Trump's renewed interest in TPP – a diversion tactic?

April 16, 2018 | By | Reply More

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PETALING JAYA: Economists say US President Donald Trump’s sudden interest in rejoining the rejuvenated Trans-Pacific Partnership (TPP) could be a move to divert attention from ongoing tensions with China and Russia and also an effort to rally the troops in its battle against China in trade.

Last week, Trump (pix) broadcast his interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPTPP, after denouncing the original TPP agreement as disadvantageous to the US during the campaign trail and eventually pulling out of it in the first week of being named president.

OCBC Group vice-president and senior investment strategist Vasu Menon said, it is hard to discount the possibility of Trump using the pact as a smokescreen to divert attention from the tension with China, sanctions against Russia, FBI investigations into Russia’s involvement in the last election and the military strike against Syria.

Echoing his sentiments, Sunway University Business School Professor of Economics Dr Yeah Kim Leng said the US could also be weighing in the possibility of using a multilateral approach rather than taking China on, on its own.

“In a way it may be he is heeding some of the advice, that it is better to use the multilateral approach to negotiate and build up position against China rather than going in alone in terms of confronting China over some of the trade issues,” said Yeah.

Vasu opined that while the withdrawal from the TPP had put the agricultural segment at a competitive disadvantage, the further pile-up of Chinese retaliatory tariffs brought things to a tipping point, forcing Trump to backtrack and now try to convince farmers that he will be able to negotiate a better deal than the already advantageous TPP deal for them and in turn appease electorates for the upcoming mid-term elections.

Yeah said that the initiative to reconsider is, however, a positive sign and an about-turn from his anti-trade and overly nationalistic policies, signaling that the bark is more than the bite when it comes to Trump’s damaging trade policies.

On renegotiating terms of the pact, RHB Banking Group chief economist and head of research Dr Arup Raha is of the view that the CPTPP trade bloc will stand its ground and welcome the US but not with a renegotiation of terms.

“There is likely to be resistance and unwillingness among many of the 11 member states in the CPTPP because of distrust with Trump and also because they know that reworking a new deal with Trump will be an arduous task given his erratic and temperamental nature and his ‘America First’ policy which suggests an unwillingness to compromise,” Vasu said in agreement.

He added that Trump’s statement on having bilateral ties with six of the 11 nations and working on a deal with Japan, the biggest of the 11 countries, raises a question on his seriousness about the deal as this goes on to suggest that his preference is with bilateral ties, over multilateral as that will pave way for the US to assert itself and negotiate better terms in line with Trump’s “America First” policy.

“They (CPTPP) will still need to deliberate whether they will accept the re-entry of the US without deviating back to the original agreement or they need to insist the US join under the new terms where quite a number of the onerous provisions has been removed under the CPTPP,” said Yeah.

Arup and Vasu concurred that it will take a long time for an outcome to materialise, with Vasu saying that nothing may come out of it, as he finds it hard to see CPTPP members agreeing to significant new concessions to Trump.

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