How TPP Can Survive Trump

With the shock election of Donald Trump, the ratification of the Trans-Pacific Partnership (TPP) trade agreement looks all but impossible.

There was initially some hope that the pact might be approved during the lame duck session of Congress before a President Hillary Clinton took office. But given President-elect Trump’s fierce opposition to the deal and Congressional Republican opposition toward voting on it, there has been a flood of commentary in the United States indicating that TPP is now effectively dead, though, to be fair, we still know very little about what his administration will actually do.

It might be too soon to bury the TPP, however. There are in fact already whispers among U.S. and Asian thinkers about how the agreement could yet survive even after Trump, either fully in its current or a modified form or partly by salvaging some of its key benefits through alternate pathways or visions. Given the importance of the pact, it is worth briefly exploring what these options are.

Cost of Failure

Before proceeding, let me be clear: TPP’s demise would be a major blow to the United States both economically and strategically.

Economically, apart from the usual gains in any traditional trade pact, Washington would also lose a valuable opportunity to write the rules of 21st century trade – including in areas where it would break new ground like state-owned enterprises and the digital economy. Since the TPP, unlike bilateral deals, has “open architecture,” the United States would also be deprived of an initiative that could help both attract new members and generate a race to the top in terms of trade pacts regionally and even globally.

Strategically, the TPP’s failure would reinforce doubts about U.S. credibility in the region amid a rising China and undermine Washington’s efforts to strengthen the capabilities of its Asian allies and partners.

That said, given where we are now, it is worth considering the alternatives that exist as a Trump administration takes office.

Renegotiation?

One possible (though at this stage admittedly unlikely) scenario is that Trump would actually look to seriously renegotiate the TPP. From a practical standpoint, that would seem to be the way to both address the concerns he has with the agreement while ensuring that the United States does not lose out on its benefits.

Though that might seem sensible, as of now it seems like a rather improbable future. While Trump has certainly shown a willingness to be flexible on some issues, his opposition to free trade has spanned decades and was also a key part of his campaign. Trump included his promise to withdraw from the TPP in his to-do list for his first 100 days in office, and his advisers have given few indications that he will reverse his position on this.

Even if Trump chooses to go through with renegotiation, the process will not be easy. Other signatories have already both privately and publicly warned Washington that given how difficult it was for them to negotiate the deal once with their publics, doing so a second time would be a step too far.

TPP Minus U.S… For Now

A more likely scenario might be the other existing signatories initially moving forward with TPP without the United States, with Washington coming on board at a later time.

If this could be accomplished, it would seem to be a win-win. Signatories would be able to extend the current provisions to themselves so that they do not lose out on the benefits, while Washington would be given time needed to muster the domestic consensus needed to finalize the pact. The Trump administration could either find a way to get the United States back in, or, more likely, Washington and the world could simply wait for the next administration to do so.

Such an outcome would not be unprecedented for U.S. policy. As Jeffrey Schott, an expert at the Peterson Institute of International Economics, a Washington, D.C.-based think tank, recalled in a note, when Congress failed to vote on the Havana Charter for an International Trade Organization (ITO), the planned trade regime for the post-World War II era, the General Agreement on Tariffs and Trade (GATT) became the de facto trade regime until a new agreement established what we now call the World Trade Organization (WTO) nearly half a century later.

Getting to this, however, will not be easy. One of the key reasons why some of the signatories were on board with the TPP in the first place was that they would gain access to the U.S. market. Washington’s exclusion may alter their decision to be involved in the pact.

Procedurally, it would also require an amendment to the original agreement. Currently, the enactment provisions for TPP under Article 30 stipulate that the agreement would come into force either if all 12 original signatories ratify it within two years of the date of its signing, or, alternatively, if at least six of them which together account for at least 85 percent of the combined GDP of the original signatories in 2013 do so. Under that provision, finalizing TPP would be impossible without Japan and the United States which, at the time of signing, accounted for around 80 percent of GDP. But Article 30 also specifies that TPP members can make amendments to the agreement as well, and so if the signatories determine that they would like to adopt this course, they could consider that possibility.

Picking Up the Pieces

Even if the TPP does not move forward in its current form or a revised one, it would still be possible for countries to preserve some of the key benefits inherent in the agreement.

For example, from a U.S. perspective, a point often missed about the TPP is that Washington already enjoys free trade agreements with most of the TPP members, with Japan, Malaysia, and Vietnam being the major exceptions. If TPP cannot move forward for now, the United States and these countries could move quickly to conclude bilateral FTAs that would have essentially occurred under the agreement. Other countries have privately and publicly been saying that they are also likely to move forward with concluding bilateral deals as well.

Doing so will not be easy. Some bilateral pacts have been either contemplated or partly negotiated before, as was the case with the U.S.-Malaysia free trade agreement during the Bush administration, which eventually lost steam. Although Trump advisers say that the administration would be more open to bilateral FTAs than multilateral ones, actually negotiating these pacts is nonetheless likely to be difficult given the protectionist bent we have seen from the next administration thus far.

Even if this is possible, optics-wise, admittedly, negotiating a series of high-standard bilateral deals will not look as impressive as a U.S.-led, single multilateral effort. Substantively, as mentioned earlier, bilateral agreements also lack the ability to attract others into them unlike multilateral initiatives with “open architecture” like the TPP.

But it is also true that irrespective of whether Washington does it through one big multilateral deal or a few high-standard bilateral agreements that serve as models for others, it would essentially be accomplishing the same objective: writing the rules of the 21st century for trade and generating a race to the top among countries in the region as well as globally. In addition, this would be tied to other U.S. economic initiatives that aim to foster the same thing, since trade is only one component of economic policy, which is in turn just a sphere within wider U.S. Asia policy.

That big picture is worth keeping in mind even as we hear talk of TPP’s demise – whether it is the agreement itself as it stands, modifications of it, or its spirit. Though that may well come to pass, alternatives that can lead to its full or partial survival ought not to be dismissed.