Regional partnership shows how China could soon be writing the rules in international trade

US president Donald Trump’s signing of an executive order withdrawing the US from the Trans-Pacific Partnership (TPP) will be a boon to China, experts say. The TPP, developed over more than eight years and with 12 signatory Asian and Pacific Rim countries, was considered a centrepiece of former president Barack Obama’s Asia policy.

Chinese President Xi Jinping has been actively pursuing stronger trade and investment ties with its neighbours, notably through its massive One Belt, One Road initiative and through its promotion of the Regional Comprehensive Economic Partnership (RCEP), an alternative free trade agreement to the TPP, which excludes the US. The RCEP includes 16 countries – China, the ten Association of South-East Asian Nations (ASEAN) members and six countries with which they have free trade agreements: Japan, South Korea, Australia, New Zealand and India. The RCEP population accounts for approximately 3.4 billion people with a total GDP of $21,400bn. 

In the absence of a US-led trade deal, many economists and regional experts predict Asian countries will instead gravitate to the RCEP, giving China far greater leeway to cement its economic and political leadership in the Asia-Pacific region. Obama administration officials warned that the passage of the RCEP would lead to significantly decreased market share for US industries exporting goods to Asia.  

“There are a lot of losses here in terms of US trade strategy, and the rules of the game in Asia going forward are increasingly going to be written by China,” says Ted Alden, senior fellow at the Council on Foreign Relations in Washington DC. “The new RCEP will become the central regional trading agreement in the absence of the TPP, and other countries in the region are a part of that.”

At the 2017 World Economic Forum in Davos, Xi Jinping – the first Chinese leader to attend the forum – delivered a speech staunchly defending globalisation. He compared the global economy to a “big ocean that you cannot escape from”, and likened protectionism to “locking one’s self in a dark room”. 

Deborah Elms, executive director of the Singapore-based Asian Trade Centre, told fDi: “Mr Xi’s speech was a stark reminder of the upside-down trade world coming in 2017. China was urging restraint, openness and multilateralism. The US was absent. Mr Xi’s presence clearly signalled China’s intention to lead – not just Asia, but globally.” 

This article is sourced from fDi Magazine
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