The TPP is dead; long live the TPP. Over one year after the United States pulled out of the Trans-Pacific Partnership, seemingly dooming years of talks and preparation, a new agreement between the deal’s remaining 11 countries now looks set to be signed in March.
For Australia, this is good news. As a global trading nation, Australia's prosperity depends on a stable, rules-based and open international trading regime.
"The rising backlash against trade and globalisation continues across the globe amid growing income inequality, stagnant wages and job losses."
That system, especially Asia, the world's centre of economic dynamism, is currently under threat on multiple fronts - competing geopolitical and geoeconomic visions for the region, populism and backlash against globalisation and a rapid and disruptive rise of under-regulated digitally-enabled trade.
In the wake of trade uncertainty out of the US, governments across the Asia-Pacific are reassessing their reliance on American economic leadership and its markets, while pressing ahead with their own trade and investment agreements.
These themes are explored in a new Asia Society Policy Institute paper, Shifting Trade Winds: US Bilateralism and Asia-Pacific Economic Integration, which looks at how policymakers in the region are navigating the new world.
The report led by my colleague Wendy Cutler, one of the leading global trade experts, is a product of collaboration of Australian (Peter Grey, Former CEO of Austrade and Asia Society Australia Advisory Councillor), Japanese, Chinese, Philippines, Indonesian and Korean trade experts and former senior officials.
Backlash
The rising backlash against trade and globalisation continues across the globe amid growing income inequality, stagnant wages and job losses. A growing number of people feel left out of an increasingly connected world and are making their voices heard at the domestic and international level.
Moreover, some in the Asia-Pacific region are starting to seriously question the consensus around the rules-based multilateral system which has governed trade for the past 70 years and trade liberalisation more broadly. This is most prevalent in the US but by no means limited to the world’s largest economy.
East Asian nations have emerged as the leading advocates for trade - mainly because their prosperity of the last decades has been largely a result of economic liberalisation and regional integration. The region continues to be a bright spot on the global economic scene—in 2017, nine of the 15 fastest-growing economies were in Asia. While the APAC region accounted for less than 30 percent of global gross-domestic product in 2000, today it accounts for more than 40 per cent. Economists agree the region will continue to drive global growth for years to come.
Nevertheless, risks underlie global and regional economic growth and global trade projections. The World Trade Organisation warns factors such as monetary tightening, geopolitical tensions, the potential for restrictive trade policy measures, and costly natural disasters could undercut growth in global trade flows. A U.S.-China confrontation over trade will also be disastrous, given the combined weight and interdependency of their economies.
Amid such uncertainty, there is no guarantee of continued growth and rising prosperity without forward-looking, inclusive frameworks and policies.
Shaken
The withdrawal of the US from the TPP in 2017 shook the Asia-Pacific but ultimately prompted regional economies to take matters into their own hands.
In the wake of this, Shifting Trade Winds contains a number of recommendations for the countries in the new TPP, including:
The United States, a member of the original Trans-Pacific Partnership, will hopefully reconsider joining the agreement at the appropriate time.
Crossroads
As 2017 began, the course of trade and investment in the region was at a crossroads. By following one road, Asia-Pacific economies could work to promote high standards and inclusiveness in trade agreements, drive forward regional economic integration, and build support for trade agreements.
On the other, they could capitulate to forces calling for greater protectionism and isolationism, becoming less open and integrated, upsetting the regional economic and security balance.
As 2018 begins it is clear the Asia-Pacific region has chosen the first path, albeit without the US.
Should the region continue to liberalise and prosper through regional economic integration, the US may wish to step up its engagement and become a leader once again – an outcome we would strongly welcome.
Philipp Ivanov is Chief Executive Officer at Asia Society Australia
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
27 Oct 2015
09 Feb 2017