• March 9, 2017 at 4:43 pm

    Further to our previous discussion: The 45th president of the United States of America (USA) “Donald Trump” has announced withdrawal of USA from TPPA on 23rd January 2017, Within 72 hours of assuming office. The most positive thing in this decision was that it was an act of a politician executing his campaign pledge. Obama administration has negotiated for terms and conditions in this agreement for 6-years. It was considered as a business joint to control the growing influence of China in Asia‑Pacific countries. Now, the USA withdrew from this agreement.

    In this part of our discussion we will discuss about global implication of this decision.

    The execution of this decision will not only make impact on USA but also create an impact globally. However, one of major of implications was loss of credibility of USA among its business partners. This will affect the balance between businesses of USA & Asia. As TPPA was the major connecting link in the economic dominion of previous USA administration. The face of agreement after withdrawal of USA would not be same. Majority of countries want to go with the agreement, but without the ratification of USA the agreement has no fate and it will have moved to a dead end. In the absence of this agreement the economic center of start shifting across the Pacific i.e. toward Asia. Where the trade rules are lesser opaque, discriminatory which subvert the existing order, advance provincial objectives all these factors will consequently not good in the interest of USA.

    Now the years’ long planned agreement between worlds’ great economies lost its existence. Partner countries like New Zealand started looking for alternatives without USA.  Australian think tanks looking for solutions to revive the agreement without the USA and reconstitute the deal with inclusion of presently excluded countries, such as Indonesia and China. Although the inclusion of China in agreement might be opposed by existing members such as Japan and Vietnam. Majority of TPPA participating countries believe this would be a loss for not only them but also for global economy.

    Impact on China

    After exit of USA from Pacific trade, a vacuum is developed China is exploring opportunity to fill this vacuum. It could create an Asian free trade pact, according to a recent news. Which would help it do business across same countries those were in the list of previous USA administration. This planned pact would strengthen China to emerge as most stable economic power in all participating euro-Asian countries even during the period of recession. .

    China has started to develop an alternative agreement i.e. The Regional Comprehensive Economic Partnership (RCEP)”. This agreement will include negotiation between 16 countries (10 member of ASEAN and 6 regional members ‘India, Japan, China, South Korea, Australia and New Zealand’). In comparison to TPPA the RCEP involve lower standards for environment, labour rights and intellectual property protection which might be proven harmful for USA business in Asia. In addition, China played a major role in creation of the both Asian Infrastructure Investment Bank and the BRICS Bank. This will provide a leverage while negotiating for energy needs required with other countries like Russia and support to an established position to do business globally.

    The main goal of this agreement is to establish new markets for agricultural products and raw materials beyond Europe and Asia.

    Hence, China has precisely developed many multilateral economic forums to explore and exploit them to its advantage. On the contrary, a protectionist approach adopted by USA may result in its economic isolation.

    A study reveal that a joint venture between just China and Japan could put $5 billion in USA exports and millions of American jobs at risk.

    Impact on Canada and Mexico

    These countries already have a tensed relationship with Trump’s USA administration due to change immigration policies. The Mexican President Enrique Pena Nieto, already announced their plans to look for trade deals other nations and depend fewer on USA. Conversely, there is a trilateral trade agreement North American Free Trade Agreement (NAFTA) previously exist between USA, Mexico, and Canada since 1994. Trump has promised to renegotiate NAFTA, which will affect the economy of Canada greatly as only 12 percent of the cars assembled in Canada are sold domestically, with the vast majority being shipped to USA. In case, a higher import tax is levied after the NAFTA is renegotiated, it would make the proposition economically nonviable. Similar case is applicable for Mexico. Also lots of European automaker get affected by this negotiation, coz Germans have transferred the production plants to Mexico in search of cheaper labor and being more cost effective. Trump has threatened German carmakers with a 35% import tax if they do not build more cars in the USA.

    Impact on Peru

    One of the best performing economies of Latin America. The major cause of this development is the Lima’s bi-lateral trade pact with Washington, which was signed in 2009.

    Both Americans and Peruvians were benefited, everything from organic artichokes and quinoa to gold, silver and other metals mined in the Andes.

    Yet those gains could be at risk if President Donald Trump follows through on his campaign promise to renegotiate USA trade deals, in particular the bilateral Peru treaty.

    Impact on India

    India was not a part of TPPA, with its demise India will not get affected. But still there could be some long term impacts on Indian economy. Due to reduced tariffs, anti‑corruption measures, intellectual property obligations, human rights and child labour conditions, and environmental commitments India would not be able to join TPPA.

    Again, vacuum created by USA withdrawal from TPPA raise opportunity for new partnerships in Asia-Pacific region. , where China in all likelihood will emerge as a reliable bastion for smaller/ emerging economies. India, with its competitive pays and underutilized potential, may possibly tend gain. India will collaborate with China in RCEP. It also open gates for India to go for direct trade with USA using bilateral talks

    Conclusion

    From the above discussion, it can be concluded that this decision will president Trump to gain credibility. This gain could lose it dignity if there will not be a significant increase in jobs. If the USA paired preventive measures with their withdrawal from TPPA then soon we will audience trade war. Which would definitely impact economies of both and have undulate effects that impact countries across the globe.

    Hence it is difficult to identify exact benefit of USA withdrawal from TPPA. The decision has already been criticized by some American leaders.

     

    Result: Globalization gains are at menace and economic gains are no longer easy to come. All in all, Trump’s withdrawal from TPPA will likely to be remembered as a giant step in the slide towards a more protective world.