TPP, anti-multilateral stance. Trump will find that negotiating bilateral trade deals is expensive, tough and time-consuming, so it is important that the remaining TPP players keep the door open to US participation and continue to sell the deal’s benefits to Washington in the hope of coaxing them back into the tent.  

While the world continues to adjust to President Trump, recent developments related to the TPP should give some hope that a rejigged deal can be shepherded towards implementation. All eyes will now be on the APEC meeting in Vietnam on May 20-21 to see if trade ministers from the 11 remaining TPP countries can find a way to bring the deal into effect.