My series of articles is progressing. After discussing the North American Free Trade Agreement (NAFTA) in the new world with Donald Trump in the previous article, I switched to the Trans Pacific Partnership (TPP), another issue which the new president needled in the election campaign, and said that China has a share of this business, despite not being a party to it. Let us continue.
While it is projected that the TPP agreement will bring not-so-bad economic gains to the U.S., it is known that the issue essentially has higher purposes. As I discussed many times before, the outgoing U.S. President Barack Obama designed the TPP as a part of his strategy to prevent China's domination in the Asia Pacific.
We frequently heard that Trump defined the agreement as a “disaster” and vowed that he would sabotage it as soon as he came to power. He thinks the TPP is a complicated disgrace consisting of 5,600 pages which no one reads. Certainly, it is unclear what percent of his promises he will fulfil; however, he might be expected to act relatively crueler on the TPP. Even in a scenario when Trump well-temperedly wakes up in the morning in Washington and says, “Let us at least negotiate it,” things will hang in the balance. Therefore, it seems the TPP will crawl somewhere between stroke and death in the upcoming period.
A gift to China
When viewed rationally, this decision must consider possible losses as well as possible gains. Certainly, preventing the TPP means giving up the U.S.'s calculated economic gains and moreover, will it lead to extra losses? China's story becomes relevant here. With the possibility of actualizing the TPP decreasing, it cannot be rejected that China is happy these days. This is because, for China, the U.S.'s renunciation of the TPP means that the U.S.'s potential to gain relative strength in the region will decline. So, there will be new opportunities for China to economically dominate the region.
What are these opportunities? China will accelerate works on the Regional Comprehensive Economic Partnership (RCEP) on which it has long focused in the region. The Association of Southeast Asian Nations + 6 (ASEAN + Indonesia, Malaysia, the Philippines, Brunei Darussalam, Singapore, and Thailand) are a party to the RCEP. Conditions might be different and they might be asperities, but, parties will unavoidably ask “Why not the RCEP?” in an environment where the TPP is fluent. Let us note that the Japanese clearly said they will shift their attention to the RCEP, if the TTP will not take place.
As I write this article, Peru is waking up to an Asia-Pacific Economic Cooperation (APEC) meeting where the cooperation, including the U.S. and Russia, will discuss all this in the new world with Trump. We will be curious to see the statements of regional economies which will flow into Lima until Sunday.
As a result, the emergence of a format outside of the TPP, which excludes the U.S. in the Asia Pacific, might entail Trump economy's deprivation of opportunities in the region and the impairment of its competitiveness. So, Trump needs to keep an eye on it, while the aforementioned China-oriented strategic intents are the other part of the issue. In this context, aside from economic motives, I think that the U.S. will not give up the Pacific in the military sense. We even get some signals that the Trump administration already wants to increase military power, let alone maintain it.
In the new period with Trump, some direct effects are lying ahead of China which was unavoidably involved in the matter through the TPP. As is known, one of the most heated matters of debate in the election period was the U.S.-China trade. According to the final situation (2015), China is the third largest export and first largest import market for the U.S. The trade surplus going to China as result of this relation annoys Trump. We still remember his heavy accusation of China, crying out in the election campaign that China struck the U.S.
In this context, Trump also uttered that the U.S. might levy a 45 percent tax on import products coming from China (which is also the production base of some U.S. brands). As required by the bounds of his authorities, the possibility of retaliation and World Trade Organization (WTO) rules, he might have neither strength nor courage to go to the same extent this time. It is too little too late to bring back most of the things that have gone away. Moreover, it is certain that the new president will be up to no good around China. Depending on its extent, this includes unfavorable risks for both U.S. and China economies, and for successive global effects that will spread from here as a mix of facts and perceptions.
Let me conclude saying that I consider Trump's rapprochement with Russia against China's potential to gain strength to be inconvenient.
I will address Russia and other oil producers next time.