The trade war between the United States and China is not going as planned for the Trump administration, with tariffs and investment controls proving ineffective in bringing China to heel. Given that a new front is needed in what is expected to be a long and protracted battle, do not be surprised if the Trump administration revives the
Trans-Pacific Partnership (TPP).
The trade war is at an impasse, with no side able to claim any sort of victory. Though China is
slowing economically, the major impacts are not evident. The US’ greatest fear would be China normalising trade war-related measures through structural adjustments, like Russia has, which would over time neutralise US President Donald Trump’s containment strategy.
The Obama-led TPP involved 12 countries along the Pacific Rim, excluding China. These countries constitute 40 per cent of world gross domestic product. The proposed free-trade agreement’s geopolitical purpose was to economically isolate China and, in hindsight, would have been a more powerful tool than the current suite of tariffs, investment controls and export bans.
The TPP offered the elimination of up to 18,000 tariffs, advantages to large corporations’ on labour standards, environmental regulations and intellectual property, and favourable terms for corporations in investor-state disputes. Additionally, the US agricultural and services sectors were expected to be big winners.
Overshadowing the above, US critics of the TPP cited the manufacturing sector as its largest casualty. Balancing the needs of America’s manufacturing workers, not prioritised by the Obama administration, with US geopolitical requirements was Trump’s conundrum. Given that Trump ran on an “America first” promise, it’s clear why he
negated the TPP
– further offshoring of jobs to the likes of Vietnam and Mexico would have
obliterated his voter base.
Trump’s decision to bury the pact drew protests, particularly from Japan, which made strong overtures to the US asking it to reconsider. The TPP may technically be dead, but its resurrection would be easy with the remaining 11 member states
eager and its architecture
mostly intact.
The reintroduction of the TPP should be seriously expected. When draped over the current suite of US measures, the pact could significantly boost America’s strategic position. A US role as the TPP hub and gatekeeper, with the power to divert trade away from China, along with an expected increase in membership over time, would be a nightmare for China.
With the
2020 presidential elections fast approaching and a Trump win expected, the TPP could be reintroduced early into Trump’s second term. While the acrimony of the US president’s opponents towards him is only set to increase, expect strong bipartisan support for a resurrected TPP as the pact originated with the Democratic Party.
Considering Trump’s liberal application of
tariffs against friends and foes, a resurrected TPP would have the other member states rushing to ensure their place inside the tent. This would give Trump the power to renegotiate terms favourable to his base, especially measures to limit the offshoring of US manufacturing.
Lastly, a Trump TPP would be named differently. Moreover, its promotion would emphasise the revolutionary nature of the agreement, courtesy of Trump’s strengths, such as his ability to negotiate a deal. This would be a segue into the reopening of negotiations for a new
Transatlantic Trade and Investment Partnership, the TPP’s European cousin.
Given Trump’s failed economic measures against China, the likelihood of the TPP being reinstated is high. With bipartisan support for it in the US and among American allies, the TPP can more effectively counter China and silence some of Trump’s critics. Expect a multilateral free-trade agreement that looks and sounds like the old TPP but isn’t.
S. George Marano holds a PhD from the School of Management at RMIT University, Australia, and has an MBA and Master of Commerce from RMIT University
