US President Barack Obama has had a full schedule recently. Right after the G20 summit in China’s Hangzhou ended, he traveled to Laos, the chair of ASEAN, to sell the US-led Trans-Pacific Partnership (TPP). It seems that Obama is trying hard to use the last few months of his presidency to complete his “rebalance to Asia.”
At the moment, the US is facing major economic, trade and diplomatic challenges. Talks with the EU on the Transatlantic Trade and Investment Partnership have run aground, and the TPP is at an impasse due to opposition from the two main presidential candidates. This raises questions about the future of the TPP.
As for Taiwan, the issue is not only crucial to the nation’s economic and trade arrangements for the next four years, it also has a far reaching effect on the market opportunities from the “new southbound policy.”
It has been more than six months since the TPP was signed by its member states in February. The agreement includes an escalation clause, which states that the agreement can become effective if six contracting parties whose GDP accounted for 85 percent of all member nations’ total GDP in 2013 complete their domestic procedures.
In other words, it can take effect once it is approved by the legislatures in the US, Japan and Canada, whose GDP accounted for 60, 18 and 7 percent respectively of the combined GDP of member nations’ in 2013.
However, the outside world is pessimistic, as the US process is being hampered by the its presidential election and questioned by the Democratic Party’s candidate.
From an economic perspective, the next US administration could block the agreement due to industrial and labor issues. However, taking into account the US’ political and business strategies in East Asia, the agreement’s lack of progress could be the result of a deliberate confrontational atmosphere created by the two main presidential candidates prior to November’s election.
On the surface, both candidates have raised concerns that the TPP might hurt the US economy and workers. Democratic US presidential candidate Hillary Rodham Clinton says that its rules of origin for automotive goods are not in line with the interests of the US automobile industry, while Republican US presidential nominee Donald Trump claims that the agreement will make job opportunities disappear in the US.
However, for the US, the TPP is more than just based on economic calculations, as it also includes strategic considerations, with the US planning to maintain a balance of power with China in East Asia. It also has substantial regional security and political functions, as well as deepening regional development and cooperation.
In the past few years, China has aggressively tried to co-opt its neighbors, including ASEAN, through the Regional Comprehensive Economic Partnership, the “One Belt, One Road” project and the Asian Infrastructure Investment Bank. To effectively restrain China’s momentum, the US is under pressure to push through the TPP, which is its primary Asia-Pacific strategy.
Although Brunei, Japan, Malaysia, Singapore and Vietnam are the only East Asian nations that have responded positively to the TPP, it is expected to deepen differences in the development of East Asian nations once it takes off. As a result of investment and trade-facilitated effects, nations outside the TPP would be facing unequal competitive conditions, and that is likely to cause concern among outsiders, such as Indonesia and Thailand.
It is worth noting that for developing East Asian nations in particular, the agreement — which contains more than 30 chapters — is likely to serve as an important reform opportunity for government administration and system establishment.
As an important part of the US’ “rebalancing to Asia” strategy, Washington would not abolish the TPP, regardless of who takes over the White House. If it fails, it would not only devastate US prestige and credibility, but also strike a political blow at its allies, such as Japan and Singapore. Therefore, it is unlikely that the agreement would be abandoned, although its content might be changed.
US politicians have attacked the free-trade policies of previous administrations. The negotiations for the North American Free Trade Agreement were launched by former US president Ronald Reagan, and the agreement was completed by former US president George H.W. Bush, both of the Republican Party, and took effect during the presidency of the Democratic Party’s Bill Clinton, who was critical of the agreement during his first election campaign.
As for Taiwan, given the division within the US, preparing for some “give and take” during the next round of talks is perhaps more important than worrying about if Trump will be elected.
Patrick Liou is a researcher at the Industrial Technology Research Institute.
Translated by Eddy Chang
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