Asia-Pacific nations sign sweeping trade deal without US

IFR Asia 1037 - Asian Development Bank SR 2018
4 min read

Eleven countries, including Japan and Canada, signed a landmark Asia-Pacific trade agreement without the United States in early March in what one minister called a powerful signal against protectionism and trade wars.

The deal came as US President Donald Trump vowed to press ahead with a plan to impose tariffs on steel and aluminium imports, a move that other nations and the International Monetary Fund said could start a global trade war.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CP-TPP) will reduce tariffs in countries that together amount to more than 13% of the global economy – a total of US$10trn in gross domestic product. With the United States, it would have represented 40%.

“Today, we can proudly conclude this process, sending a strong message to the international community that open markets, economic integration and international cooperation are the best tools for creating economic opportunities and prosperity,” said Chilean President Michelle Bachelet.

Heraldo Munoz, Chile’s minister of foreign affairs, said he expected Chile’s trade with China, its top trading partner, to continue growing alongside trade with CP-TPP countries.

Even without the United States, the deal will span a market of nearly 500 million people, making it one of the world’s largest trade agreements, according to Chilean and Canadian trade statistics.

The original 12-member agreement, known as the Trans-Pacific Partnership (TPP), was thrown into limbo early last year when Trump withdrew from the deal three days after his inauguration. He said the move was aimed at protecting US jobs.

The 11 remaining nations finalised a revised trade pact in January. That agreement will become effective when at least six member nations have completed domestic procedures to ratify it, possibly before the end of the year.

“We are very hopeful like others that we will see the CP-TPP coming into effect about the end of the year or shortly thereafter,” said Australia’s Trade Minister Steven Ciobo.

‘THE WAY FORWARD’

The revised agreement eliminates some stipulations originally demanded by US negotiators, including rules to ramp up intellectual property protection of pharmaceuticals. Governments and activists of other member nations worry the changes will raise the costs of medicine.

The final version of the agreement was released in New Zealand on February 21. The member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

“We’re proud … to show the world that progressive trade is the way forward, that fair, balanced, and principled trade is the way forward, and that putting citizens first is the way forward for the world when it comes to trade,” Canadian Trade Minister Francois-Philippe Champagne said.

In January, Trump, who also has threatened to pull the United States out of the North American Free Trade Agreement, told the World Economic Forum in Switzerland that it was possible Washington might return to the TPP pact if it got a better deal.

However, on April 17, Trump appeared to put the idea to rest. “While Japan and South Korea would like us to go back into TPP, I don’t like the deal for the United States,” he tweeted.

“Too many contingencies and no way to get out if it doesn’t work. Bilateral deals are far more efficient, profitable and better for OUR workers. Look how bad WTO is to U.S.”

Trump vowed on March 8 to impose a 25% tariff on steel imports and 10% tariff on aluminium imports, although he said there would be exemptions for NAFTA partners Mexico and Canada.

Mexican Economy Minister Ildefonso Guajardo, in Santiago for the CP-TPP signing, told Reuters he would not allow the United States to use the tariffs to pressure it in the NAFTA talks. Champagne told Reuters that Canada would not accept duties or quotas from the United States.

(Reuters)

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