TPP: what now?

As leaders of the 21 nations of the Asia-Pacific Economic Cooperation organisation met in Peru on November 20, one question overshadowed their discussions: the fate of the Trans-Pacific Partnership (TPP).

Rejection of the TPP, a landmark free trade agreement among 12 nations bordering the Pacific Ocean, was a cornerstone of US president-elect Donald Trump’s campaign. If he follows through, as expected, a shadow would be cast over the bright futures member countries had foreseen for their country’s economies through higher exports and foreign direct investment.

The 12 TPP signatories – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – now face tough choices as they decide whether to wait and see if the TPP can be revived, or to align themselves with alternative free trade groupings proposed by China in the Asia-Pacific region.

The failure of the TPP would be especially harmful for Vietnam and Malaysia, the two countries expected to benefit most. Vietnam halted ratification of the TPP after the US election, but Oliver Massmann, general director of the law firm Duane Morris Vietnam, believes Vietnam will ratify the treaty if the US does.

Chinese alternatives

Whatever the fate of the TPP, its members could join free trade agreements dangled by China that exclude the US: the 10-member Regional Comprehensive Economic Partnership (RCEP) and the 21-nation Free Trade Area of the Asia Pacific. Australia has already said it will work to do so, and Peru and Japan are among countries considering this option, even though many consider it less desirable. 

“RCEP is not the TPP,” explains Deborah Elms, executive director of the Asian Trade Centre in Singapore. “It is not as deep or as broad. It doesn’t deliver the same type of incentives for domestic reform that the TPP would have done. And RCEP comes with the particular challenges of competing in Asia.”

Decisions won’t be made quickly. “Countries have to determine what the benefit is in a different paradigm, and what they would have to do to get those benefits,” says David Morfesi, a trade negotiator and research fellow at the University of South Australia’s law school.

Ultimately, the fate of the TPP may rest on reassuring US workers who fear job losses from trade deals. However, worker protections like aid in finding new jobs or retraining are more properly addressed in separate trade adjustment assistance legislation, says Raj Bhala, a University of Kansas law school professor, whose book TPP Objectively was published in September.