Analyst say, fast-growing Asia-Pacific economies will strike more trade deals among themselves as opposition grows in Europe and the United States (US) to globalization, warning the West will lose out as the dynamic region powers ahead. The most high-profile victim of recent protectionist sentiments has been a major US-led trans-Pacific deal, which is as good as dead after the American election victory of Donald Trump in November 2016. Asia to narrow trade focus in the face of rising protectionism
Given such problems, much of Asia – where economies have generally enjoyed robust growth in recent years and are heavily dependent on exports – will be looking with trepidation at potential accords with the West
Prof Sarwar Md Saifullah Khaled
Analyst say, fast-growing Asia-Pacific economies will strike more trade deals among themselves as opposition grows in Europe and the United States (US) to globalization, warning the West will lose out as the dynamic region powers ahead. The most high-profile victim of recent protectionist sentiments has been a major US-led trans-Pacific deal, which is as good as dead after the American election victory of Donald Trump in November 2016.
An agreement of 12 Pacific Rim economies, the Trans Pacific-Partnership (TPP), was the economic plank of President Barack Obamas pivot to Asia, and notably excluded China as the US sought to combat Beijings rising influence. But it is just the latest accord to run into trouble amid growing protectionism in developed economies, where globalization is increasingly regarded as a goblin responsible for sending jobs abroad and eroding living standards. A proposed deal between the European Union (EU) and the US is now unlikely to be signed after Trumps win, while a trade accord between the EU and Canada took seven years to complete and was nearly torpedoed by resistance from a tiny Belgian region.
Given such problems, much of Asia where economies have generally enjoyed robust growth in recent years and are heavily dependent on exports will be looking with trepidation at potential accords with the West. Executive director of the Asian Trade Centre in Singapore, Deborah Elms said, The result of having the US and Europe turn inward is that Asia will focus on regional agreements. The global system will not function if the US blocks action and the EU remains stymied. The immediate effect will be to give China a free hand to push its own favoured regional accords. This will be a heavy blow to Obama, who had hoped the TPP would allow the US to write the regions trade rules before Beijing got there.
Chinese President Xi Jinping took the opportunity to urge support for two potential accords it was backing at a meeting of the 21-member Asia-Pacific Economic Cooperation (APEC) group in Peru. These are an APEC-wide deal, and a 16-nation agreement whose members include Southeast Asian countries and India, but notably excludes the US. In reality, myriad small-scale trade deals had already mushroomed in Asia in recent years as efforts to forge truly global accords through the World Trade Organization (WTO) proved difficult. According to a study carried out by APEC, 145 trade deals existed between the groups members as of December 2015, at least 30 of which had been struck since 2008.
The US election of Trump who repeatedly railed against trade accords and dubbed the TPP a terrible deal combined with rising opposition to free trade elsewhere is likely to accelerate that trend. Asia-Pacific chief economist with IHS Global Insight, Rajiv Biswas said, If the US significantly alters its trade policies with Asia... this could catalyze greater intra-Asian trade liberalization initiatives. Rising protectionism has alarmed supporters of free trade, who feel that it is being scapegoated in many developed nations as an increasingly squeezed middle- and working-class seek something to blame. An expert in Asian economics from the Center for Strategic and International Studies Matthew Goodman said trade had become a target of a lot of anxieties. But he added that the problems were in reality not just about trade but more broadly about economic change, about social change, about other things that have dislocated peoples lives.
However, there have been genuine concerns about the way major deals have been negotiated, such as that details about the TPP were shrouded in intense secrecy during talks. Still, many observers believe that Europe and the US are set to inflict damage on their own economies as they turn away from free trade. Elms of the Asian Trade Centre said The West will certainly lose out. American companies will lose competitiveness relative to their counterparts in markets in Asia. But those who may lose the most are consumers, who have benefited from ever cheaper goods in recent years as free trade flourished. An Asian delegate at the APEC summit told, requesting anonymity to speak freely Consumers have better choices; they get better quality goods because of the competition sparked by free trade.
