May 26, 2017 / 7:15 AM / 7 months ago

Commentary: Trump's best option in the Asia Pacific

Eleven American allies and friends met on the sidelines of the Asia-Pacific Economic Cooperation meeting in Hanoi last weekend in an effort to keep alive the Trans Pacific Partnership (TPP), the trade agreement they thought they had locked up with the United States last year. All the countries trade with China, which is not a TPP member, but none wants to be sucked into the China-centric future Beijing is trying to will to life through TPP-ish substitutes like the Regional Comprehensive Economic Program and “One Belt One Road” initiative.

An employee checks on a drink bottle at a production line of a factory in Luohe, Henan Province, China, August 15, 2016. Picture taken August 15, 2016. REUTERS/Sheng Li

So, calling themselves the TPP-11, they’re trying to salvage what they can from the pact, which is technically dead in its current form without the United States.

The odds of Trump reversing course on the TPP are zero, but he’d be wise not to rule out too many other options in a region as precarious as the Asia Pacific is now.

Listening to Trump’s campaign promises last year had to be confusing for the eleven allies and friends. He promised American voters he would both jettison the TPP, which he said would have taken jobs out of the United States, and get tough with China.

But since the two promises don’t square – a dead TPP is a good thing for Beijing, some believe, because it would have diminished China’s trade clout – he was bound to break one of them. And since he withdrew the United States from the TPP on his first day in office, it looks like he’s on track to break his promise to get tough on China. That’s the wrong promise to break, a “read my lips, no new taxes” kind of broken promise.

The other eleven members would be happy to have the United States back to resurrect the TPP, even if they’re bickering at the moment. The TPP was as much about security around the Pacific as it was about trade. If one accepts that capital will inevitably flow toward low-cost labor, the United States secures no benefit by walking away; that flow will continue without it.

“Protecting” America from low-cost labor markets by slapping tariffs on imports from them shields American business from competition, and competition has always been what has made America, well, competitive. Penalizing Beijing for dumping steel and aluminum in American markets is one thing; walking away from friends simply because their labor costs are lower is another.

Trump talks with gusto about bringing jobs back from China. I’d never bet against American business – with the right tax and trade policies in place, American businesspeople can do anything – but even if jobs leave China, they are as likely to go to Vietnam or Indonesia as they are to go to Ohio. Companies that picked up and moved to China to lower their labor costs or be closer to Asian markets are unlikely to pick back up and come home. Thoughtful domestic economic and tax policies that stimulate business formation and investment will likely have a bigger impact on new job creation than browbeating American companies overseas to return.

No one knows how to exploit low-cost labor advantages in developing countries better than those countries’ businesspeople, and they’re not going to stop no matter how much noise American politicians make. So, from a strategic viewpoint – Beijing has grown increasingly assertive regionally as China has grown economically – the issue may be more about not directing new jobs to China than actually repatriating them. TPP members like Vietnam and Malaysia, or Chile and Peru, would be logical, friendly alternative destinations.

The TPP was never going to be another NAFTA, causing, as billionaire presidential candidate Ross Perot famously anticipated in 1992, “a giant sucking sound” of American jobs out of the country. That’s already happened. The TPP is designed to reduce trade barriers among members, which would open new markets for American exports.

Trade isn’t the major challenge the West has with Beijing, anyway. The strategic issues of the nuclearization of North Korea and the militarization of the South China Sea are. Unless the United States is prepared to cede the western Pacific to Beijing, it’s going to need all the allies and friends it has in the region as it negotiates these issues. It’s hard to find a better group than the eleven other TPP countries.

So if an opportunity arises to draft a new agreement with the TPP-11, Trump should consider it closely. Explaining to Americans why that’s a good idea would be more complex than the tweets and sound bites he used to kill the TPP, but simpler than explaining in years to come why America left its friends behind in a region Beijing came to dominate.

About the Author

Robert Boxwell is director of Opera Advisors, a management consulting firm based in Kuala Lumpur.

The views expressed in this article are not those of Reuters News.

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