US Rejoining The TPP "Not Likely" - Emerging Market Views

US Rejoining The TPP “Not Likely”

The U.S. is now making noise about rejoining the TPP. This is why that isn’t likely.

One of U.S. President Donald Trump’s first actions after the inauguration was to withdraw his country from the Trans-Pacific Partnership (TPP) trade pact, which he’d denounced as a “disaster.”

That makes his recent, sudden about-face to look at rejoining the now 11-nation pact quite a surprise.

To be sure, Trump said in a Twitter post that would only be possible “if the deal were substantially better than the deal offered to Pres. Obama.”

But Australia’s Trade Minister Steve Ciobo has already put the kibosh on any expectations that would be an easy process: “I think there is very little appetite among the TPP-11 countries for there to be any meaningful renegotiation of the TPP-11 at all,” Ciobo said in mid-April, according to The Australian newspaper. “We’ve got a deal … I can’t see that all being thrown open to appease the United States.”

Other analysts have noted that the U.S. would likely be welcomed back in to the deal–eventually.

Steve Okun, senior advisor at international consultancy McLarty Associates, said recently that the TPP-12 became the TPP-11 so quickly because rather than rewriting the agreement to remove perks given to the U.S., those were merely delayed or suspended.

“It’s designed to bring the U.S. back in,” he said.

But he said that came with caveats.

“Whether they will bring this administration into this agreement and what this administration would demand politically to be changed before it would come in and whether the countries would agree to that, I’m very sceptical that would happen in the near term,” Okun said.

He said the U.S. was likely out until the TPP-11 is ratified and takes effect, which could be as soon as this year. But even then, other countries interested in joining, such as South Korea, may be considered ahead of the U.S., he noted.

“I think the U.S. coming back into TPP is not going to be for another couple years yet, if at all,” Okun said.

Others have also said that if the U.S. wants to rejoin the TPP, it may have to wait until Trump is no longer president and potentially even longer.

“The rhetoric around trade has changed so much domestically that getting members of Congress to vote for it is going to be tricky,” noted Deborah Elms, who is executive director of the Asian Trade Centre and who consults with governments on trade issues.

But she noted a potential positive from the Trump administration’s efforts to disrupt trade deals.

“Paradoxically, we may actually find that his moves on trade against China may drive U.S. domestic constituents to be more in favor of TPP than they were before,” she said recently. “People have viewed trade as some sort of evil, horrible thing, but now, when you disrupt trade, people may say actually that didn’t sound so bad to us, maybe we should rethink our opposition.”

Indeed, Okun noted that the group that was worst-hit by Trump’s withdrawal from the TPP was U.S. farmers — precisely the group that will be worst-hit by the retaliatory tariffs imposed by China.

A U.S.-headquartered company can still make their products in one of the TPP-11 countries and access the benefits of the deal, but agriculture doesn’t have the same option, Okun noted.

“While you can manufacture products in Singapore and export them to China, or you could provide a payment solution in Vietnam and help a company get to Australia, you can not grow U.S. corn in Australia. You can not grow U.S. soybeans in Malaysia. You can’t raise U.S. cattle in Japan,” he said. “Agrculture is going to get hit hard in terms of opportunity cost with the withdrawal from TPP.”

Indeed, Australia’s Trade Minister Ciobo pointed to Australian agriculture in a mid-April Sky News interview.

“If the United States isn’t a part of it, well that’s good for Australia relative to the United States because it means our Australian beef farmers are getting much better market access than U.S. beef farmers,” he reportedly said.

Indeed, Japan’s Prime Minister Shinzo Abe had used the prospect of joining the TPP and gaining access to the U.S. market to pry open his country’s famously closed and inefficient agricultural sector — one that U.S. agricultural players had long sought entry to.

“There’s another reason beyond simple competition that the TPP-11 may not immediately welcome the sudden Trump administration effort to rejoin: a newborn lack of trust.”

“When you’ve withdrawn from the TPP, when you’ve withdrawn from Paris, when you’ve come close to withdrawing from KORUS and then renegotiated, when you’ve threatened to withdraw from NAFTA, when you’ve threatened to withdraw from Iran, even when Iran is in compliance with the agreement, then why would you take the United States at its word that it will live up to the agreements upon which its negotiated?” Okun asked.