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Trump Stealing A Page Out Of Xi's Belt And Road Playbook Will Not Stop The TPP
The future of global trade appears to be going back to the way things were before -- with special characteristics, of course.
I’ve been traveling around Southeast Asia for the past few months researching the rise of Chinese influence and the (real and perceived) decline of American clout throughout the region, something which little Brunei -- a country of 400,000 people that has a real king who lives in a palace and sits on a golden throne -- is oddly positioned at the center of.
Balance of trade
Hafimi Haadii told me that she is an architect by training but found her passion in entrepreneurship, eventually becoming a key link between the Brunei government and the country’s business community, as well as being appointed as a representative for the APEC (the Asia-Pacific Economic Cooperation community), straddling, as she put it, “that fine line between government and private sector.”
I was interested in what would become of the Trans-Pacific Partnership (TPP) now that Donald Trump crumpled it up and tossed it into the presidential wastepaper basket on his first full day at the helm, essentially declaring “an end to the era of multinational trade agreements that defined global economics for decades.”
“The main driver of APEC is obviously trade,” Haadii began. “Free and open trade … With trade comes better partnerships, better understanding of each other, and hopefully better political arrangements.”
The TPP actually got its start when Singapore, New Zealand and Chile got together in 2002 and decided to form a group called the P-3. A few years later, Brunei was added into the mix, and its name was changed to the P-4 to reflect this.
Although the P-4 aimed to boost trade and political relations along both flanks of the Pacific, it was ultimately a treehouse club for geo-economic weenies, with all of the countries combined boasting a population of just 28.5 million and a collective GDP of $736 billion -- which doesn’t even add up to that of the U.S. state of Illinois.
But the fact that they were small was exactly why they bonded together.
“It actually started with this core group of people, because they realized that they were the smaller economies,” Haadii explained. “Brunei being a very small economy, if we were to negotiate bilaterally, it wouldn't work for us, because the bigger guys would say ‘Well, I've got everything that you've got, what can you do for me?’ So Brunei saw this as a very good opportunity to access bigger markets that we would not [otherwise] have.”
But eventually, the big boys of the Pacific would come knocking on the doors of the P-4's clubhouse, as Australia, Canada, Japan, Mexico, Malaysia, Peru, Vietnam, and, eventually, the U.S. all wanted to get inside. The original members responded by flinging open the doors, as the P-4 morphed into the largest trade pact in history: the TPP, a 12-nation behemoth with an annual GDP of $28 trillion -- roughly one-third of all global trade.
A global marketplace
The U.S. took interest in the TPP in 2008 as it was viewed as a way to better position U.S. companies in the Asia-Pacific, “which is seeing the proliferation of preferential trade agreements among U.S. competitors and the development of several competing regional economic integration initiatives that exclude the United States.”
The TPP took on new significance under Obama, and was a key piece of his "pivot to Asia," with a U.S. Congress research paper pointing out that “the region has served as an anchor of U.S. strategic relationships, first in the containment of communism and more recently as a counterweight to the rise of China.”
From Haadii’s perspective, the TPP would have been “very, very good for companies in the U.S.”
“The general population, it takes a lot of buy-in for them … it's like, ‘Oh, I'm opening up everything, people are going to come steal my jobs, that protectionist mentality. What they don't understand is when you open up markets and you open up the competition, it improves your local productivity.”
But she wasn’t talking about the big multinationals firms that are usually mentioned alongside talks about free trade.
“There are a lot of very, very good companies in the U.S. They're not multinationals, they're actually businesses run by families or even small groups, but they are run extremely successfully. Because their markets have always been the U.S., their products can actually do much better outside the U.S… especially when local consumption reduces.”
Haadii viewed the TPP as something that could give these smaller American companies better access to the booming markets of Southeast Asia.
However, Donald Trump really didn’t see it that way.
The Trump factor
“So what was the general reaction in Brunei when Trump was elected president and then immediately left the TPP?” I asked.
“Nobody really knew where he was coming from," Haadii replied. "Nobody was really prepared. It was more of a 'we'll wait and see.' I think waiting until the meeting in Peru there was a sense of 'what's going to happen next?'”
U.S. President Donald Trump holds up an executive order withdrawing the US from the Trans-Pacific... [+]
More on Forbes: The TPP Moves Forward Without Trump's America
“What do you think is going to happen with TPP now? Do you think it will be less powerful?”
“I don't think it's less powerful,” Haadii responded. “I think there are other economies at play, that if they do step up to the plate it can still be a very, very good trade pact … Ever since President Trump actually made the announcement that he was actually pulling the U.S. out, the meetings are still going. I think the remaining economies don't give up … Regardless of what's happened, I think for us, we're still going to stick to the course of what we're doing.”
The future of the TPP
So the TPP carries on, even without Trump and the world's largest economy.
It has been posited that Trump pulling out of the TPP would open the way for China to come in and take more aggressive control over a region of the world where they are gaining evermore political influence and seeding evermore economic dependency. While this very well may end up working out this way, it’s not as cause and effect as it may seem. Trump’s pullout of the TPP seems to be more of a taking of a page out of Xi Jinping’s playbook than anything else.
In his reasoning behind squashing the United State’s participation in the TPP, Trump claimed that he prefers to establish an array of one-on-one bilateral trade deals rather than entering into massive multilateral arrangements, which appears startlingly similar to what Xi Jinping is setting up around the world via the Belt and Road Initiative:
The BRI can ultimately be deduced to a series of interconnected bilateral trade and development deals which China is making either one-on-one or group+1 with countries and political blocs across Asia, Europe, and Africa. There is no overarching structure, no membership protocols, no moralistic browbeatings, no predefined set of standards that BRI participants need to uphold in unison, and deals that are made do not need to be watered down to the lowest common denominator of an established group. Each country or bloc negotiates on their own terms, and deals can be structured in accordance with each set of particular parameters. When things go awry, China can renegotiate with the conflicting party directly rather than having a situation that puts an entire multilateral network at risk.
China’s strategy does have some marked benefits for the more powerful player in these trade deals, as it allows them to go into the ring with specific, weaker governments one-on-one rather than dealing with an entire bloc of smaller countries who can use their combined clout to neutralize or, in some cases, fuel unfavorable trade movements for the more dominant player. These toe-to-toe types of deals seem to be the exact type of scenario that the U.S. President, who views himself as a beast negotiator, would more than likely find extremely rewarding.
As China continues to demonstrate success with their "toe-to-toe" brand of diplomacy, striking trade deals and big infrastructure development projects all over the world, its application could very well become the new norm of trade relations. And President Trump may be right, the era of multinational trade agreements that defined the first stage of globalization may very well be dead ... even as the TPP keeps trying to kickstart itself off of fumes.