Tuesday, 22 November 2016

Trump SinksTPP: Road Open for Chinese Domination?

    It seems that the Chinese have had a very good day at the office. Not only has Trump scuttled the Trans Pacific Partnership [TPP], but severely left alone his campaign promise to name China as a "currency manipulator", as also his assertion that he would slap punitive tariffs of 45 per cent on Chinese imports into the US. The Chinese saw the TPP as a thinly disguised US effort to "contain" China, for as Xinhua had claimed only very recently,"the TPP was the economic arm of the Obama Administration's geo-political strategy to make sure that Washington rules supreme in the region". US supporters and allies in the Asia-Pacific region were aghast at the enormity of what Trump has done. As the Singapore PM only recently lamented, "each one of us has overcome some domestic political objection, some sensitivity, some political cost to come to the table and make the deal". PM Abe of Japan said that without the US, the TPP was dead.
   The TPP was the largest trade deal in history, involving 12 states of the Asia-Pacific region with about two-fifths of the world's GDPThe signing of the text of the TPP, on 4 February 2016, was thus seen as a US policy response to the rapidly increasing economic and strategic linkages among the Asia-Pacific states and that this effort had become the economic linchpin of the Obama Administration’s renewed strategic involvement with the region. The TPP agreement contains over 5000 pages of text, with 30 chapters covering different issues such as non-tariff barriers [NTBs], labor, environment, investment, state owned enterprises [SOEs] and some regulatory mechanisms not covered under WTO. The TPP was supposed to be designed for facilitating US business, as the US was the prime mover in the negotiations, for as President Obama himself had observed "we have to make sure that the US--and not countries like China--are the ones writing this century's rules for the world economy".
    The Chinese President Xi Jinping, while on a tour of Latin America, was not slow to see the openings for China and moved in rather quickly. Xi told his interlocutors that this was the time for "strong partnerships", for "win-win" solutions and strategic initiatives. As opposed to what Trump has been saying, Xi Jinping emphasized that China will not shut its doors, but open them even wider for facilitating trade and investment. Xi Jinping also has pushed for the Chinese sponsored FTAAP, that includes the US, but which in the context of Trump's rejection of the TPP, is hardly likely to succeed. But where the Chinese can make a considerable dent is the RCEP, where in the context of the Chinese initiatives of the OBOR, the RCEP that excludes the US, can help expand Chinese trade, investment and strategic influence in the Asia-Pacific. The RCEP is not very ambitious, for it is essentially a tariff reduction mechanism. At present Asia has 147 free trade agreements in force, up from 82 a decade ago. A further 68 free trade agreements are under negotiations.
   Trump has indicated that the US would negotiate bilateral trade agreements with individual states of the Asia-Pacific region; at best a tedious and a time consuming process. Meanwhile Chinese interlocutors would have fanned out in the region, dubbing the US as "untrustworthy" and "unreliable". If the US can renege on an important strategic initiative, albeit a trade and an investment deal, what will the states of the Asia-Pacific region make of the US security umbrella? Unfortunately, Trump has left the Asia-Pacific region wide open for Chinese influence to expand exponentially

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