Business

Asia, except China, laments Trump rejection of TPP, weighs ways to salvage pact

AP, Reuters

President-elect Donald Trump says he wants to pull out of the Trans-Pacific Partnership but other Pacific Rim leaders are vowing to push market-opening efforts they say are vital for growth.

The possible decline of the 12-nation TPP could give a boost to alternative initiatives including one promoted by China in which the United States is not taking part.

Trump’s message, in a brief video, was issued after President Barack Obama and other leaders of the Asia-Pacific Economic Cooperation group, meeting in Peru, called Sunday for fighting the backlash against trade highlighted by Trump’s victory and Britain’s vote to leave the European Union.

Promoters of the TPP say it is a step toward building a wider, pan-Pacific free trade zone, though critics object it would shift too much control over regulation to companies from governments and the public.

“There is very strong support among the other 11 parties to the TPP to ratify it and to seek to bring it into force,” said Australian Prime Minister Malcolm Turnbull.

Trump described the 12-nation pact as a “potential disaster for our country.” He has also said he wants to renegotiate the North American Free Trade Agreement with Canada and Mexico.

Obama has said he would give up seeking congressional approval for the TPP. He had championed it as a way for the United States to lead the creation of “gold standard” rules for 21st century trade.

“I think not moving forward would undermine our position across the region,” Obama told reporters in Lima.

New Zealand Prime Minister John Key said Washington will need to think about what role it wants to play in Asia and its fast-growing markets.

“The United States isn’t an island. It can’t just sit there and say it’s not going to trade with the rest of the world,” said Key after returning home. “At some point they’re going to have to give some consideration to that. But naturally, we’re a bit disappointed.”

The TPP, signed this year in New Zealand, would take effect after it is ratified by six countries that account for 85 percent of the combined gross domestic product of its member nations.

The United States is 60 percent of the combined GDP of that group and Japan less than 20 percent, so those conditions cannot be met without U.S. participation.

“TPP is meaningless without the United States,” said Prime Minister Shinzo Abe. Last week, he became the first foreign leader to meet Trump since his Nov. 8 election victory.

As Japan’s most powerful leader in a decade, Abe invested political capital in overcoming opposition to the TPP from farmers and the medical lobby. His ruling Liberal Democratic Party pushed TPP ratification through the Lower House and had been set to seek final approval in the Upper House.

Renegotiating the agreement would “disturb the fundamental balance of benefits,” said Abe, who was in Argentina following APEC.

Other TPP members include Chile, Mexico, Canada, Peru, Brunei, Malaysia, Singapore, Vietnam and Australia.

China hopes for progress on the Regional Comprehensive Economic Partnership, or RCEP, it is promoting with the 10 governments of the Association of Southeast Asian Nations, a Chinese foreign ministry spokesman said.

RCEP would require fewer market-opening concessions than TPP. Critics say that would let China shield its huge but inefficient state-owned companies from competition. The agreement would include China, India, Indonesia and South Korea but no countries from the Americas have joined.

“We would like to push the negotiation process to make headway at an early date,” said the spokesman, Geng Shuang, at a regular briefing.

China also called at APEC for progress on a separate arrangement, the Free Trade Agreement of the Asia Pacific.

“We hope these free trade agreements can reinforce rather than thwart each other,” said Geng. “We should prevent fragmentation of economic and trade arrangements or politicizing such agreements.”

The TPP stands almost no chance of working now that Trump has pulled the plug on it, proponents of the pact said on Tuesday, opening the way for China to assume the leadership mantle on trade.

Japan and Australia expressed their commitment to the pact on Tuesday, hours after Trump vowed to withdraw from the 12-nation Trans-Pacific Partnership on his first day in office.

Trump’s declaration appeared to snuff out any hopes for the deal, a signature trade initiative of President Obama, five years in the making and meant to cover 40 percent of the world economy.

Yet even without U.S. ratification, the TPP won’t just die, a senior Japanese official said.

“It just continues in a state of not being in effect,” said Shinpei Sasaki of the Cabinet Office’s TPP headquarters. “In the future if the United States takes the procedures and it passes Congress, that would satisfy the provisions and the TPP would go into effect.”

Other members of the 12-nation grouping could conceivably work around a U.S. withdrawal.

Australian Trade Minister Steven Ciobo told reporters in Canberra countries could push ahead with the TPP without the United States by amending the agreement and possibly adding new members.

“We could look at, for example, if China or Indonesia or another country wanted to join, saying, ‘Yes, we open the door for them signing up to the agreement as well.'”

But Singapore Prime Minister Lee Hsien Loong said reopening negotiations wouldn’t be easy. “If you sign a fresh agreement, you have to go through it again. We haven’t crossed that bridge yet. We’ll cross it if and when we come to that.”

China’s RCEP, which notably excludes the United States, is a more traditional trade agreement, involving cutting tariffs rather than opening up economies and setting labor and environmental standards as TPP would.

Tan Jian, a senior member of China’s delegation at the APEC summit, said more countries are now seeking to join its 16-member bloc, including Peru and Chile, and current members want to reach a deal as soon as possible to counter rising protectionism.

China’s foreign ministry said on Tuesday Beijing has an “open attitude” toward any arrangements that promote free trade in the region as long they don’t become “fragmented and politicized.”

Foreign ministry spokesman Geng Shuang said the RCEP was an initiative led by ASEAN, which China has been promoting. “We are willing to keep pushing the (RCEP) talks process with all sides to achieve positive progress at an early date,” he said.

Vietnam last week shelved its own ratification of TPP, after Obama abandoned efforts to push it through a lame-duck Congress, while Malaysia has shifted its attention to the RCEP.

Countries involved in the TPP will continue working to bring a deal to fruition despite a pledge by Trump to withdraw from the accord, Chile’s foreign minister said on Tuesday.

“Whether it be with the United States or without the United States, there’s a willingness among the countries that make up the TPP to move forward,” Heraldo Munoz told a news conference ahead of a visit by Chinese President Xi Jinping to the South American nation.

“Whether it’s to be the same framework as the current TPP, that remains to be seen.”

There is debate over to what extent a U.S.-free TPP might advance without a complete renegotiation.

The Chinese premier was due to arrive in Santiago on Tuesday, where he will meet with Chilean President Michelle Bachelet and speak at the United Nations’ Latin American arm, ECLAC.

Munoz said China and Chile plan to sign an agreement to deepen bilateral trade ties during Xi’s visit.

In a column in national newspaper El Mercurio published on Tuesday, Xi wrote that Chile and China should work together to facilitate free trade and business ties in areas such as mining, agriculture, infrastructure, telecommunications, clean energy and IT.

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