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Politics

TPP can do without US

The trading bloc should revolve around Asia's mid-sized economies

U.S. President Donald Trump holds up the executive order on withdrawal from the Trans-Pacific Partnership at the White House in Washington on Jan. 23, 2017.   © Reuters

True to his style of leaving everyone guessing, U.S. President Donald Trump's recent suggestion that the U.S. might want to rejoin the Trans-Pacific Partnership trade pact -- after withdrawing a year ago -- would appear to revive the fortunes of what would be the world's most extensive trade liberalization platform, representing 40% of global gross domestic product.

Trump's "on-again" TPP posture poses a dilemma for the remaining 11 TPP members. Following the U.S. departure, they renamed the pact the "Comprehensive and Progressive Agreement for Trans-Pacific Partnership," which in its reduced form accounts for a sixth of global output.

Notwithstanding Trump's rethink, the revival of the original TPP is not necessary to secure Asia's prospects for peace, prosperity, stability and security. Moving ahead without the U.S. and opening membership to other key Asian economies besides China is likely the most optimal route for the TPP. In other words, the best TPP for the Asia-Pacific region would be an incarnation that is relatively neutral and depoliticized.

Trump's reconsideration of the TPP is hardly a departure from the unpredictable course of his administration. He has proven to be not just America's commander-in-chief at home but its chief dealmaker abroad. His business-focused, transactional approach is geared for a deals-based world rather than a rules-based international order. His remarks on TPP, for instance, were conditioned by calling for a "substantially better deal," implying a renegotiation to address the concerns of his domestic political base, whose jobs he pledged to safeguard during his election campaign.

The U.S. president paired his TPP flip-flop with a pragmatic speech at the World Economic Forum in Davos, Switzerland, last Friday, where he offered "mutually beneficial, bilateral trade agreements with all countries." He highlighted his preference for bilateral free trade agreements over regional deals such as the TPP.

Trump does not favor a multilateral approach to global trade negotiations in view of the moribund Doha Round. He pointed to existing one-on-one deals with "several" TPP countries, presumably Australia, Chile, Peru and Singapore. But as a self-proclaimed dealmaker, he also does not want to miss the boat when it comes to TPP-11, which finalized revised terms for the trade pact just days before the Davos gathering, when Canada gave its assent.

The U.S. president's change of heart could potentially have far-reaching global economic and political ramifications. If the TPP-11 group, whose members also include Brunei, Malaysia, Mexico, Japan, New Zealand and Vietnam, decided to readmit the U.S., they would likely have to make concessions to placate Trump. Any renegotiations would reopen a can of worms when it comes to such issues as investment measures, government procurement and intellectual property. Yet without the U.S., the TPP-11 would have far less geoeconomic weight and geopolitical heft.

Moving on without the U.S. and excluding China may prove to be a good compromise if the TPP-11 can start talks with other key Southeast Asian economies such as Indonesia, the Philippines and Thailand. These founding members of the Association of Southeast Asian Nations provide trade and investment complementaries and sizeable markets, while their supply-chain networks add compelling value to the TPP mix. In addition, it would also allow Australia and Japan, TPP's middle powers, to display alternative regional leadership.

Adding the more advanced ASEAN economies to the TPP and leaving out the U.S. will reduce trade friction and divisions due to the diversion of trade patterns. For instance, Thailand's automobile and auto parts industry, which accounts for about 12% of its economy, may lose substantially to Vietnam if the U.S. is readmitted.

Excluding China and leaving out the U.S. in some respects makes geopolitical sense. China is already busy with its Belt and Road Initiative and the Asian Infrastructure Investment Bank. If the U.S. were to re-enter the TPP, China would likely increase its campaign for the rival Regional Comprehensive Economic Partnership. This competition between the two economic blocs would further fuel geopolitical tensions between the two superpowers.

It is strategically preferable for the TPP-11 to continue on its present path and attract other regional economies that can lead to a "third way" in trade liberalization and geoeconomic benefits. It would not be smooth, however, as it would inevitably involve difficult negotiations with the new members.

But at this stage, given Trump's unpredictable behavior and China's growing power, the best course for the TPP-11 members, which have now demonstrated their unity and commitment, would be to create a bigger regional trade liberalization area that is substantial and comprehensive but also geopolitically sensible.

Thitinan Pongsudhirak teaches international political economy and directs the Institute of Security and International Studies at Chulalongkorn University in Bangkok.

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