ASIAN DISUNITY

Winter 2016. The international community regards the U.S. actions as an indisputable economic and geopolitical achievement. The agreement will help America to have a privileged access to the markets of 11 countries and to be connected to the important states of the Asia-Pacific region, thereby squeezing China in competition for influence in this part of the world.

Winter 2017. U.S. actions are regarded as a defeat, a voluntary renunciation of the advantage achieved in competition with China, which will inevitably intercept the geopolitical initiative. In addition, the credibility of the U.S. as a reliable negotiating partner is significantly undermined.

Winter 2018. Donald Trump considers the resumption of negotiations on the trade agreement. U.S. Secretary of the Treasury Steven Mnuchin said that he had already begun negotiations on this topic.

Spring 2018. On March 8, the eleven countries of the Asia-Pacific region (Australia, Brunei, Vietnam, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, Chile, and Japan) sign the document on the establishment of the Trans-Pacific Trade Partnership (TTP) in Santiago. That is the same document at different times called the achievement of the U.S., their defeat and the one they want to return to.

Indeed, the signing of the TTP in February 2016 was considered the greatest achievement of President Obama, which would strengthen the leading position of the U.S. in global politics. The population of the 12 signatory countries reaches 800 million people, which is almost double the population of countries located in the European common market. At that time, these countries provided almost 40% of the world's GDP and about a quarter of the global trade turnover.

The Chinese state agency Xinhua described the TTP as “an economic component of the geopolitical strategy of the Obama administration to ensure the absolute supremacy of Washington in the region.”

This project had large ambitions indeed: it was the U.S., and not China, which had to establish new global rules of trade. The innovation of the Treaty was precisely that it contained many of the economic standards for the 21^st century concerning, for instance, services, access to state orders or the rights of employees, let alone the promotion of American values within the reach of the main competitor, that is China.

On January 23, 2017, on the third day of his presidency, Donald Trump cancelled all these plans saying that he preferred to negotiate bilateral trade deals to settle his country's trade deficit.

A year later, Japan chose this date for the final stage of new negotiations between the remaining 11 states. Tokyo announced that the idea of TTP was still alive and the updated agreement would still be concluded but without the U.S.

False start

It is not accidental that Japan became the leader of the negotiation process. First, it had a chance as the third largest economy of the world to get out of the shadow of the U.S. and declare her own ambitions not only in the Asian region. Secondly, rivalry with China is getting increasingly high levels. Finally, the Trump Administration increases the pressure on Tokyo hoping to reduce the trade deficit, which reached almost $64b in 2017. Therefore, Japan is interested in the speedy development of new markets.

After Trump's decision to leave the TTP talks last year, many have hastened to bury this project thinking that it was doomed to failure without the world's largest economy. During the first six months, it seemed that the forecast was correct - there were no noticeable steps to reanimate the talks. However, since the end of summer 2017, the intensity of negotiations has increased each month, and the treaty had to be signed in November in the Vietnamese resort city of Danang during the summit of the heads of 11 states. But an unforeseen event happened suddenly. On the final day of the talks, when there were already statements about overcoming all the differences and a single desire to sign their contracts... the Prime Minister of Canada, Justin Trudeau, did not appear on the signing ceremony. As he admitted later, he decided to stay in his hotel room and not join his colleagues at the last moment.

Fortunately for the rest, it was not a refusal, but a desire to rethink the Canadian position. Doubts of Trudeau are understandable. Some parts of the TTP are in conflict with the NAFTA agreement effective between the three North American countries, which is critical for Canada. After all, ¾ of Canada's total exports go to the U.S. For example, the liberalization of imports of spare parts for automobiles in the TTP is set at 55%, while NAFTA requires 37.5%. Trump, who insisted on revision of the NAFTA, even offers 15% for the Canadian share.

However, the Japanese Prime Minister Shinzo Abe finally managed to find favourable arguments for his Canadian counterpart to sign the treaty. One of them is that the positions of Canada and Mexico in negotiations with the U.S. will become much stronger if both countries are supported by such a powerful international organization representing countries with a total population of almost 500 million people and GDP equal to 13.5% of the world GDP.

