What Trump’s move means for Australia

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US President Donald Trump has killed America’s involvement in the Trans-Pacific Partnership free trade deal.

US President Donald Trump prepares to sign several executive orders in the Oval Office of the White House. Picture: Saul Loeb/AFP

THE withdrawal of the US from the Trans-Pacific Partnership will be a huge blow to some Australian producers but its biggest impact could be to relations in the Asia-Pacific.

With the stroke of his pen and a smile, US President Donald Trump lived up to his promise of killing the TPP between America, Australia, New Zealand and nine other Pacific nations.

The agreement was originally billed as the gold-standard in free trade deals and a strategy to blunt China’s dominance in the Asia-Pacific.

But just three days after the TPP’s champion, former president Barack Obama, moved out of the White House, Mr Trump signed the executive order to withdraw the US from the TPP.

It is a major blow to Australian Prime Minister Malcolm Turnbull as the TPP was the key plank of the nation’s trade policy.

“Everyone knows what that means, right?” Mr Trump said at the signing ceremony.

“We’ve been talking about this for a long time. It’s a great thing for the American worker.”

A slimmed down TPP, without the US, could emerge, although China is expected to move in and fill the hole left by America. China was not invited to join the TPP and had already been negotiating its own rival deal, the RCEP.

The TPP was between the US, Australia, New Zealand, Canada, Japan, Singapore, Mexico, Chile, Vietnam, Peru, Brunei and Malaysia.

Australian Trade Minster Steven Ciobo, who is in the US, said on the weekend he had been speaking with remaining TPP nations “on ways to lock in the benefits from the TPP” without US involvement.

Negotiations began more than eight years ago and Australia’s prime ministers during the period — Julia Gillard, Kevin Rudd, Tony Abbott and Mr Turnbull — all threw their support behind it.

The deal was signed last year and was in the process of being ratified. That looks unlikely to happen now that the US has pulled out.

US President Donald Trump holds up an executive order withdrawing the US from the Trans-Pacific Partnership after signing it in the Oval Office of the White House in Washington on Monday. Picture: Saul Loeb/AFP

US President Donald Trump holds up an executive order withdrawing the US from the Trans-Pacific Partnership after signing it in the Oval Office of the White House in Washington on Monday. Picture: Saul Loeb/AFPSource:AFP

AUSSIE BUSINESSES LOSE OUT

Submissions to a Senate inquiry on the TPP highlighted some of the benefits to the Australian economy, with the committee expected to report back on February 7.

In particular the Australian sugar industry was a big winner from the deal.

According to the Australian Sugar Industry Alliance, the TPP allowed Australian producers to export an extra 65,000 tonnes of sugar to the US — 74 per cent higher than the current limit — worth more than $13 million a year to farmers.

In addition to this, they would also be able to provide 23 per cent of any extra raw sugar allocations in the US, and the TPP also removed an in-quota tariff worth about $3 million a year to Australia.

If the US withdrawal means the entire deal falls apart, producers looking to unlock other markets are also set to lose out.

The Australian pork industry was expected to benefit from the removal of tariffs in markets such as Mexico, a significant pork-importing country.

Cheese makers were expected to benefit from the cutting of tariffs to Japan and increased access to the US.

The Business Council of Australia said reducing barriers and costs to doing business internationally would help generate new jobs and opportunities.

“Seventy per cent of our exports currently flow to TPP countries,” it said.

It quoted World Bank modelling that suggested Australia’s GDP would increase by 0.7 per cent by 2030, and exports would increase by 5 per cent.

The Peterson Institute’s modelling has estimated that the TPP would lead to a US$15 billion permanent increase in Australia’s real GDP.

Cane farmers like Steve Calgano had been worried about Donald Trump’s TPP move.

Cane farmers like Steve Calgano had been worried about Donald Trump’s TPP move.Source:News Corp Australia

NOT EVERYONE’S UNHAPPY

But others have raised concerns with the TPP, in particular the Investor-State Dispute Settlement (ISDS) clause that gives foreign companies the right to sue governments.

Consumer organisation Choice has questioned whether it could limit future reforms to require food labelling, the display of ‘health stars’ on packaged foods, ban certain imports or improve consumer law.

There were also concerns about whether the TPP would keep cheaper generic drugs locked out of Australia for longer, although the PM has insisted there will be no change to Australian laws.

Mr Trump said on Monday he was pursuing what he calls “fair trade”, not free trade, and he has China and Japan in his sights.

He called out Japan, a TPP member, for making “it impossible to sell” US cars in Japan.

“If you want to sell something into China and other countries it’s very, very hard,” Mr Trump told a meeting of chief executives of some of America’s biggest companies earlier on Monday.

“In some cases it’s impossible. They won’t even take your product.

“But when they do take your product they charge you a lot of tax.

“I don’t call that free trade. What we want is fair trade.”

The President plans to cut regulations for businesses in the US and slash the company tax rate from 35 per cent “down to anywhere from 15 to 20 per cent” to bring manufacturing back to the country.

He said companies that moved factories out of the US and then tried to sell its products back to America would be punished with a “very major border tax”.

WITHDRAWAL CLEARS THE WAY FOR CHINA

But one expert says Mr Trump’s decision to pull out of the TPP is giving China “a free hand to dictate trade in Asia”.

China was not invited to join the TPP, but Mr Trump could have opened the way for the Asian power by walking the US away from the massive free trade pact.

Mr Trump’s media spokesman Sean Spicer said on Monday the US would pursue one-on-one trade deals with countries rather than complicated multi-nation pacts like the TPP.

“For someone who is so outwardly anti-China, many of Trump’s major policies, philosophies, and plans benefit China,” Asia Society’s centre for US-China relations senior fellow Isaac Stone Fish said.

“TPP is just one of many examples.”

Mr Fish said Trump’s “discrediting” of the US alliance structure made China stronger in regards to Japan and South Korea.

“His isolationism, and his dislike of pushing China on human rights, improves the country’s image both domestically and internationally,” he said.

“His trade policies — and even a trade war — could push China towards an economy more reliant on domestic consumption, instead of exports.

“And that is what many foreign experts, and Chinese liberals, believe is the way for the country to build a sustainable economy.”

charis.chang@news.com.au

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