President Barack Obama and other leaders of the Trans-Pacific Partnership countries pose for a photo in Manila, Philippines. (AP Photo/Susan Walsh)
By Xiang Wang
U.S. President-elect Donald Trump is not the only one who wants to take a step back from joining the Trans-Pacific Partnership (TPP) free trade deal, so does Vietnam. The country’s leader announced it will not ratify the Asia-Pacific trade deal at the 14th National Assembly on Thursday.
“Vietnam has prepared to join the 12-nation TPP. However, as the U.S. has announced to suspend the deal, there would be no sufficient conditions for Vietnam to submit its proposal for ratification,” said Vietnam’s Prime Minister Nguyen Xuan Phuc.
With more than five years of negotiation, TPP, one of the most ambitious free trade deals negotiated between developing and developed countries, officially entered into an agreement in February. Countries have two years to ratify this more than 2,000-pages pact, involving higher labor standards, intellectual property rights, environmental rules and other issues. None of the 12 countries have completed the ratification process so far. Japan, the second-largest economy after the U.S in this treaty, voted to ratify the deal this month. Prime Minister Abe is meeting Trump in New York today, where TPP is likely to be discussed.
While this China-excluded deal is facing uncertainties after the U.S. election, some countries like Australia are signaling they would support a China-led regional trade deal, which its trade minister, Steve Ciobo, said on national media ahead of the Asia-Pacific Economic Cooperation meeting this weekend in Peru.
Good News for China?
The U.S-led TPP is an important initiative under President Obama’s Asia pivot strategy, where it seems to have more strategic implications for the U.S. than economic benefits. Under the Trump administration, TPP is most likely not going to be implemented, which leaves China more space to flex its muscles in the region. (His opponent, Hillary Clinton, also opposed TPP.) But does this mean good news for China? Some experts say no.
“I think this is bad for China because TPP would promote economic growth in the region, which is good for all trading nations in the region, including China,” Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics and a former official of the U.S. Treasury Department, told FORBES ASIA. Schott points out China benefits when it has more prosperous trading partners and TPP helps to promote economic reforms in member countries.
China was not sitting on the sidelines during TPP negotiations. Along with 15 other countries, China has been negotiating a region-wide trade deal since early 2013, covering around 50% the world’s population and 30% of global GDP. The Regional Comprehensive Economic Partnership (RCEP), a less ambitious treaty than TPP, which aims to tackle some highly sensitive aspects of trade, has finished its 15th round of negotiations this month. A TPP member, Peru, expressed its interest in joining this week.
“RCEP is not equivalent or a substitute to TPP because there is less value in it. That’s why seven of the 16 RCEP members are also in TPP, where the economic payoff is much greater,” Schott told FORBES ASIA.
No U.S.=No TPP?
The U.S.-led TPP already faced a hard path for ratification back home before Trump was elected. So what’s the future of TPP?
“While the U.S. may not proceed on TPP that does not mean other countries will not continue to value the agreement,” Schott told FORBES ASIA. He mentioned that other countries could apply ratification procedures at home, and apply the agreement provisionally among themselves until the U.S. decides on what is it going to do.
Schott said the U.S. might decide to finalize TPP membership or negotiate some revisions that are in its interest in the future. While this may not be the case for the Trump administration, the door is still open to future U.S. participation.
This article was written by Xiang Wang from Forbes and was legally licensed through the NewsCred publisher network.
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