Is this free trade agreement is about to be crumbled into a paper ball and tossed into the waste bin for good?
If anything positive can be said about Donald Trump, he’s a man of his words.
Within the first few days of his presidency, he has signed off executive orders to build the notorious Mexican border wall, as well as to officialise the United States’ withdrawal from the Trans-Pacific Partnership—both of which were key campaign promises he reiterated to the public and the press while running for president.
But, we’ll dive into a topic with more sensibility here.
What is the TPP?
The Trans-Pacific Partnership (TPP) is the world’s largest trade pact among twelve of the Pacific Rim countries to promote economic growth, support the creation and retention of jobs, and promote environmental protections to name a few.
Why was it important to Singapore?
Other than the abovementioned economic and environmental benefits, Prime Minister Lee Hsien Loong also believes that the TPP is an extension of “deeper economic and broad relationships”. In an interview with TIME magazine last October, he mentioned that involvement in the foreign policy “shows that you are serious, that you are prepared to deepen the relationship and that you are putting a stake here which you will have an interest in upholding.”
So, after seven years of legislative compromises, does the removal of the US from the equation mean the free trade agreement is about to be crumbled into a paper ball and tossed into the waste bin for good?
While the TPP cannot come into effect without the global superpower’s involvement (unless rules are changed), that’s not necessary and here’s why.
Alternative Key Players
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Losing the US in the trade deal is huge, but it’s possible that equally competitive economies can fill in the gap. For one, Germany has already expressed interest in the void of economic opportunities left behind by Trump within the region.
In an interview published by Handelsblatt newspaper a day after Trump’s withdrawal from the TPP, Vice-Chancellor Sigmar Gabriel said, “If Trump starts a trade war with Asia and South America, it will open opportunities for us … Trump must simply recognise that the US economy often isn’t competitive, while the German (economy) is.”
However, long-standing strains between frenemies China and Japan—one of the ratifiers of the TPP—could be a deterrent. Even if China does join the free trade agreement, renegotiations to reach a compromise will take years and possibly water down the ambitions of the initial proposal, a source told Reuters.
Pursuing Other Trade Agreements
In a statement made to Channel News Asia, a Ministry of Trade and Industry Singapore spokesperson reiterated that without the United States’ participation, the TPP agreement cannot carry through.
However, Singapore will continue to actively participate in other economic initiatives such as the Regional Comprehensive Economic Partnership (RCEP), another proposed free trade agreement formed in 2012 that involves sixteen states sans US. But, the RCEP falls behind when it comes to drawing up protections for labour, human rights and the environment, all of which the TPP encompasses. Its trade rules are also much less ambitious.
Relatively, the RCEP is a less ideal scenario for a Singapore undergoing economic restructuring amidst global trade torpor, but there is no doubt that our country will strive to remain as attractive as possible to foreign investments and safeguard our position as the world’s easiest place to do business.
