The Current State of TPP - Commentary

As the US election became the US inauguration, many Australian policymakers and businesses became concerned about whether or not the TPP would go ahead. The Trans-Pacific Partnership was intended to be a partnership of twelve states from around the pacific region, with America as the largest economy and lynchpin of the agreement. However, in one of his first acts as the President of the United States of America, Donald Trump signed a memorandum to pull American support from the scheme. In doing so, the longevity of the TPP has been jeopardised. With only one country ratifying the agreement so far (Japan) and the divide between the Asian and South American countries that make up most of the member nations the loss of the US to act as the connective tissue between the two sides of the pacific, it is hard to see how the agreement could continue or evolve without the US.
 
In many ways this is a blow to Australian businesses. From an economic standpoint, the chance to open markets in the South American region, as well as strengthen existing agreements in Asia, is one that may be missed without the benefits of the TPP to deregulate high tariff rates and allow mutual recognition of qualifications and trade in services to flourish. From a political perspective, it also signals a disengagement from the Asia-Pacific region by the US, which may by extension harm Australia’s foreign policy goals in the area. Our traditional alliance with the US has been characterised by our willingness to follow the lead they provide, whether in war or in sanctions. The question of if this cooperative spirit extends to our economic opportunities remains to be seen.
 
Despite the demise of the TPP with the withdrawal of US support, the age of massive multi-laterals can continue with the RCEP. Originally intended to run in parallel with the TPP to work towards a Free Trade Area for the Asia Pacific Region, the Regional Comprehensive Economic Partnership is likely to be where the focus Australia foreign policy will now shift. This agreement covers all ASEAN nations as well as China, Japan, South Korea and New Zealand (all of whom are partners in other FTA’s with Australia) and India. As the second largest growing economy behind China, a partnership would work heavily in Australia’s favour, especially when all other negotiating partners have established strong economic ties with one another.
 
As businesses increasingly operate internationally, through e-commerce and physical trade, these massive agreements are a necessity. They allow the development of sophisticated supply chains, economic growth beyond the confines of a national border and for SME’s to compete with multi-nationals by simplifying the exporting process. While the loss of the TPP and subsequent shift in US policy may delay the maturation of a truly free trade region in the Asia-Pacific.

RCEP Regional the other massive multi-lateral is now well on the way for completion, and other agreements will follow the fill the gap and build the unions that will characterise the next age of trade, diplomacy and innovation.

*Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam) and the six states with which include India, China, Australia, Japan, South Korea and New Zealand.

In total, the grouping of 16 nations includes more than 3 billion people, has a combined GDP of about $17 trillion, and accounts for about 40 percent of world trade.

If negotiated successfully, RCEP would create the world’s largest trading bloc and have major implications for Asian countries and the world economy.

Author: Nick Linsley