Trump sinks Asia trade pact, opening the way for China to lead

By Ami Miyazaki and Tom Westbrook, November 22, 2016, http://www.reuters.com/article/us-usa-trump-tpp-idUSKBN13H0OT?utm_campaign=trueAnthem:+Trending+Content&utm_content=58349de704d3011591ab15c0&utm_medium=trueAnthem&utm_source=twitter

An ambitious Asia-Pacific trade pact linking the United States and 11 countries lay in tatters on Tuesday after U.S. President-elect Donald Trump said he would kill the deal on his first day in office on Jan. 20.

Trump’s statement appeared to open the way for China to assume the United States’ leadership mantle on trade and diplomacy in Asia. The Republican termed the Trans Pacific Partnership (TPP) “a potential disaster for our country.”

China, Japan and South Korea are already in the initial stages of discussing a trilateral trade deal, and Beijing has been pushing its own limited Asian regional trade pact that excludes Washington for the past five years.

Japan and Australia, Washington’s closest allies in Asia, pledged after Trump’s announcement to push ahead without the United States, although removing the largest market for goods and services would shrink it dramatically.

“Pushing them forward is the idea that, if they don’t act, it will look like China’s very weak trade deals are the only game in town,” said Derek Scissors, a resident scholar at the American Enterprise Institute, where he focuses on Asian economies and trade.

Trump has pledged to redraw trade deals to win back American jobs, and has threatened Mexico and China with punitive tariffs in a move that some economists have warned could spark a trade war that threatens to roll back decades of liberalization.

Ending the TPP was a key election pledge of Trump’s and was also the policy of his Democratic opponent, Hillary Clinton. The deal died in Congress after Trump’s Nov. 8 election victory.

The Trans Pacific Partnership, a signature diplomatic initiative of Democratic President Barack Obama, was intended to lower tariff barriers in countries that accounted for 40 percent of the world economy, as well as providing a bulwark against China.

A major trade deal between the United States and Europe is also now close to collapse after Britain’s plans to withdraw from the European Union prompted Washington to demand better terms and opposition in France and Germany has also all but scuppered it.

TPP LIGHT?

Japanese Prime Minister Shinzo Abe said “the TPP would be meaningless without the United States,” even as parliament continued debating ratification and his government vowed to lobby other members to approve it.

“It (the pact) just continues in a state of not being in effect,” said Shinpei Sasaki of the Cabinet Office’s TPP headquarters.

Australian Trade Minister Steven Ciobo told reporters in Canberra that countries could push ahead with the TPP without the United States by amending the agreement and possibly adding new members.

“We could look at, for example, if China or Indonesia or another country wanted to join, saying, ‘Yes, we open the door for them signing up to the agreement as well.'”

But Singapore Prime Minister Lee Hsien Loong said reopening negotiations would not be easy. “If you sign a fresh agreement, you have to go through it again. We haven’t crossed that bridge yet. We’ll cross it if and when we come to that.”

CHINA’S RIVAL PACT

China has pushed its own Regional Comprehensive Economic Partnership (RCEP), which notably excludes the United States. It is a more traditional trade agreement, involving cutting tariffs rather than opening up economies and setting labor and environmental standards as TPP would.

The RCEP was a focus of attention at the Asia Pacific Economic Cooperation summit in Peru over the weekend.

Tan Jian, a senior member of China’s delegation at the summit, said more countries are now seeking to join its 16-member bloc, including Peru and Chile, and current members want to reach a deal as soon as possible to counter rising protectionism.

China’s foreign ministry said on Tuesday that Beijing has an “open attitude” toward any arrangements that promote free trade in the region as long they don’t become “fragmented and politicized.”

Foreign ministry spokesman Geng Shuang said the RCEP was an initiative led by the 10-member Association of Southeast Asian Nations (ASEAN), which China has been promoting. “We are willing to keep pushing the (RCEP) talks process with all sides to achieve positive progress at an early date,” he said.

Vietnam last week shelved its own ratification of TPP, after Obama abandoned efforts to push it through a lame-duck Congress, while Malaysia has shifted its attention to the RCEP.

IN WASHINGTON CHINA FORUM, FOCUS ON BILATERAL ACTION

At a U.S.-China agricultural trade seminar in Washington, senior Obama administration officials and their Chinese counterparts appeared to ignore the elephant in the room: the collapse of TPP and Trump’s tough trade talk against China.

U.S. Agriculture Secretary Tom Vilsack said he was focused in a U.S.-China trade negotiators meeting in Washington this week on reducing China’s regulatory and food safety barriers to American beef, poultry and genetically modified crops out of China.

“There hasn’t been a discussion about the future, there’s really a focus on the present,” Vilsack said when asked about what he was telling his Chinese counterparts about the risks posed by an incoming Trump administration.

Chinese Vice Premier Wang Yang did not address Trump’s trade rhetoric at the discussion in Washington, but warned that a closing of agricultural trade would be “unacceptable to our farmers.”

“China is one of the most important markets for agricultural exports, accounting for nearly a fifth of U.S. agricultural exports. … On average, every U.S. farmer exports about $12,000 of agricultural products to China” every year, Wang said.

(Reporting by Ami Miyazaki and Elaine Lies in Tokyo, Kiyoshi Takenaka in Buenos Aires, Tom Westbrook in Sydney, Marius Zaharia in Singapore, Elias Glenn in Beijing and David Lawder in Washington; Writing by William Mallard and David Chance. Editing by Bill Tarrant and Jonathan Oatis)