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U.S. President Donald Trump holds up the executive order pulling his country out of the TPP in January 2017.   © Reuters
International relations

Trump's about-face on the TPP keeps the world guessing

But as US president sends mixed signals on trade, governments move ahead with deals

YASU OTA, Nikkei Asian Review columnist | China

SINGAPORE -- Echoing his boss's apparent turnaround in Davos, U.S. Treasury Secretary Steven Mnuchin has said the possibility of America rejoining the Trans-Pacific Partnership is "on the table."

Mnuchin's comments at an investment forum in Washington on Feb. 27 lend weight to the notion that President Donald Trump could be willing to change his tune on the trade pact. In late January, Trump surprised attendees at the World Economic Forum when he told U.S. cable news channel CNBC, "I would do TPP if we were able to make a substantially better deal." One of his first acts as president was to withdraw the U.S. from the pact it had spearheaded through years of often fraught negotiations.

But Trump, like Mnuchin, made it clear that any potential return is contingent on the pact being renegotiated. 

Another potential hurdle is the steel and aluminum tariffs Trump suddenly announced on March 1, angering the pro-free trade faction of his administration. Now that his economic adviser, former Goldman Sachs executive Gary Cohn, has resigned in the wake of the tariff plan, the administration's trade skeptics are expected to have an even greater voice.

A Singaporean diplomat who has long backed the TPP said U.S. foreign policy officials are growing concerned that the international community no longer knows when to take their president's comments seriously when it comes to trade and other issues. 

In the meantime, Trump's favored approach of using bilateral talks to pry open markets has borne little fruit. Key trade partners like Japan and South Korea are avoiding such talks, knowing they would be at a disadvantage in one-on-one negotiations with Washington.

While the Trump administration sends out mixed signals on trade, the rest of the world is growing restless, and momentum is growing for new multilateral deals that do not include the U.S. Southeast Asian nations, for example, are exploring ways to join the Pacific Alliance, comprising countries along the Pacific coast of Latin America.

At the same time, China is busy with its own efforts to reshape Asia's economic order, most notably through the Belt and Road Initiative, President Xi Jinping's signature infrastructure development program. Washington's repeated threats to impose sanctions if China does not rectify its massive trade deficit with the U.S. have apparently fallen on deaf ears. Even the proposed steel and aluminum tariffs have been met with only muted criticism in China -- a sharp contrast to the fiery response from the European Union. 

A U.S. trade official, speaking on condition of anonymity, acknowledged that the effectiveness of bilateralism is limited in today's globalized economy, in which complicated supply chains span numerous countries.

A Japanese trade official interpreted the new TPP messaging as a coded request for Japan -- which played a key role in pushing the trade deal to completion after the U.S. pulled out --  to offer up an alternative that would be acceptable to Trump.

As a candidate, Trump campaigned hard on a promise to reject the TPP, which American detractors say would cost the U.S. jobs and override U.S. laws.

When Trump softened on the TPP, Toshimitsu Motegi, the Japanese minister in charge of the pact, said he welcomed "the fact that the U.S. has recognized the significance of the TPP."

The completion of the TPP 11, along with the difficult NAFTA negotiations with Canada and Mexico, has been "helpful in reminding members of the U.S. Congress that trade matters to their constituents," said Deborah Elms, executive director at the Asian Trade Center in Singapore.

Yet it is hard to imagine Trump returning to the pact without making any demands. 

Behind the scenes, trade policy officials in Washington and Tokyo are working to create what Japanese officials are calling an "evolved TPP." For all intents and purposes, it would be the TPP by another name. 

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