Fulfilling one of his most important campaign promises, Donald Trump withdrew the United States from the Trans-Pacific Partnership (TPP) a few days after taking office in January. This action was part of a set of measures seeking to erase former President Barack Obama’s foreign policy legacy. The ambitious TPP agreement was part of the “pivot to Asia” launched by Obama in 2011, aiming to create a new trade area in the Asia-Pacific in order to counterbalance Chinese economic interests in the region.
Apart from his anti-Obama campaign discourse, President Trump’s decision was also driven by his well-known stance against global trade regimes, as well as regional trade agreements like the North American Free Trade Agreement (NAFTA). According to Trump, free trade policies impoverish the “average worker,” and because of this, the challenge for his administration would be to rebuild American industries to create new employment for Americans.
With his decision on the TPP, Trump put at risk a six-year negotiation process that involved his country and 11 of the most important economies of the Asia-Pacific region: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The U.S. withdrawal from the TPP was received with different reactions within Latin America. On one hand, for the left-leaning governments of Venezuela, Bolivia, and Ecuador, Trump’s decision only confirmed what they have been saying for years about the negative effects that free-trade policies have on growth, distribution of income, and inequality, even if they do not bother to understand why (under their classical views on U.S. imperialism as the main engine of neo-liberal hegemony) Washington would withdraw from a trade agreement supposedly designed to benefit American and multinational companies. On the other hand, the open-market governments of Colombia, Peru, Chile, and Mexico were concerned by the future viability of the agreement without its most important partner. To enter into force, the TPP must be approved at least by six member countries and to encompass 85 percent of the group’s overall GDP, an impossible goal without U.S. participation.
Due to this contradiction, there is no consensus on the region on how to elaborate an integral response strategy that includes trade policy and migration issues together. Instead, regional organizations like the Community of Latin American and Caribbean States (CELAC) are currently discussing how to deal with future U.S. anti-migrant initiatives, but not talking about the future of the TPP, which only involves three CELAC members: Peru, Chile, and Mexico. Notably, all three are also members of the Pacific Alliance (PA), along with Colombia. These four countries together have a population of 225 million and represent 35 percent of Latin America’s GDP.Another source of division on Latin American countries positions regarding Trump’s new policies comes from his electoral stance on the situation of Latino (especially Mexican) migration to the United States. Despite their internal differences regarding economic and trade issues, both blocs of Latin American countries rejected the creation of a wall on the U.S.-Mexican border as well as the massive immigrant deportation plan envisioned by the White House. So we have the unprecedented situation of Latin American leftist governments supporting Trump’s trade policy, while the right and pro-free trade bloc is against it. At the same time, both blocs reject anti-migrant discourses and policies in the United States.
In recent months, there has been growing pressure to “revive” the TPP, even without American support. In early July, Japan hosted a meeting in Tokyo with negotiators from the other TPP members with the objective of discussing a new framework for the agreement. Even if Japan was initially the most skeptical about the TPP (it joined the negotiations recently, in 2013), its higher priority is to counterbalance a future Regional Comprehensive Economic Partnership (RCEP) that encompasses the 10 ASEAN members and the six countries that have free trade agreements with the Southeast Asian bloc (including also TPP countries). In RCEP China would have the leverage to re-write some of the most important trade and investment rules in the region.
Nevertheless, even if Japan’s initiative received the most media coverage, there is also an overlooked, but very interesting initiative coming from the other side of the ocean. The open-market Latin American countries gathered by the PA are also working to keep in force the current TPP agreement. Part of this strategy was exposed by Peruvian President Pedro Pablo Kuczynski, who said that Canada, Australia, Singapore, and New Zealand — all TPP members — will become part of the PA as “associated members.” This opens a new stage in the development of this organization.
Designed as a free-trade response to leftist-interventionist regional integration models like ALBA or the “new” MERCOSUR, the PA brings together countries that have FTAs with the United States and other major powers, as well as high levels of foreign direct investment and export-oriented economies. It was promoted by Peru in 2010 and initially envisioned with the objective to integrate only Latin American countries seeking to strength their positions in front of the future TPP negotiations. The new global trade scenario forced the PA to rethink its identity, especially after the rising of protectionist waves around the world from the election of Donald Trump in the United States to Brexit and the broader Euro-skeptical movement. As part of its evolution, the PA is now allowing access to former TPP members, no matter if they are not Latin American countries, based on the predominance of their free-trade model of integration: if an “observer member” has FTAs with at least half of the PA’s country members, it can apply for an “associate membership.” This is certainly the case for Canada, Singapore, and New Zealand.
The outlook for boosting trade among PA’s old and new members is quite limited, since most of their trade volume is already covered by existing WTO and FTA rules. However, the importance of this expansion movement is related to the capacity to bring the TPP discussion agenda to PA meetings. Considering that emerging markets like Thailand, South Korea, and Japan are also PA observer members, it is expected that they will soon receive an invitation to become associate members. Considering the role of the PA as a group of emerging markets, it is predictable that the renegotiation of some labor, environmental, and investment standards already agreed to in the initial TPP text will be at the center of the debate.
Another discussion issue that will be shaped by the PA forum is relations with China. Without the United States’ inclusion, mining exporters like Peru and Chile (which both have FTAs with China) now are free of the anti-Chinese bias embedded in the original TPP. This gives the whole organization better leverage to negotiate future association terms with China, a country that, by the way, is also an observer member of the PA.
Anthony Medina Rivas Plata is a Peruvian political scientist and associated researcher at the Institute of Andean Political Studies.
This Article was written by Young Diplomats’ Partner , the Institute of Andean Political Studies. It was previously published on “The Diplomat” in August 4th 2017. The Article is available on this link on the Excellent “The Diplomat” Website.