President of the United States Donald Trump has signed a presidential memorandum withdrawing the US from the Trans-Pacific Partnership, as part of his America First trade policy.
According to the memorandum, Trump and his administration intend instead to pursue bilateral trade negotiations directly with individual countries.
The TPP was signed by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam in February 2016. The withdrawal of the US means that the other 11 signatories will be unable to proceed with the agreement in its current form.
According to trade credit insurance specialist Euler Hermes, all hope is not lost because Asian members of the TPP will still be able to find trade drivers elsewhere.
The first driver is China’s Belt and Road initiative, which aims to improve connectivity and economic cooperation throughout Asia, the Middle East, Europe and Africa through infrastructure investment.
“The impact could be felt through a capital boost in countries which could result in more funding to finance infrastructure projects,” said Mahamoud Islam, senior Asia economist at Euler Hermes, in a report analysing the effects of the US withdrawal. “Secondly, it would go through a gradual increase in demand from China for strategic natural resources. Another channel would be the rise in competitiveness as infrastructure for trade improves. Singapore could also leverage on its edge in financial services and logistics operations to advise and support companies expanding their business in the region.”
Asia can also turn to other trade deals such as the Regional Comprehensive Economic Partnership.
“This mega-trade agreement which involves China, ASEAN, Australia, New Zealand, India, South Korea and Japan represents a market worth around US$22 trillion, gathers 3.5 billion people,” said Islam. “It aims at liberalizing goods and services trade, facilitating investment flows and promoting best practices.”
Some of the TPP signatories have already discussed the possibility of a similar agreement which does not include the US.
