Trump Trumped TPP: What lies ahead ?

The US under its new president Donald Trump withdrew itself from the 12 nations Trans Pacific Partnership. We have analyzed the possible impacts of this decision on India and RCEP.

Created On: Jan 27, 2017 13:07 ISTModified On: Jan 27, 2017 16:08 IST


Trump showing cancellation sign As expected, Donald Trump officially took the much awaited decision to withdraw the US from 12 -nations Trans-Pacific Partnership (TPP). Donald Trump has been active in making a number of policy changes since he took the charge of the 45th President of the United States.

The exit of the US from the TPP was one of the most significant decisions taken by Donald Trump. The TPP was signed by his predecessor Barack Obama in 2015.
While signing the cancellation of the deal, Trump argued that the TPP deal was harmful to the citizens and manufacturers in America. He also said that the US is going to stop the ridiculous trade deals that have taken everybody out of our country and taken companies out of our country.

The TPP deal which was negotiated by Barack Obama, never got a formal approval from the Congress. But, this deal was supported by business entities. Then, it was considered as the primary economic pillar of Obama administration’s shift towards his own Asia-Pivot Policy meant for Asia pacific region to counter China.

What is TPP?

TPP stands for Trans-Pacific Partnership. It is a hefty and complex agreement negotiated meticulously by 12 countries: the United States, Mexico, Peru, Canada and Chile in the Americas, and Japan, Vietnam, Australia, Malaysia, Vietnam, Brunei, Singapore, and New Zealand in the Asia-Pacific. All these countries comprise almost 40 percent of the world's gross domestic product.
The main rationale for the deal for many negotiating members was to re-engage the United States as a trading partner, and balance what were sometimes one-sided trade relationships with China by collectively raising standards. A TPP minus the US makes it far less attractive for most members.

How did the idea of the pact come about?

On the sidelines of Asia-Pacific Economic Cooperation (APEC) meeting in Jeju, South Korea, on June 3, 2003, representatives from Brunei, New Zealand .Chile and Singapore agreed on a Trans-Pacific Strategic Economic Partnership Agreement. In January 2008, the US initiated talks with these four countries on trade liberalization in financial service. This move eventually set the stage for the TPP. The Partnership was broadened to include Vietnam, Japan, Australia, Malaysia, Canada, Peru, and Mexico.

Impact of Trump’s decision on India

The exit of the US from TPP would be beneficial for India as some of its provisions are not in the country's interest. TPP was supposed to re-write the trade rules, most of which were inimical to India's interests.
There is a possibility that the US’s withdrawal from the globalization would create a distinct possibility for China to fill its shoes. The rise of China in this reason can cause some concerns to India. Some experts believe that India should carefully watch the developments on this pact so that India could explore opportunities in all the TPP member countries to boost its trade.

Impact of Trump’s decision on RCEP

There are many common misconceptions about TPP. The biggest misconception is that it is assumed that it is simply a trade agreement when it is actually much more than that.  TPP not only does TPP slash tariffs, but it also contains intellectual property obligations, anti-corruption measures, environmental commitments and human rights and child labour conditions. As a consequence, neither India nor China would have been ready to sign on this deal.
RCEP is the proposed Free Trade Agreement (FTA) between 16 Asia-Pacific countries which include India, Japan, China, Australia, New Zealand, South Korea, and the 10-member ASEAN bloc. The proposed FTA, which aims to open up trade in goods and services as well as liberalize investment policies, will cover a market of over three billion people in these countries whose total GDP is more than $17 trillion and account for 40 percent of world trade.
After its withdrawal from the TPP, America’s role would be diminishing in the region. As a result, China will emerge as much more powerful nation now. China has already built several new regional alliances through projects like Maritime Silk Road, One Belt One Road (OBOR), Shanghai Cooperation Organization (SCO) and Asian Infrastructure Investment Bank (AIIB).
President Xi Jinping is planning to push hard for another regional alliance called the Regional Comprehensive Economic Partnership (RCEP). It was originally considered as China’s response to Obama’s TPP. Now, New US president’s cancellation of TPP, TPP has slowed down but RCEP is racing ahead. India is neither a partner in TPP nor in RCEP thus far. But now India will be forced to take a view on RCEP on the basis of its status and interests in the region.


Following the formal exit of the United States from the Trans- Pacific Partnership (TPP), China is hoping to speed up the galvanization of two regional trade proposals the Free-Trade Agreement of the Asia-Pacific (FTAAP) and the Regional Comprehensive Economic Partnership (RCEP).
Apart from it, several member countries expressed hope that the TPP could be salvaged after the US’s decision left its future in serious jeopardy. Other countries, such as China, may help fill the void left by the U.S. Members of the Trans-Pacific Partnership (TPP) are seeking to move forward with the trade agreement after the United States withdrew.

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