Don’t sound the death knell for the Trans-Pacific Partnership just yet.
A last ditch effort by some Asia-Pacific leaders to salvage the trade pact could turn out to be crucial for regional economic cooperation following US President Donald Trump’s move to pull the plug on American participation, observers said on Tuesday.
Australia, New Zealand and Malaysia were among the nations that signalled enthusiasm to continue with an 11-member partnership in the absence of the United States.
On Monday, Trump used his first day in office to sign an executive order withdrawing the US from the accord, raising fears for the continued viability of a deal that had taken nearly eight years and 32 rounds of negotiations to complete.
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But chief negotiators from the remaining signatories to the accord would “be in constant communication with each other to consider all available options before deciding the best way forward,” Malaysia’s trade minister Mustapa Mohamed said on Tuesday.
In Canberra, Australian Prime Minister Malcolm Turnbull said he had held similar talks with his Japanese, New Zealand and Singaporean counterparts.
New Zealand Prime Minister Bill English meanwhile said interest among the remaining countries for a reformed TPP was “a bit more positive than we might have thought”.
The pact would have created a free trade zone – meaning close to zero tariffs on goods – spanning territories with a total population of 750 million people, and a total GDP of US$25 trillion. Trump views such regional trade pacts as a key reason for American jobs being lost to developing countries including China, and last year described the TPP as a project designed by “special interests who want to rape our country”.
Trump’s move to pull the world’s largest economy out of the TPP weakens the allure of the partnership – the US had accounted for 60 per cent of the economies covered by the pact – but experts said there were silver linings.
Deborah Elms, the executive director of the Singapore-based Asian Trade Centre consultancy, said it “would be both possible and relatively easy for the ‘TPP 11’ to move ahead with implementation [in the absence of] the US”.
“Basically we need to change one sentence in the agreement...the rest stands untouched.
“There are still benefits to be had for the TPP parties and, I would argue, more benefits now than anyone imagined when we all started down this path in 2009.”
This was because Trump’s protectionist policies were “dramatically altering the regional and global trade environment in ways that make a ‘no-deal’ outcome much worse than just the status quo,” she said.
The US, Japan, Australia, New Zealand, Singapore, Malaysia, Vietnam, Chile, Canada, Peru, Mexico and Brunei reached an agreement on the TPP in October 2015.
The agreement did not come into force because it required the legislative ratification of at least six countries accounting for 85 per cent of the economies involved. This meant American legislative approval was compulsory.
President Barack Obama – who envisaged the trade deal as a way to counter China’s economic rise – was eventually unable to convince a Republican-dominated Congress to approve the pact during his last year in office. Beijing was not invited to negotiations when these began in 2009.
New Zealand-based trade policy expert Charles Finny said an 11-member TPP would still bring significant economic benefits.
“For New Zealand it would still be advantageous... The US omission is negative, but it isn’t a body blow to our economy,” said Finny, a government relations consultant who has led trade negotiations for New Zealand.
The US withdrawal also provided a window for countries to renegotiate clauses in the pact – such as sections about intellectual property – that had been included solely for Washington’s interests, Finny said.
US companies’ ineligibility for privileges bestowed by the TPP would also be an indirect advantage to the remaining 11 countries.
They would gain by “having less direct [competition from] US firms, as it is much harder for American companies to use the agreement now,” said Elms, the Singapore-based expert.
“You can’t just sit in Kansas and export to TPP markets. US companies will have to invest in TPP countries if they want to use the TPP agreement,” she said.
For lesser developed participant countries, however, a reforged TPP would be a mixed bag, the analysts said.
Vietnam, for example, would miss out on crucial US market access for its textile and footwear industry.
On the flip side, it would not have to sign up to the strict labour rules demanded by the US.
The TPP negotiations were prolonged in part due to Washington’s insistence that participants conform to standards on the environment, labour rights, intellectual property and state ownership of firms, in addition to the eventual removal of tariffs on almost all goods.
Some observers said the successes reaped by the remaining members of the pact could eventually compel the US to reconsider its decision to opt out.
“The TPP is not a traditional [free-trade agreement] of the sort President Trump believes have screwed America. At its core it sets standards for a new generation of industries in which the US has a clear advantage,” Bilahari Kausikan, a Singaporean ambassador-at-large, wrote on Facebook.
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“I doubt an infrastructure programme – although sorely needed – will create sufficient jobs and America’s economic future lies in these new industries. So to ‘Make America Great Again’ some form of TPP will be needed,” he added.
“Don’t ask me to put a time frame on it and of course nothing is guaranteed in politics and life, but I’m not ready to write it off completely yet.”
Singapore’s trade ministry said late on Tuesday that the TPP as signed in 2016 could not come into effect after the US pull out.
“We will have to discuss the way forward with the other TPP partners. Each of the partners will have to carefully study the new balance of benefits,” a ministry spokeswoman said, according to local media reports.