Compromise and high standards

TTP-11 (officially named Comprehensive and Progressive Agreement for Trans-Pacific Partnership) is called one of the most ambitious treaties of our time with uniform rules for international trade and investment. In addition, it requires compliance with high regulatory standards in areas such as labour law and environmental protection.

All signatory states get free access to each other's markets through the cancellation or significant reduction of trade tariffs. Hence establishing a single trading platform with a turnover of almost $14 trillion. New markets will create new jobs and contribute to the economic growth of each of these countries.

Moody's believes that the economic benefits for TTP-11 members will be lower without U.S., but exports and revenues will nevertheless increase significantly.

There are already other states willing to join TTP-11 including the countries beyond the region (Thailand, Indonesia, the Philippines, South Korea, and Taiwan) and even the United Kingdom, which is reconsidering its foreign economic activities after the final divorce with Europe. Britain can become the first participant in the trade agreement that does not have access to the Pacific Ocean or the South China Sea. The export of British products to TTP countries reaches about 8%.

The doors of the organization are not closed for the U.S. and China. Chilean President Michelle Bachelet stated that if the U.S. expressed a desire to return, they would have to accept the terms approved by eleven signatories. As a matter of fact, the existing text of the agreement does not any more contain provisions on which the U.S. have previously insisted, such as the improvement of copyright protection for pharmacological companies. This could substantially increase health care costs, but other countries agreed to this term to have an access to the U.S. market.

It is still unlikely that the U.S. returns to the agreement without uncompromising conditions. Japanese representatives hinted softly that there was no need to change the contents of the treaty in order to take into account the requirements of the Trump administration. These requirements can later be included as amendments or additional provisions.

Public blames

Due to the secrecy of negotiations the businessmen and experts of participating countries could not discuss the terms of the agreement at the stage of its preparation. Now that the treaty has to be ratified, there are speculations that some countries may face certain difficulties with this.

For example, Australians accuse their government of refusing to disclose the draft of the treaty for a nationwide discussion and now requires the parliament to critically assess its usefulness for the country before ratification. Apart from an ultimatum, they threaten the government by holding mass protests against the unfair parliamentary decision.

Indeed the treaty raises many questions. For instance, it is not clear what will happen to agricultural subsidies introduced in most of the signatory countries.

Provisions concerning the free movement of migrant workers may threaten unemployment for local labour. At the same time, despite assurances that the TTP will help protect labour rights, in fact the agreement does not contain obligations for local labour laws to comply with international standards prohibiting forced and child labour. International courts will only consider complaints about violations of those labour rights that relate to international trade and foreign investment.

Anxiety is caused by special rights granted to foreign investors. The agreement allows them in many cases to ignore national laws and judicial decisions. At the same time, they have the right to file lawsuits in international courts if they are sure that a decision at the national or regional level can damage their investments.

The agreement will enter into force 60 days after it is ratified by at least 6 countries out of 11. This is expected to happen by the end of the year or the beginning of the next.

Integration and barriers

The Asian region is on the eve of another grand project - the establishment of a free trade zone (FTZ).

ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, the Philippines), as well as Australia, China, India, Japan, the Republic of Korea, and Japan expect to sign the Comprehensive Regional Economic Partnership (CREP) Treaty. This step is regarded as a real and significant chance to realise economic integration in the countries of East Asia.

The total GDP of 16 member countries of CREP (49% of the world population) is estimated at 30% of the world GDP. They are able to cover a third of world trade.

Until recently, this project has actively promoted China as a counterweight to the “American” TTP. However, the situation has changed, and two FTZs ​​can easily come to common terms and complement each other. Many countries in the region already started or plan to enter both projects making the expected competition of economic nature only. This will only benefit the expansion of the free trade zone.

Meanwhile, the United States, which has been considered the main defender and conductor of free trade principles for decades, began a practice of introducing customs barriers threatening the rest of the world with trade wars.