Meanwhile, Xi pledged on November 19, 2016 to open the economy further as leaders of Asia-Pacific countries sought new free-trade options following Donald Trumps election to US president on promises to scrap or renegotiate trade deals. In Lima, Peru, all eyes were on China at 2016s APEC summit just over a week after Trumps surprise victory in the US dashed hopes of the largest-ever US-proposed trade deal, TPP, coming to fruition. The Obama administration has championed the TPP as a way to counter Chinas rise, but he has now stopped trying to win congressional approval for the deal signed by 12 economies in the Americas and Asia-Pacific, excluding China. Without US approval the current agreement cannot be implemented.
Trump campaigned against the TPP and the North American Free Trade Agreement (NAFTA) as bad for US jobs. He said he would scrap the TPP and threatened to impose tariffs on imports from China and Mexico. Following a meeting with Obama, Xi said Beijings relationship with Washington was at a hinge moment and called for a smooth transition. Xi has been selling an alternate vision for regional trade by promoting the Beijing-backed Regional Comprehensive Economic Partnership (RCEP), which as it stands excludes the Americas. In a keynote address at APEC, Xi said China will not shut its door to the outside world but open more. Were going to...make sure the fruits of development are shared. Chinese attendance at the APEC meeting was its largest ever and regional delegates said China would take the lead on trade if the US turned toward protectionism.
The Obama administration has warned that the RCEP would not include strong protections for workers, the environment or intellectual property. In Lima on his last scheduled trip abroad as president, Obama said the US worked to include labour provisions in a US-Peru free trade agreement to lift wages and standards for Peruvian workers. The White House said the TPP leaders held a meeting at APEC, where Obama urged them to work together to advance TPP. Japanese Deputy Chief Cabinet Secretary Kotaro Nogami told after the meeting the leaders had confirmed the economic and strategic importance of the agreement. With the fate of the TPP uncertain, Chinas talks on RCEP, which include Australia, India and more than a dozen other countries, are seen as perhaps the only path to the broader Free Trade Area of the Asia-Pacific (FTAAP) that APEC aspires to. Australian Prime Minister Malcolm Turnbull told of RCEP that Its a more traditional trade deal, reducing tariffs on goods and services. Its not as far reaching as the TPP. But the more access we can get to more markets for our exports, the better. New Zealand Prime Minister John Key said the US was an important partner in the region, but China would fill the void if a Trump administration backs away from free trade. Key said TPP members might be able to incorporate cosmetic changes to make the deal more palatable to Trump.
Some APEC members, despite Chinas overtures, were determined to press on with TPP and held out hopes the US would still show leadership on trade. Mexican President Enrique Pena Nieto said Our geopolitical position is with the United States, obviously. Thats where our eyes are set and thats what we are working for. He added the NAFTA pact between the US, Mexico and Canada should be modernized, noting that issues relating to labour rules and the environment were among those that could be included in such talks two areas Mexico had believed it could update with the US via TPP. Trump has vowed to scrap NAFTA if he cannot renegotiate it. Mexico wants to harness Canadian support for NAFTA and TPP, and after a meeting between Pena Nieto and Canadas Prime Minister Justin Trudeau, Mexicos government said in a statement the pair stated their countries should keep working together to promote North America as a competitive and prosperous region. The two also pledged their nations commitment to the free market, the statement added, without referring to NAFTA or TPP. Mexicos economy minister, Ildefonso Guajardo, said on November 18, 2016 that Mexico, Japan, Australia, Malaysia, New Zealand and Singapore aim to continue with TPP with or without the US.
However, several APEC members said it was too soon to write off support from Trump on TPP. Australias Turnbull said that Obama was not a supporter of the TPP when he became elected and he is leaving office as one of its greatest advocates. So hopes are still there to retain TPP. But experts opine in the absence of TPP Bangladesh may gain.
The writer is a retired Professor of Economics
