By Melito Salazar Jr.
After the 21 leaders of the Asia-Pacific Economic Cooperation (APEC) reiterated their commitment for free and open trade, President-elect Donald Trump of the United States announced in a video message that the US would quit the Trans-pacific partnership (TPP) on his first day in office. He indicated that he will embark on “fair trade deals” (bilateral?), going against the trend for multilateral trade deals as envisioned by the APEC leaders in their Lima Declaration, “on Free Trade Area of the Asia-Pacific (FTAAP) to advance quality growth and human development” FTAAP seeks to promote regional free and open trade and investment.
The TPP is a landmark agreement that eliminates or reduces tariffs, lowers the cost of trade, and sets new and high standards for global trade while addressing next-generation issues. The TPP is envisioned to promote economic growth, create jobs, raise living standards, reduce poverty, promote good governance, and enhance labor and environmental protections among its member countries. Signed on February 4, 2016, it covers 12 of the Pacific Rim countries, notably excluding China and accounts for 40% of the world’s gross domestic product and 30% of world trade. It establishes an investor-state dispute settlement mechanism.
In opting out from TPP, one wonders how many American jobs would the United States save considering that it may lead to having American manufacturing less competitive with other countries as cost of labor goes up together with inputs and raw materials. It is clear that American consumers will be the losers, having to pay more for products and services which other producing nations could have provided.
TPP, which is a US initiative, by establishing a common foundation for participating countries on labor, environment, intellectual property rights, good governance, etc., would have levelled the playing field making the United States which already follows most of these standards more globally competitive. It would have set the benchmark for all other countries, including the non-participants, leading to a much improved international system of trade.Without TPP (Japanese officials have declared that without the United States, TPP is “dead”), the United States may have unwittingly given up its leadership in global trade and business to China. Leaving TPP makes good Candidate Trump’s promise but it may not be good for the United States.
The China State Council website describes the Belt and Road Initiative (BRI) aims – to promote the connectivity of the Asian, European and African continents and their adjacent seas, establish and strengthen partnerships among the countries along the Belt and Road, set up all-dimensional, multitier and composite connectivity networks and realizes diversified, independent, balanced and sustainable development in these countries. Further, the BIR projects will help align and coordinate the development strategies of the countries along the Belt and Road, tap market potential in this region, promote investment and consumption, create demands and job opportunities, enhance people-to-people and cultural exchanges, and mutual learning among the peoples of the relevant countries, and enable them to understand, trust and respect each other and live in harmony, peace and prosperity.
On land, BIR will focus on building a new Eurasian Land Bridge and developing China-Mongolia-Russia, China-Central-West Asia and China-Indochina Peninsula economic corridors by taking advantage of international transport routes, relying on core cities along the Belt and Road and using key economic industrial parks as cooperation platforms. At sea, the Initiative will focus on jointly building smooth, secure and efficient transport routes connecting major sea ports along the Belt and Road.
The Chinese Ministry of Commerce reported that countries along the extensive Belt and Road infrastructure network saw their combined investment in China return to growth in the first nine months of 2016, specifically $6.12 billion, up 18.4 percent year-on-year, led by Saudi Arabia, Malaysia and Singapore.On the other hand, Chinese companies’ outbound direct investments to countries along the Belt and Road jumped to 66.2 percent in the same period. These are benefits that the United States may be foregoing by abandoning TPP.
BRI and the internationalization of Renminbi (RMB) are two anchors of China’s strategy for global dominance. Donald Trump’s protectionist stance may be handing the world leadership baton to China. It’s not just goodbye TPP, welcome BRI. It may be farewell, USA; welcome China!