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Trump’s Decision to Drop TPP Deal: A Big Chance for China to Lead, Push for Own Trade Pact

| Nov 27, 2016 09:38 PM EST

Americans march to hold a protest against the Trans-Pacific Partnership (TPP) deal in Washington, D.C.

U.S. President-elect Donald Trump said with finality on Tuesday, Nov. 22, that he would drop the Asia-Pacific trade pact that links U.S. and 11 countries when he assumes office on Jan. 20, calling it "a potential disaster for our country."

According to Reuters, Trump's statement has paved the way for China to take on the leadership role on trade and diplomacy in Asia, as a trilateral trade deal is already being discussed by China, Japan and South Korea.

After Trump's announcement, Australia and Japan also vowed to push ahead with the trade deal, sans the U.S.

"The TPP would be meaningless without the United States," Japanese Prime Minister Shinzo Abe said, while parliament continues to discuss its ratification.

In Canberra, Australian Trade Minister Steven Ciobo said that even without the U.S., countries can continue with the TPP by amending the agreement and sign up new members.

"We could look at, for example, if China or Indonesia or another country wanted to join, saying, 'Yes, we open the door for them signing up to the agreement as well.'"

Singapore Prime Minister Lee Hsien Loong, however, said that reopening negotiations would now be difficult. "If you sign a fresh agreement, you have to go through it again. We haven't crossed that bridge yet. We'll cross it if and when we come to that."

With the U.S. out of the picture, it will be a big chance for China to push for its own regional trade deal that some observers say is weak.

"Pushing them forward is the idea that, if they don't act, it will look like China's very weak trade deals are the only game in town," Derek Scissors, a scholar on Asian economies and trade at the American Enterprise Institute, said.

But unlike the TPP, which is focused on opening up economies and setting standards for labor and environment, the Regional Comprehensive Economic Partnership (RCEP) pushed by China is more of a traditional trade agreement that mainly involved reducing the tariffs.

At the Asia Pacific Economic Cooperation (APEC) summit in Peru during the weekend, the RCEP was the focus of attention of many leaders.

While several countries reportedly signified intention to join the 16-member bloc, including Chile and Peru, current members are trying to reach a deal as soon as possible, Tan Jian, a senior member of China's delegation, said.

On Tuesday, Nov. 22, China's foreign ministry said that the country maintains an "open attitude" on any deal that promotes free trade in the region as long as it does not become "fragmented and politicized."

"We are willing to keep pushing the (RCEP) talks process with all sides to achieve positive progress at an early date," foreign ministry spokesman Geng Shuang said.

Last week, Vietnam abandoned its own ratification of TPP, while Malaysia showed its interest in the RCEP.

Some economists cautioned that Trump's plan to re-negotiate trade deals to give back jobs to the Americans and impose punitive tariffs on Mexico and China could trigger a trade war and lose the gains of liberalization.

As a diplomatic initiative of Obama, the Trans-Pacific Partnership (TPP) was aimed at reducing tariffs in countries that make up about 40 percent of the world economy, but Trump's decision and the failure of the U.S. Congress to ratify it, have both contributed to TPP's demise.

Similarly, the major trade deal between the U.S. and Europe is also about to collapse after Britain decided to withdraw from the European Union, while mounting opposition in France and Germany also threatens to ruin it.

At a U.S.-China agricultural trade seminar in Washington, officials from both the Obama administration and China did not talk about the TPP collapse and Trump's pronouncements against China.

Although he did not talk about Trump's statement, Chinese Vice Premier Wang Yang said that it would "unacceptable to our farmers" if the U.S. would terminate the agricultural trade.

"China is one of the most important markets for agricultural exports, accounting for nearly a fifth of U.S. agricultural exports. . . . On average, every U.S. farmer exports about $12,000 of agricultural products to China every year," Wang said.

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