Why is Trump thinking of returning to TPP

Photo by Gage Skidmore, Creative Commons Licensing

The Trump presidency has not been alien to surprise twists and turns. But one recent development was staggering.

By Loke Hoe Yeong

US President Donald Trump made an unexpected announcement at the World Economic Forum. He announced he was reconsidering bringing the US back into the Trans-Pacific Partnership (TPP) agreement.

To rejoin the TPP would be a bizarre move for Trump. Withdrawing the US from the TPP was one of Trump’s major campaign promises in 2016. He acted on it almost immediately after taking office last January.

Trump’s election promise made sense at the time

What was Trump thinking when he made the announcement at Davos? The key to understanding lies in domestic US politics and the interests of US businesses.

Donald Trump was not alone in talking about withdrawing from TPP. Hillary Clinton also began to oppose the TPP late in the campaign. She sensed the anti-globalisation anger surrounding free trade agreements within her own party. This same anger made her Democratic rival Bernie Sanders into a viable opponent.

Liberals thought the TPP did not protect US workers and trade unions. Conservatives thought it would take away US jobs. This helped Trump clinch crucial battleground states in 2016. The population of the industrial Rust Belt feared unemployment.  This fear helped Trump. Trump even managed to win the support of states that voted for Barack Obama.

Opposition to the TPP was almost universal across the political spectrum. Trump’s campaign promise to take the US out of the TPP made political sense at the time.

Trump may have calculated that he can afford to make a U-turn on the TPP now. The last election is behind him, and the next one is still a few years off. Trump can consider rejoining the agreement without losing ground to his political rivals.

Now, it makes political sense for Trump to reconsider the TPP

Trump has been very friendly towards big businesses. The biggest beneficiaries of his December tax cuts will be big US businesses. Large corporations are supportive of a mega-free trade agreement like the TPP. It would improve market access for them over a large swathe of the globe.
The TPP includes some key ASEAN economies of interest to the US like Singapore. The TPP also excludes several important ASEAN and Asian countries. Indonesia, Myanmar, and South Korea are all excluded from the agreement.

US-ASEAN Business Council hoped that the TPP would act as a catalyst. It wants other ASEAN member states to join once the agreement comes into practice. This would open up ASEAN’s emerging markets to the US.

Likewise, ASEAN countries would welcome the US back into the TPP. Access to the US market would be valuable for ASEAN’s developing economies. Countries like Indonesia have expressed an interest in joining it. There is scope for more countries to join once the members finalise the agreement terms.

It would also rebalance bilateral relationships in the region

The return of the US would also rebalance economic relationships within the region. China has economically dominated the region of late. Many ASEAN nations are looking to the US to offset this dominance.

It would be of particular importance to Malaysia and Thailand. The West has sidelined the two countries in recent years. In Malaysia, the 1MDB scandal hurt its international standing. The Thai military coup in 2014 was also an international setback for Thailand. Thus, they would welcome any kind of political or economic rehabilitation with Washington.

Moreover, policy hawks in Washington would also welcome a return to the TPP. They recently identified China as a security threat alongside Russia. Neither country a member of the agreement. The US could enjoy the economic benefits without sharing them with its main rivals.

Sources: BBC, CNBC, ST, NZMFAT, Government of Canada

But the revised TTP agreement is moving forward

His Davos announcement came hot on the heels of the conclusion of the revised TPP agreement. The 11 remaining members plan to sign the agreement in March.

Trump may have changed his mind, but that does not mean it would be easy to return. It is unlikely that the remaining members will revise the agreement to suit Trump. Even reaching a revised deal among the remaining TPP-11 was difficult.

Last October, New Zealand prime minister, Jacinda Ardern, pushed for changes to the negotiation text. In November, Canadian Prime Minister Justin Trudeau temporarily threw the negotiations off course. He wanted to protect Canada’s automotive industry and cultural sectors. At the last minute, Trudeau agreed to the TPP draft agreement.

Canada already has a free trade agreement with the US. They are both included in the North American Free Trade Agreement (NAFTA). Justin Trudeau has little incentive to go back to the drawing board to accommodate Trump.

It might be too little too late for Trump. The best scenario he could hope for is the US joining the agreement after implementation. But the US would not have had a hand in its making. It would lose many of the benefits it stood to gain. The TTP ship is sailing, and Trump is still standing in the harbour.