Editorial: US will be left behind on trade deals
In the world according to Donald Trump the Trans-Pacific Partnership is dead.
But Trump’s proclamations and America’s new protectionist outlook can’t kill the desire of emerging economies, including New Zealand, for a world where international trade offers a path to growth and prosperity.
New Zealand’s hopes for progress on free-trade breakthrough in the Asia-Pacific region remain very much alive after the latest Apec meeting in Peru.
China has been quick to step into the vacuum and seize the initiative as the US looks inwards. It looks set to benefit with increased economic influence in the Pacific region – which may now stretch into South America.
Whether that translates to increased political influence remains to be seen, but it will no doubt worry Americans who retain an interest in the region – including many of Trump’s Republican colleagues.
While he will be disappointed that the US President-elect has ruled out any last chance to revisit the TPP, John Key can return from Apec confident that New Zealand’s hopes of achieving further trade gains in the relatively near future have not been dashed.
He has returned with a commitment from China to begin renegotiating our bilateral FTA.
That’s good news for exporters who will look forward to further gains on a deal in which trade with China has nearly tripled in the past decade, with two-way trade rising from $8.2 billion in the year ended June 2007 – the year before the Free Trade Agreement was signed – to $23b in the June 2016 year.
Then there was talk of the TPP nations carrying on without America. That’s something that might be most practically achieved via the 2012 Regional Comprehensive Economic Partnership (RCEP).
That 2012 agreement put the framework already in place for an agreement with the 10 Asean nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) plus China, India, Japan, South Korea, Australia and New Zealand.
Even more promising, TPP signatories Peru and Chile have indicated a willingness to join RCEP.
If it makes good progress, others may follow.
If Mexico, facing the unpalatable prospect of renegotiating its position in the North American Free Trade Agreement (Nafta), were to get involved then the RCEP agreement could start to represent a serious concern to the US.
The economic advantages for the US in taking an aggressive protectionist stance on trade remain dubious at best.
Certainly global free trade has faced a populist backlash in the past few years.
But the correlation between global trade and global economic growth is well established.
There is no doubt that America remains the world’s economic powerhouse – it represents 22 per cent of global GDP.
If any country has the clout to go it alone on trade it is the US.
But the rest of the world, particularly the emerging nations of the Pacific-rim have no choice but to forge on.
If they can get the trade and can get the formula right then there is potential to create a successful trading bloc that America can’t afford to ignore.
Under domestic political pressure from free-trade advocates on both sides of the US political spectrum Trump may yet be forced to step back from his hard line on trade.
When eventually the US returns to the multilateral free-trade party, it may do so with its power and influence greatly diminished.