Trump's America

Donald Trump: Trans-Pacific Partnership scrapping the first shot before aiming at China

Updated February 07, 2017 16:13:56

Analysts fear the scrapping of the Trans-Pacific Partnership (TPP) is just the first shot in what is set to become a far more serious challenge to Australia and the world, when US President Donald Trump takes direct aim at Australia's major trading partner, China.

Australian exports to the US are worth $14 billion, while the nation's exports to China total $100 billion.

"Trump has managed to capitalise on a longer term and more deep seated concern in those communities that have been affected by trade agreements over time, particularly the North American Free Trade Agreement," said Dr Patricia Ranald, convenor at the Australian Fair Trade and Investment Network, which opposed the TPP.

"The fact that they haven't delivered on what were often exaggerated promises of jobs and growth."

However, even if Mr Trump is perceived as protecting his manufacturing support base, his rejection of the Trans-Pacific Partnership is another contradiction.

Many viewed the Trans-Pacific Partnership deal as strongly favouring the United States.

America's National Association of Manufacturers strongly supported the TPP as a deal that would open markets in Asia where their members were losing market share.

Manufacturers also saw the deal as reducing foreign government barriers.

"The fear is that's the beginning of a whole slew of interventionist protectionist trade policies. If that's true then we have some serious issues. Not just us but the whole world," said Martin Richardson, economics professor at ANU.

"I think the biggest fear most trade economists have here is that the US pursues, or Trump pursues the punitive tariffs on China that he's been threatening.

"If he does that that triggers a retaliation by China and we just get a massive collapse in global trade."

Australian exporters push for TPP without US

Australian exporters, including some in the farm sector and wine industry, continue to push for a TPP without the US.

"It reduces a lot of the non-tariff barriers that can exist between countries, and creates a system where we can have free trade where national regulations still prevail but we can fit within those national regulations for the trade within wine between the parties," said Tony Battaglene chief executive at the Wine Makers' Federation of Australia.

"So for us it's all win."

But Dr Patricia Ranald disagrees and welcomed Mr Trump's withdrawal from the TPP, saying the non-tariff measures embraced the wine industry are the very things she is concerned about.

"There are 30 chapters in the TPP and most of them are about restraining governments from regulating - either regulating corporations or regulating more generally in the public interest," Dr Ranald said.

"The whole agreement would have to be renegotiated without the US and so the whole parliamentary process, negotiation and signing would have to start again, and so it's really stupid," Dr Ranald said.

The question now is, can the TPP survive without the US?

"The difficulty of selling this for a large part of the population was a couple of things like the ISDS (investor-state dispute settlement), the idea that corporations could sue in an extra legal situation and also the intellectual property protection of pharmaceuticals," Mr Richardson said.

"Those were both pushed heavily by the US in a sense, with the US out of it we can make this much more of a trade oriented agreement."

But, the TPP seems destined to disappear with China unlikely to fill the breach.

"China is involved in another big trade agreement, the Regional Comprehensive Economic Partnership with India, Japan, Korea, the ten Asian countries, Australia and New Zealand. Sixteen countries and I think they'll be focusing on that for a while," Dr Ranald said.

Topics: trade, globalisation---economy, united-states, australia, china

First posted February 07, 2017 12:08:30