President Obama's TPP is as good as dead

Nobel Laureate President Barack Obama wanted to leave behind three foreign policy legacies – the Trans-Pacific Partnership deal (TPP), the Iran nuclear deal and the normalisation of relations with Cuba. Sadly, TPP is now as good as dead.

In a video clip released to YouTube on November 21, 2016, Donald Trump clearly said that on day one of his presidency, he would issue a note of intent to withdraw the US from the (TPP) trade deal, calling it "a potential disaster for our country". He said he would "negotiate fair bilateral trade deals that bring jobs and industry back on to American shores". Its death knell was sounded by Trump during his raucous campaign.

The US-led trade deal was signed in Auckland in February 2016, after seven years of hard negotiations among nations of the Pacific Rim. The Agreement, signed by 12 nations, was awaiting ratification to come into effect. The 30-chapter exhaustive Agreement was aimed at promoting economic growth and creating jobs, reducing non-tariff and tariff barriers to trade and establishing a mechanism for settlement of investor-state disputes. The combined population of the member states is 800 million with a GDP of USD 28.5 trillion, which is 40 percent of the world total of USD 107.5 trillion (2015). What is most striking is that China, the second largest economy in the world, was deliberately excluded from the deal. 

When the TPP was being negotiated, studies were commissioned to determine whether there would be any benefit from this deal to the signatory nations. President Obama was convinced that the Agreement would benefit the US more than other partners. The high tariffs faced by American manufactured products, automobiles, agricultural products, information and communication products in importing countries would be vastly reduced. It was supposed to remove 18,000 tariffs on US exports to other countries and generate additional export earnings of USD 123.5 billion. The Agreement was to add USD 223 billion a year to the incomes of workers in all countries with USD 77 billion going to US workers. 

But another recent study by Tuft University came out with quite the opposite scenario. It found that TPP would generate net losses of GDP in the United States and Japan. Economic gains would be negligible for other participating nations. The Agreement would lead to a total of 771,000 job losses in member countries. Income inequality would further accentuate in the TPP countries, and it would also drive down employment and GDP in non-TPP countries. 

Donald Trump has been against the Agreement, probably not knowing much about its deficiencies. During the campaign, he never laid out any cogent reason as to why he wanted to get the US out of the TPP. He just declared that he wanted to get back control of the US economy. He opposed it because it was a Barack Obama project supported by the Democrats. In fact, during his campaign he opposed almost all deals and laws made by the Obama Administration.

The demise of TPP would be a boon for China – both politically and economically. The TPP was seen as an essential element of President Obama's 'Pivot to Asia' stratagem. Obama wanted to achieve two objectives through this deal: economically bind the Pacific Rim nations through the TPP, and build a political coalition to oppose China's growing influence; in a sense strategically encircle China. 

While attending the APEC summit in Lima, Peru (November 19-20, 2016) Chinese President Xi Jinping pushed Beijing's pet project, the 16-nation Regional Comprehensive Economic Partnership (RCEP). Donald Trump's scuttling of the TPP has left a wide arena for China to spread its influence in Asia and the Pacific Rim. Beijing's OBOR (One Belt One Road) project will get the much needed boost, as American influence wanes in the region.

There is a strong possibility that after US' withdrawal from TPP, China may get into the deal and change its entire character through renegotiation. Trump's abdication from the Pacific region may even persuade Japan to seek a rapprochement with China.  

Trump's campaign rhetoric has already unnerved Japan, the closest US ally in Asia. Shinzo Abe was the first foreign leader to rush to New York on November 18 to greet Donald Trump and press Japan's case on security and trade. Abe later remarked that without America, TPP is "meaningless".

What was most unusual is that Trump did not speak to the press directly to announce his priorities but rather used the online media to talk about his first 100 days in office. Donald Trump is an unknown quantity as far as politics is concerned. Though over the past three weeks he has sobered a little, his selection of cabinet members is disquieting. One wonders whether he will be an isolationist and avidly pursue medieval policies of protectionism. 

What are the implications of US' withdrawal from TPP? The immediate reaction would be a hike in tariff walls against US products, leading to trade wars of a new genre. Isolationist policies and neo-nationalism will certainly not bring back the jobs to American shores as Trump has claimed. 

It is now an established truth that globalisation has not only benefitted the developed economies but also significantly reduced poverty in the developing countries. Protectionism and "beggar thy neighbour" policies have failed in the past and will fail again. TPP and several regional and inter-regional trading agreements are the products of frustration over the deadlock at WTO since the Doha Rounds were launched in 2001. 

Trump has declared that he would negotiate fair bilateral trade deals with other nations. When one nation tries to impose its goods on another unilaterally, it invariably triggers protectionism. Every nation tries vehemently to protect its economic interest and political sovereignty. Trade means a two-way traffic of goods and services based on comparative advantage. 

Now that Donald Trump has slain the TPP, the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU will also most likely be dumped. The dark forces of protectionism are gaining ground in the West.

The writer is a former Ambassador and Secretary.