Protectionism has grown quite popular in the United States as workers worry about losing jobs to other countries.
One particular sore spot for Americans across the political spectrum has been the Trans-Pacific Partnership, or TPP, the landmark free-trade agreement that aims to slash tariffs and promote economic growth among 12 nations in the Pacific Rim — excluding China.
Over the last year, both Donald Trump and Hillary Clinton zeroed in on these anxieties by saying they oppose the deal as they vied for the top job in the White House.
Trump in particular made the debate over free trade one of the central topics of his campaign after criticising China, Mexico, and Japan. He called the TPP “a rape of our country,” and at one point even suggested putting a 45% tariff on Chinese imports.
Now that he has been elected the 45th president of the United States, the possibility of the TPP deal passing has effectively dropped to nil. And that could have major implications for the Asia Pacific.
“…the chances of TPP passing this year are not high, and if it is not passed by the end of the lame duck session of Congress, then it probably will not be passed at all — at least, as presently constituted,” wrote analysts at BMI Research.
“Failure to pass the TPP would be a sea-change for US trade policy, as the US has never before failed to ratify a negotiated trade agreement,” they added.
“I think the TPP is dead, and there will be blood all over the floor if somebody tries to move that through the Congress any time soon,” Alabama Sen. Jeff Sessions told the New York Observer. “Both candidates opposed it, Hillary Clinton and Donald Trump.”
One country in particular that will feel the effects here is Japan, whose “hopes for the TPP [are now] dead and buried,” according to Capital Economics’ Marcel Thieliant.
“The key immediate economic implication of Donald Trump’s election win is that the TPP trade deal, which many in Japan had hopes would drive faster gains in productivity, has no hope of being implemented,” he wrote in a note to clients. “The upshot is that the long-term losses for Japan from the TPP not coming into force are substantial.”
It’s not just the economy, stupid
Still, despite voters’ job concerns, the TPP is not just about economics. As China continues to grow economically on the global stage and militarily in Asia, the deal is arguably more about the United States’ long-term position in Asia than about the near-term financial advantages.
Notably, back in September, Japanese Prime Minister Shinzo Abe furiously promoted the TTP deal at various investment and media events when major world leaders congregated in New York for the UN General Assembly.
During one event attended by the prime minister that week, an investment seminar hosted by the Japan External Trade Organisation and the Japanese Ministry of Economy, Trade, and Industry at the Pierre Hotel, Dr. Ziad Haider, special representative for commercial and business affairs at the US Department of State said, “Secretary Kerry … likes to say that foreign policy is economic policy, and in saying that he’s referring to that interplay between foreign policy, foreign affairs, economic issues, and it’s certainly true with bilateral diplomatic relations, as well.”
“A lot depends on TPP,” Eurasia Group President Ian Bremmer previously told Business Insider. “If it doesn’t get done, China will become the fall-back leader for Asian economic architecture. And US relations with many countries in the region will slip.”
And so, the US somewhat receding from the Asia Pacific if the TPP deal fails likely comes with geopolitical ramifications going forward.
“If Trump wins, the Japanese are more freaked out than almost anyone in the region,” Bremmer told Business Insider in an interview as the election results were rolling out on Tuesday night. “And, yes, they will focus more on their military, but really they will recognise the United States is not as committed to them as an ally and they will need to find ways to work with the Chinese economically.”
“In Asia, at the very least, China is the economic power; China has political stability; China long-term feels like a country that isn’t going anywhere. Where the Americans used to be your friend and now who knows after the 2016 election?” he continued.
“So that’s the issue. No where else in the world is there a country that can take America’s place. In Asia, China feels like increasingly they can. So a lot of American allies would be aligning with the Chinese accordingly.”
Taking it a step further, the BMI Research team argued that, “a Trump presidency would represent a radical departure from the status quo” in the region, writing:
“Firstly, he has questioned the usefulness of stationing American troops in Japan and South Korea, thus challenging the pillars of US military power in East Asia for the last 70 years (the US maintains 40,000 troops in Japan and 28,000 troops in South Korea). Trump wants Tokyo and Seoul to pay Washington to defend them, or failing that, has suggested that they could develop their own nuclear arsenals for deterrence. The latter suggestion goes against decades of US policy aimed at preventing the spread of nuclear weapons, and in Japan’s case, decades of anti-nuclear sentiment. Even Japanese and South Korean defence hawks are cautious about expressing the need for atomic arms. […]
Trump’s apparent lack of commitment to Japan and South Korea could embolden their adversaries.”
As an interesting side note, it’s notable that as the US appears to be withdrawing from the Asia Pacific, Canada seems to be moving closer — at least economically. China and Canada announced that they opened “exploratory talks” on a possible free-trade agreement in September, and the country applied to join the China-backed Asian Infrastructure Investment Bank, AIIB in late August.
The only two major economic powers not yet in the AIIB? The US and Japan.