The U.S. Wants Back in the TPP? Good Luck With That.
Asia is moving on without America when it comes to trade — and could be better off for it.
More than a year after withdrawing from a big Asia-Pacific trade pact, the Trump administration keeps talking about rejoining it on its own terms. But the Asia-Pacific countries that were eager a year ago to hold the door open for the United States are now busy building their own trading order — without Washington at all.
Treasury Secretary Steven Mnuchin is the latest Trump administration official to talk up the prospect of returning to the Trans-Pacific Partnership, the sprawling trade deal that was the centerpiece of the Obama administration’s pivot to Asia and the first target of U.S. President Donald Trump’s demolition job.
Earlier this month, speaking in Chile, Mnuchin said Washington would “definitely” be open to rejoining the pact — once all the administration’s other trade deals were taken care of, and provided the trade accord could be rewritten to be more beneficial to the United States. (U.S. trade officials declined to say what those revised conditions might be.)
And Larry Kudlow, a former television commentator who was named Trump’s top economic adviser, said this month that the United States could lead a “trade coalition of the willing” to counter China’s trade heft and abuses — almost the very definition of the TPP that Trump walked away from early in his presidency.
But that ship seems to have sailed. The remaining 11 countries from the original TPP signed a slightly slimmed-down version of the accord earlier this month in Chile, suspending a score of controversial provisions that the United States had insisted upon. Member countries are already in the process of ratifying the deal, which could go into effect early next year.
Many of the member states shudder at the idea of re-opening contentious, yearslong negotiations just to try to coax the United States back into the club. Chile’s outgoing president said last month that Washington would have to take the revised deal as is if it wanted back in. And a top Canadian trade official said the United States would get no special treatment if it wanted to rejoin. Even Japan, which wants the United States back in, warns Washington against renegotiating the whole thing.
“Is there a chance in hell anyone wants to reopen the thing to get the U.S. back in? Not under a Trump administration,” says Mike Callaghan, a former Australian Treasury official and economic advisor to the prime minister, now at the Lowy Institute, a Sydney-based think tank.
That’s partly because many countries in the Asia-Pacific region are already inking new, ambitious trade deals left and right even as the Trump administration struggles to tweak existing pacts such as the North American Free Trade Agreement and the free trade deal with South Korea.
Japan, Australia, and New Zealand are close to signing free trade deals this year with the European Union. Canada just did the same, and Mexico is close to its own deal with the EU, while Southeast Asian nations hope to sign their own EU deal. Singapore, meanwhile, is inking trade pacts with a bevy of Latin American countries.
But domestic politics also play a big part in the reluctance to open up the Trans-Pacific Partnership all over again. Countries such as Japan, Australia, and Vietnam first had to sell their publics on the original deal — which included a lot of unpopular provisions Washington insisted on — only to see the pact’s sponsor back out early last year. Then they had to salvage an 11-member pact during another year of tough negotiations that only concluded at the beginning of this year.
“They’ve designed a deal they are determined to put into effect,” says Wendy Cutler, who spent three decades as a U.S. trade negotiator, including leading talks on the TPP. “They’ve gone through two traumatic episodes. There’s not much stomach for more,” says Cutler, now vice president of the Asia Society Policy Institute.
The revised TPP — now formally known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership — is smaller and leaner than the original accord. Without the United States, it covers only between 13 and 18 percent of the global economy, rather than 40 percent. That will mean smaller trade benefits for everybody.
But the new TPP is also an easier pill for many Asia-Pacific nations to swallow, which should make ratification and longer-term support easier to secure. Gone for now are 22 provisions that U.S. negotiators had insisted on but that were unpopular with potential partners. Those included protections for pharmaceuticals, longer patents and extended copyrights, and some extra protections for corporations against national governments.
“Almost by definition, the suspended parts cover topics that were controversial to the TPP-11 members, otherwise they would not have been suspended,” Callaghan says.
And the revised pact is also open to new members — and not just the eventual return of the United States. Countries such as South Korea, Thailand, the Philippines, Indonesia, and Taiwan have all toyed with joining the revised TPP, as have Colombia and even the United Kingdom. (Chile’s new president, Sebastián Piñera, even resuscitated the notion that China could eventually join the pact, though Beijing would have to slash tariffs, open up its markets, and boost its labor and environmental standards.)
The open nature of the new accord is important, because member countries could see even greater benefits from new arrivals than they could have seen in the original 12-nation deal with the United States on board. The Peterson Institute for International Economics estimated that a TPP-16 that included Indonesia, South Korea, Thailand, Taiwan, and the Philippines could offer $486 billion in benefits for member countries, compared with $465 billion from the original deal.
“From an economic point of view, a TPP-16 would be better for them than the original TPP,” Cutler says.
Of course, several key countries — including Japan and Vietnam — don’t have a separate free trade deal with the United States. Roping Washington back into a sprawling Asian trade pact would be an easier lift than trying to sign separate bilateral trade deals and would also bring greater economic benefits, the Peterson Institute found. Former Japanese economic officials tell Foreign Policy they expect the administration of Prime Minister Shinzo Abe is trying to find some way to convince the Trump administration to re-embrace the deal.
For other countries, like Australia, joining the TPP alongside the United States in the first place, or coaxing Washington back in, is not ultimately about trade; Canberra already has a free trade pact with the United States. Rather, Callaghan says, it’s about making sure the United States stays engaged in the Asia-Pacific region as China flexes its economic and military might.
“For Australia, the driving force behind the TPP was not so much access to the U.S. market as locking the U.S. into the Asian region,” he says.
For Cutler, who saw previous Congresses and presidents change their minds on trade pacts they once vilified, the mere fact that Trump administration officials keep talking about rejoining the TPP is encouraging. U.S. presence in the pact would advance many of the administration’s professed goals, she says, from prying open Asian markets to pushing back against China’s heft. And ratifying a big trade deal would only require one bruising battle with Congress, while a series of bilateral trade deals will mean going back to the Hill again and again.
“It’s important that the United States makes positive signals, compared with a year ago,” Cutler says. “Over time, they might come to understand the value” in the trade pact.