Is there a future for TPP following the US withdrawal?

Legislation | | MIC Customs Solutions |

The withdrawal of the US from the Trans-Pacific Partnership (TPP) has thrown the future of the deal into disarray - but the remaining nations continue to mull over potential methods of salvaging the deal.

It is little exaggeration to say that Donald Trump's appointment as president of the US is already shaping up to be one of the most significant events in recent global political history, with decisions taken in the early days of his presidency having immediate and sizeable repercussions all over the world.

For businesses involved in international trade, one of the most significant of these was the executive order signed on January 24th 2017 confirming the US's withdrawal from the Trans-Pacific Partnership (TPP), a broad-ranging free trade agreement (FTA) that had been set to revolutionize the way companies through the Pacific Rim nations do business.

Supporters of the deal had long feared that a Trump election victory would spell the end of TPP in its original incarnation - a suspicion confirmed by the new president's decisive move to curtail further participation in the deal his predecessor Barack Obama spent seven years trying to put in place. Now that the US has bailed on the agreement, its future has been thrown into doubt, leaving the remaining member nations to consider whether there is any way to salvage the much-discussed FTA.

Why did the US withdraw?

TPP was designed to eliminate tariffs, unify regulations and encourage closer economic ties between the US and 11 other nations - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Representing roughly 40 per cent of the world's economic output, it would have represented one of the largest FTAs in history, but the deal had received criticism even before Mr Trump launched his presidential campaign, due to concerns it prioritized big business and the needs of a globalized marketplace over local jobs and national sovereignty.

Mr Trump pushed a similar agenda, calling TPP a "horrible deal" and a "potential disaster" that would take jobs away from American communities, and promised to withdraw the US from the agreement as one of his first acts upon taking office - a pledge he has now fulfilled.

What ideas are being discussed by the remaining nations?

Several of the remaining TPP nations have spoken out about the need for a new approach following the US withdrawal, with a number of ministers expressing a hope that the deal could still be salvaged in some form.

Australia's prime minister Malcolm Turnbull said his government is "not about to walk away" from TPP despite the setback, with trade minister Steve Ciobo saying he has spoken to officials from Canada, Mexico, Japan, New Zealand, Singapore and Malaysia about the prospect of pressing ahead without the US, or by involving other countries such as Indonesia.

New Zealand's prime minister Bill English and trade minister Todd McClay, meanwhile, have both expressed their continued commitment to further TPP discussions, while pursuing a broader strategy of securing bilateral deals with individual countries.

Japan has also been involved in many of the conversations to salvage TPP, though its prime minister Shinzo Abe previously said the deal would be "meaningless" without the involvement of the US. As the world's third-largest economy, any future TPP retooling is likely to depend heavily on Japan's continued involvement.

Could China help to salvage the deal?

One potentially significant upshot of the US abandonment of TPP is the door that has been opened for China to step in and salvage the deal - a prospect that Mr Turnbull and Mr Ciobo have mooted as a possibility when outlining Australia's stance.

China was not a member of the original version of the TPP agreement, which was widely interpreted as a move by the US to increase its economic influence in Asia at China's expense. Prior to this, China's focus was on completing a similar deal called the Regional Comprehensive Economic Partnership, an FTA between the ten members of the Association of Southeast Asian Nations, plus China, Australia, India, Japan, South Korea and New Zealand.

However, the possibility of China replacing the US as a TPP member is now being actively considered by those involved in the deal, with a spokesperson for Beijing subsequently downplaying the idea without ruling it out.

They said: "We believe in regional economic integration. We are for open and transparent regional economic arrangements. The economies of the Asia Pacific region are diverse. It's important to behave in an open way. We're ready to work with all sides to provide impetus for the Asia Pacific and the global economy."