The Post-America Future of Asian Trade

On January 23rd, 2017, just three days after his inauguration as the 45th President of the United States, Donald J. Trump signed a presidential memorandum titled “Regarding Withdrawal of the United States from the Trans-Pacific Partnership Negotiations and Agreement.” With three strokes of his pen, President Trump withdrew the U.S. from the Trans-Pacific Partnership (TPP). This action killed the TPP in its form at the time and opened the door for China to dominate Pacific trade through the Regional Comprehensive Economic Partnership (RCEP).

The TPP is a free trade agreement whose membership is centered on several states in the Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation Forum (APEC). When President Trump criticized TPP as a candidate, he lambasted its potential to widen the US-China trade deficit, encourage the flight of American companies to less regulated markets, precipitate the layoffs of millions of American workers, shrink American tax revenues, and effectively “rape” the American economy. Withdrawing from the TPP, to his understanding, was an easy decision that only special interest groups would oppose.

However, President Trump may have failed to realize or acknowledge the important functions that the TPP would have fulfilled in a region where China’s economic influence has become increasingly dominant. The TPP, by design, would have promoted intercontinental trade by committing members to lowering tariffs, standardizing regulations, and establishing stronger trade dispute resolution mechanisms. Its successful implementation would have raised labor protection, environmental protection, intellectual property protection, and other standards in a region that without the TPP would compete at a far lower standard.

By raising standards in signatory nations, American firms would enjoy a more level playing field, and American investors would find lower-risk, higher-return opportunities for which to mobilize capital. At the same time, the TPP could signal the United States’ continued commitment to maintaining geopolitical stability in East Asia and quell fears of aggression by North Korea, China, and Russia by tying American security interests to economic ones. Successful negotiations suggested a promising step forward in the United States’ relationship with the world’s fastest growing region. Sudden withdrawal cast much of that progress into chaos.

President Trump’s decision resulted in the end of at least the incarnation of the TPP that had been agreed upon in 2016, if not the TPP as a whole. Many elements of that previous version required American participation, due to the trigger clause stating said elements only come into effect when ratified by at least six nations corresponding to 85% of the combined economic value of signatories, a condition impossible to meet now that the United States has left the agreement. According to the Australian Trade Minister, the remaining TPP members have expressed an interest in continuing to negotiate the TPP even without the United States, but it may be years before a new version of the TPP can be completed, and there is no guarantee that such an agreement would faithfully embody the spirit of the original.

The death of the original TPP has pushed into greater prominence the China-led sister-agreement, the Regional Comprehensive Economic Partnership (RCEP). In its current state, the RCEP does not reduce trade barriers or raise regulatory standards to the same degree as the TPP. Thus, economic integration through RCEP would amplify Chinese economic influence, making it even cheaper for Chinese companies to export their goods to nearby states without compelling China to end anti-competitive, unsustainable growth practices. Thus, American withdrawal from the TPP effectively created an economic power vacuum in Asia that China can now more easily step into and define the future from.

The China of the future will draw its economic power not from garment factories or coal plants, but from a highly educated and skilled workforce equipped with domestic and foreign technology and trade secrets, capable of dominating the growing renewable energy and information technology industries if unchallenged. If the United States wishes to maintain economic primacy, it cannot squander its energies on reviving manufacturing and fossil fuel industries. Yet, by withdrawing from the TPP, the United States seems to be doing just that, conducting its trade policy as though the economic leaders of tomorrow should be engaged in a regulatory race to the bottom today. The President and his advisers should ask themselves, “Why would nations partner with an America seized by nostalgia for glory days past when they could instead follow China in a race to the future?” The United States should be at the vanguard of global trade, defining the rules and institutions that can catapult the world into a fair future of shared prosperity, not languishing on an island of outdated notions and convictions.

Editor’s note: This article was written a year and a half before Trump’s decision on the TPP, and does not reflect subsequent events.

David Michael Jaffe is a student at Stanford University. He can be contacted at dmjaffe@stanford.edu.

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