Image: Gage Skidmore @ Flickr.com

Image: Gage Skidmore @ Flickr.com

The TPP is over. What happens now?

22 November 2016

Throughout the primaries and general election campaigns Donald Trump repeatedly criticized the Trans-Pacific Partnership (TPP) as being a terrible deal for America. Now, as President-Elect, Trump has committed to withdrawing from the TPP immediately upon assuming office.

Key US allies are dismayed at Trump’s decision to reverse course, first amongst them Japan’s Prime Minister Shinzo Abe, a keen supporter of the TPP, who had worked hard to overcome domestic opposition to the agreement. Australian Prime Minister Malcolm Turnbull had called the TPP an ‘important strategic commitment’ and that it was in Australia’s national interest to see the TPP in force.

Beyond the immediate disquiet Trump’s decision has caused amongst US allies, however, emerges another question – what does the US now want in the Pacific?

The TPP, alongside other aspects of Obama’s pivot, was intended to provide certainty – that the US was ‘there’ for its friends and allies, committed to the key principles of free-trade and open economies as a mutually beneficial relationship.

What happens now is a question that many will be asking.

Not just an economic agreement

The TPP was always widely criticized, not only by Trump but also by Democratic primary contender Bernie Sanders and, even, by Hillary Clinton who once was a strong supporter of it.

It was intended to be a wide-ranging agreement between 12 states across the Pacific. It included an agreement to cut trade tariffs on manufactured and agricultural goods, harmonize approaches to intellectual property and to establish an agreed arbitration process by which investors can sue member governments if they violate the terms of the agreement.

It is a mistake, however, to view the TPP only as an economic agreement.

It is best understood as an economic dimension to President Barack Obama’s decision during his first term to rebalance America’s strategic resources to the Pacific to face a rising China.

This rebalance included the redeployment of military assets, the investment of increased diplomatic resources and – through the TPP – a renewed US economic interest in the region.

To achieve this end, the TPP included traditional US allies such as Australia and Japan as well as more recent friends such as Vietnam, and excluded China.

President-Elect Trump’s decision to reverse US policy and abandon the TPP therefore not only has economic consequences but also political and strategic ones.

The reliability of the US as an economic and strategic partner has just plummeted in key regional capitals. Trump has indicated an interest in placing tariffs on Chinese exports to the US and little concern with the consequences of a trade conflict for supposed US allies.

With the abandonment of the TPP by Trump, we are now entering a period of intense competition around what, if any, economic agreement will be put in place across the Pacific and who will oversee that process.

Just as with the TPP, these seemingly economic arguments have clear political consequences.

New proposals

China has already proposed its own economic agreement, a free-trade zone across South and East Asia that excludes the United States, the Regional Comprehensive Economic Partnership.

This proposal, already under negotiation, will now receive renewed interest from states who were previously part of the TPP arrangement. Before Trump’s announcement, Prime Minister Abe said that there would be a shift in thinking towards participating in China’s proposal were the TPP fail.

Indonesia, which had not taken part in the TPP, has forwarded a different suggestion.

At the recently concluded APEC summit held in Lima, Peru, Indonesian Vice-President M Jusuf Kalla proposed an economic group comprising the ten member states of the Association of Southeast Asian Nations (ASEAN) together with The Pacific Alliance, a collection of four Central/Latin American states.

Such a grouping would offer ASEAN members, a collection of small and middle powers, a way to take the lead in the face of US withdrawal and the continued concern about Chinese domination.

Indonesia, when making the proposal, explicitly positioned it as a balance against both China and the United States, demonstrating the extent to which both states are now viewed with concern in Southeast Asia.

Whilst Indonesia’s proposal is new, and seemingly made without extensive consultation with other ASEAN members, it would likely receive the backing of ASEAN member states including the Philippines, which under Rodrigo Duterte has followed a high-profile policy detaching itself from the US.

Uncertain times

Even ASEAN members with a strong relationship with the US, such as Singapore, will now look on these proposals with renewed interest in the belief that any agreement is better than no agreement.

Trump’s decision to leave the TPP reinforces the biggest fear that his election has provoked – that we do not know what the US is going to do next.

The TPP, despite being criticised widely within and beyond the US, was a traditional product of US diplomacy with traditional aims.

The decision to leave the TPP is a sign that Trump places little value in the US keeping its promises when he sees no value in doing so – and that uncertainty now colours dealings with the US.

Once Trump assumes the presidency states across the Asia-Pacific, whether allies, friends or supposed rivals, are going to have to come to terms with a not only insular superpower, but a likely erratic one.

Dr Mathew Davies is Head of the Department of International Relations, Coral Bell School of Asia Pacific Affairs, at the Australian National University.

This article first appeared on CNN, 22 November 2016.

Updated:  23 March 2016/Responsible Officer:  Su-Ann Tan/Page Contact:  CAP Web Team