Trump TPP move seen as win for China, but Beijing isn’t celebrating

By Emily Rauhala and Anna Fifield 

January 24. 2017

BEIJING — President Donald Trump’s decision to cancel a Pacific rim trade deal was greeted as a sign of a U.S. retreat from Asia and a boon for China, which hadn’t been included in it.

The Chinese government — a long-time critic Trans-Pacific Partnership — opted not to gloat, however, instead signalling Tuesday a cautious approach to the new U.S. administration and concern for what comes next.

While the U.S. withdrawal from the treaty could boost China’s role in the Pacific, Beijing is more preoccupied by what else the Trump administration may have planned for the region.

As a candidate, Trump made China and trade regular talking points. He vowed, among other things, to scrap the TPP, list China as a currency manipulator and slap an eye-popping 45 percent tariff on imported Chinese goods. 

The TPP deal was all-but-dead by Monday, but the other threats still stand — and that is what’s bothering Beijing.

“It could be counted as good news for China that the pressure of TPP is now gone,” said Tu Xinquan, an trade expert at the Beijing’s University of International Business and Economics. “However, there is great uncertainty as to whether China stands to benefit.”

Monday’s announcement was the end of a long, slow death for a trade deal that in some ways defined the Obama administration’s thwarted vision for renewed U.S. engagement in Asia-Pacific.

The agreement aimed to reduce trade barriers and tariffs across 12 countries incorporating nearly 40 percent of the global economy, including Japan, Australia, Singapore and Vietnam, but excluding China. 

It also included provisions that would compel countries to comply with rules on labor and intellectual property rights, potentially spurring domestic economic reforms in countries like Vietnam. 

The Obama administration pitched it as a way to spur U.S. growth by opening Asian markets and exercise U.S. leadership. Critics, including supporters of both Donald Trump and Hillary Clinton, called it a threat to U.S. jobs.

The plan was popular among U.S. allies in Asia, particularly Japan, the world’s third-largest economy. 

Even after Trump made good on his promise to withdraw from the trade deal, Japanese Prime Minister Shinzo Abe signalled that he would continue trying to convince the new American president of its benefits.

“I believe President Trump recognizes the importance of free and fair trade and I’d like to concentrate on getting him to understanding the strategic and economic significance of the TPP agreement,” Abe told the Diet, or Japanese parliament, Tuesday morning.

The Diet had just ratified the deal on Friday, despite its dim prospects. Still, it was a crucial part of the prime minister’s “Abenomics” plan to overhaul the Japanese economy and inject new momentum into it after two decades of stagnation.

Officials made clear that Japan would not try to keep the deal alive if the U.S. was not a part of it. “The TPP agreement will be meaningless without the U.S.,” Koichi Hagiuda, deputy chief cabinet secretary, told reporters. 

The concern for Japan, and for others in the region, is that “America first” foreign policy will mean poorer economic prospects and a broader role for Beijing.

Scrapping the TPP will likely bolster support for Chinese regional trade regimes. The Philippines and Singapore are already shifting toward the Beijing-backed Regional Comprehensive Economic Partnership, for instance. 

On Monday, New Zealand’s Prime Minister, Bill English, said his country did not have the option of not pursuing new deals. "We don't have the choice America has. It's big enough that they can make a living selling things to themselves," he said, adding, "We have to trade."

“China is actually now in a great position to assume a leadership role as the leading proponent for regional integration in the region,” said Davin Chor an associate professor in the Department of Economics at the National University of Singapore. “I do foresee the Chinese being more vocal and active in advocating for regional trade agreements centered around the Chinese economy.”

All this could help China increase its global clout.

“China had been afraid that the U.S. would use the TPP to economically encircle China in Asia,” said Victor Shih, an associate professor at the University of California at San Diego’s School of Global Policy and Strategy.

"With the abandonment of TPP, Chinese leaders are likely breathing a sigh of relief and actively thinking of ways to further consolidate China's dominance in Asia and beyond.”

What’s striking, though, is that Chinese experts seem more concerned with Trump’s foreign policy than convinced a golden era is on they way.

Hu Xingdou, an economist at Beijing Institute of Technology, said he was “not too optimistic” about China’s prospects. The new U.S. president  “will pursue protectionism,” he said, and seems is appearing to China as its “the biggest enemy.”

Tu, the trade expert at Beijing’s University, said it was hard to see a positive outcome when an all-out trade war is a possibility. President Trump, after all, seems “rather wayward,” he said.