The Trans-Pacific Partnership (TPP) trade deal has fallen over after the Obama administration suspended trying to legislate it before president-elect Donald Trump takes office.
The free trade agreement between the US, Australia and 10 other Pacific Rim countries had been nearly a decade in the making, but has been shelved because it there wasn’t enough support for the deal to pass through Congress. Negotiations on the TPP concluded in October 2015.
The trade deal appeared doomed in the lead up to the US election after Democrat candidate Hillary Clinton changed her position under pressure from rivals Bernie Sanders and Donald Trump, who both campaigned against it, and also came out in opposition to the deal, despite once calling it “the gold standard in trade agreements”, which she helped negotiate as secretary of State under Obama.
The TPP would have covered around 40% of the world’s total trade, and proponents warned that a US retreat would push the other 11 nations in the deal closer to China.
While going ahead with the pact would be “transformational” for the Australian economy, according to former trade minister Andrew Robb, providing “a very significant contribution to commercial stability in our region but also for peace and stability,” its defeat is a big win for China.
“…one upside to China under the Trump administration, relative to the Obama administration, is that the Trans-Pacific Partnership (TPP) free-trade pact — which excluded China — looks more certainly doomed,” noted Societe Generale analyst Wei Yao in a recent note to clients.
By not going ahead with it China has the opportunity to fill the vacuum left by the lack of US influence. The most likely vehicle for that would be China’s “One Belt One Road” initiative, which creates a partnerships to build infrastructure and trade with the country’s continental neighbours. Read more on that here.
Turnbull had made a last-minute plea in a phone call to Trump last week, but failed to persuade the Republican president-elect to reverse his position.
Australia will now pursue other regional trade deals, such as ASEAN’s planned Regional Comprehensive Economic Partnership (RCEP), which will be a hot topic of discussion at the Asia-Pacific Economic Co-operation summit in Peru next weekend.
It will be the first opportunity for world leaders, including Turnbull, to consider the implications of Trump’s election for global trade liberalisation.
Australian trade minister Steven Ciobo told the ABC’s Insiders that Australia had still thought the TPP was a good deal, but it would not make sense to conclude it in the current form without the US.
“Is there enough merit to look at a trade deal among the 11 of us? It changes the metrics substantially,” he said, adding: “This is not a case of all eggs in one basket.”
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