President-elect Donald Trump promised to destroy President Barack Obama’s legacy trade deal, leaving a void in Asia likely to be filled by a rising China.
Trump wants to tear up the Trans-Pacific Partnership (TPP), a 12-country trade pact he called “a potential disaster for our country,” on his first day in office.
“This is very depressing news. It means the end of US leadership on trade and the passing of the baton,” Executive Director of the Asian Trade Centre Deborah Elms told the BBC.
“We like the US being in the region. But if the US is not there, that void needs to be filled, and it will be filled by China,” New Zealand’s Prime Minister John Key explained.
“China will not shut the door to the outside world but will open it even wider,” Chinese President Xi Jinping said at the Asia Pacific Economic Cooperation (APEC) summit in Peru this past weekend. “[We will] fully involve ourselves in economic globalization.”
China may attempt to take the lead in global trade through projects like the China-led Regional Comprehensive Economic Partnership (RCEP), a 16-member trade agreement which does not include the U.S. RCEP is designed to remove trade barriers and create a single market accounting for roughly one-third the global GDP. If approved, RCEP will create one of the largest free-trade zones in the world.
The RCEP noticeably lacks many of the strict requirements of TPP.
TPP demands countries uphold labor rights in accordance with the rules of the International Labor Organization, engage in environmental protection, permit the free flow of information, push state-owned enterprises to make decisions in accordance with the demands of the market rather than the needs of the specific country, and fight corruption. China, which struggles with all of the aforementioned requirements, has not sought to include such regulations in \RCEP.
TPP excluded China, but was expected to encourage Beijing to aspire to higher standards; the death of the trade deal may deter much needed reforms.
China is also an advocate for the Free Trade Area of the Asia Pacific (FTAAP), a trade deal which could potentially include 21 global economies. At the APEC summit, Xi pushed forward China’s FTAAP agenda.
Both RCEP and FTAAP faced setbacks in the face of TPP. The collapse of TPP may breathe new life into these agreements.
While not a free-trade platform, China is promoting its “One Belt, One Road” project, a regional economic integration project which involves building a Silk Road Economic Belt (SREB) and 21st century Maritime Silk Road (MSR). The project would put China at the heart of a massive transcontinental trade network that may some day be worth trillions of dollars.
While the death of TPP may create new opportunities for China to boost its influence, China is not convinced it’s ready to lead.
“China still cannot match the US in terms of comprehensive strength. It has no ability to lead the world in an overall way, plus, neither the world nor China is psychologically ready for it. It’s beyond imagination to think that China could replace the US to lead the world,” the Global Times wrote Monday. “For a long time to come, the leadership of the US will be irreplaceable, meanwhile, China’s further rise is inevitable.”
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