Trans-Pacific Partnership (TPP) was a landmark trade deal driven by US which spanned 12 Pacific Rim countries, excluding China. It was viewed as President Barack Obama’s strategy to set more ambitious trade rules and preserve US dominance. In keeping with his election promise, President-elect Donald Trump said he would undo TPP on his first day in office. Harsha Vardhana Singh, former deputy director-general at WTO, who is now executive director at Brookings India, spoke to Sanjiv Shankaran of the Times of India about the regional economic implications of Trump’s decision and why he thinks it will give India greater leeway in global trade.
What does Donald Trump’s decision on undoing TPP imply?
For all practical purposes TPP without US will not be TPP. Trump is not against the trade deal. He is just saying i want to negotiate a fair trade deal. When TPP was negotiated, US effort was to address the non-level playing field which was created by perceptions that different standards were used in competing economies. TPP was an effort to address that.
Given Trump’s stance, TPP as envisaged will not be implemented. TPP is a reflection of the kind of regime which US administration thought was needed to address their concerns about conditions in the global market. It was a well-conceived framework that took US interests ahead. Those interests are still valid and Trump is not against a negotiation. He said we will negotiate fair bilateral trade deals which bring back jobs and industry to American soil. You are going to have a revised trade deal.
My perception is that US sees its own market to be very open in terms of tariff schedule promised in TPP. So that is one area where it may go back. Trump is not that strongly committed to environmental objectives as President Obama has been. That’s one area where there may be some kind of lower priority within the revised agreement and perhaps on labour there might be greater focus because labour unions feels that they need to preserve the existing jobs.
The second aspect (of Trump’s promises) is the bilateral deals part. This is semantics because TPP covers 40% of global GDP and about a quarter of world trade. So, it’s a significant area where they would create value chain links. A bilateral trade will completely negate that objective.
In a situation where Trump may not want to invest time in pursuing trade deals, will China assume responsibility and global trade leadership?
The key issue is whether others are comfortable opening their markets to Chinese imports. The initial question is can we open up our markets any more to Chinese exports? That is the reason why the TPP strategy was to negotiate an agreement, get certain rules and then they make it attractive enough for China to come in. China will come in with rules already agreed. That was the implicit strategy of TPP.
Was it all about containing China?
Ambitious conditions are among the key objectives of US negotiators. They feel with China coming and the large weight it has, there will be difficulties in achieving the same kind of ambition. Each negotiator is working for national interest. Each one thinks let me get maximum win at lowest cost. US ambition may be to seek large openings from China. In negotiating a deal if existing conditions are not already there, China may be in a position to limit that ambition.
If we assume TPP is finished, does it help India?
For India if TPP had come into place there would have been trade diversion (to the 12 TPP members). Now, there is breathing space for India. This is the time to focus on what is required. We should take the initiative of improving ease of doing business to another level.
How will recent developments impact WTO?
Factors emphasised in US elections (like job losses to globalisation) were covered in WTO under market access. Those aspects were difficult to deal with because of TPP.
I am being optimistic: if US changes its views on market access perhaps discussions at WTO could begin. There are other aspects which can take off and are doing so – such as services facilitation. People will continue to seek specific results in specific areas instead of a large umbrella deal. In areas where ambition is high such as information technology you can have plurilaterals (narrower group of signatories) in WTO.
This article first appeared in the Times of India on November 25, 2016. Like other products of the Brookings Institution India Center, this article is intended to contribute to discussion and stimulate debate on important issues. The views are of the author(s). Brookings India does not have any institutional views.