President Donald Trump made a point on his first day in office to formally remove the U.S. from the contentious trade agreement known as TPP. WSJ’s Gerald F. Seib explains how Trump’s campaign promises on trade might play out in the new administration. Photo: AP
AUSTRALIA is working to recast the Trans-Pacific Partnership without the United States and open the door for China to sign up after President Donald Trump ditched the huge trade pact.
The deal included a dozen Asia-Pacific nations which together account for 40 per cent of the global economy.
But Trump declared on Monday he had “terminated” it in line with election pledges to scrap the “job killer” pact.
Canberra is floating a “TPP 12 minus one”, with Prime Minister Malcolm Turnbull saying his government was in “active discussions” with other signatories including Japan, New Zealand and Singapore on how to salvage the agreement.
“It is possible that US policy could change over time on this, as it has done on other trade deals,” Mr Turnbull told reporters in Canberra, adding that the nominee for US secretary of state Rex Tillerson and Republicans supported the TPP.
“There is also the opportunity for the TPP to proceed without the United States. Certainly there is the potential for China to join the TPP.”
The agreement, the biggest trade deal in history, was seen as a counter to China’s rising economic influence. It was signed last year but has not gone into effect.
Trade Minister Steven Ciobo said Australia, Canada, Mexico and others had canvassed for a pact without the United States at a World Trade Organisation ministerial meeting in Davos.
“There would be scope for China if we were able to reformulate it to be a TPP 12 minus one, for countries like Indonesia or China or indeed other countries to consider joining,” Ciobo told the ABC.
“This is very much a live option and we are pursuing it and it will be the focus of conversations for some time to come.”
Opposition spokesman for defence Richard Marles responded to Malcolm Turnbull’s claim Bill Shorten and Labor were enaging in protectionist policies.
“Malcolm Turnbull is all over the place. He has said that his principal economic agenda is the TPP,” he told Sky News this morning.
“No amount of hoping and wishing is going to make that occur.”
He said it was “silly” to suggest that Labor was siding with Pauling Hanson on the issue.
“Labor has been a supporter of trade liberalisation for decades,” he said.
Former trade minister Andrew Robb likened the TPP to a difficult-to-unscramble omelette.
Mr Robb said reconfiguring the deal to exclude the US or bring in other countries would be tricky.
“It’s not impossible to bring China in but you’d be out for another four or five years of negotiations” and the deal would be “a very big omelette to unscramble”, he told ABC TV.
“I’d leave the TPP in the top drawer because I think the politics will change in the United States.”
Mr Robb retired from politics in February last year after sealing bilateral free trade deals with Korea, Japan and China and helping negotiate the TPP.
Mr Robb said Australia should now focus on the China-led Regional Comprehensive Economic Partnership trade deal which includes India, Japan and southeast Asian countries.
“If that’s concluded this year that will put enormous pressure on the United States – not only trade pressure but also geopolitical pressure when the region starts to wonder who do they turn to for leadership,” he said.
New Zealand Prime Minister Bill English noted that Beijing “hasn’t been slow to spot the opportunity” to cast itself as a free trade supporter.
There was a willingness towards “making an effort to find out what we can do with TPP, rather than just dropping it and waiting and hoping to get a call (from Washington) about bilateral agreements sometime”, he told reporters in Wellington.
Trump said he would pursue bilateral deals with TPP signatories to secure terms more favourable to the US.
But English said a US-New Zealand pact would be challenging given Trump’s insistence that Washington would dictate terms.
Alan Oxley, the first Australian to chair the General Agreement on Tariffs and Trade (GATT), the World Trade Organisation’s predecessor, said Chinese involvement in the TPP was unlikely at this stage since it had bigger issues to tackle.
“China’s certainly interested in the long run … but the prospect of them tying into the TPP now, given their own domestic economic problems, has got to be considered very low,” Oxley, who heads the Australian APEC Study Centre at RMIT University, told AFP.
The most likely option for TPP nations was “let the dust settle” and wait for possible changes in US attitudes towards multilateral pacts.
“There was support for the TPP from the leaders of both houses of Congress … and trade policy is settled by Congress and the Administration,” Oxley said.
“It’s worth noting that (previous US president Barack) Obama in his first term opposed free-trade agreements, and in his second term switched positions.
“So US politics on trade policy is more fluid, I think, than some outside the US realise.”
His view was echoed by analysts in Japan, even though Prime Minister Shinzo Abe — a big supporter of the accord — has said the TPP would not make sense without the US.
“Japan thinks it’s worth patiently maintaining the (TPP) framework even until the United States possibly comes back to it under the next administration,” Yoko Takeda, chief economist at Mitsubishi Research Institute, told AFP.
“Also, it is still unknown if the Trump administration is really walking away from TPP or if it could be a negotiating bluff. It’s too early for Japan to change its stance.”