Southeast Asia from Scott Circle: Will Trump’s “America First” Result in U.S. Economy Being Left Behind in Asia?
August 24, 2017
Will Trump’s “America First” Result in U.S. Economy Being Left Behind in Asia?By Murray Hiebert, Senior Adviser and Deputy Director (@MurrayHiebert1), Southeast Asia Program (@SoutheastAsiaDC), CSIS
Seven months after President Donald Trump pulled out of the Trans-Pacific Partnership (TPP), many in the United States view the 12-nation trade pact as all but dead. But that’s far from accurate, at least outside of the United States.
Although most countries in the Asia Pacific viewed the United States’ exit from the TPP with considerable alarm and anxiety, many of them are wasting little time trying to cobble together other preferential trade arrangements that could have considerable negative impact on the U.S. economy down the road.
The TPP-11—the original 12 minus the United States—have met several times in recent months to see if they can rework the agreement without Washington. Japan’s goal is to try to have a TPP-11 deal in place by the time of the November Asia-Pacific Economic Cooperation (APEC) summit in Vietnam, which Trump is slated to attend.
The next round of TPP-11 talks will be held in Australia in the next few weeks. The big question is whether the remaining members will be able to sustain the momentum required to clear away the remaining hurdles to forge a new pact. To complete the agreement they need to change the rules to reflect the fact that the deal has shrunk without the U.S. economy. The original rules had the TPP going into force after notification by at least six countries that together had a gross domestic product (GDP) of 85 percent of the signatories. The United States made up 60 percent of the grouping’s combined GDP.
Meanwhile, the United States’ withdrawal from the TPP has increased interest in the 16-member Regional Comprehensive Economic Partnership (RCEP), which includes the 10 ASEAN member states plus Australia, China, India, Japan, New Zealand, and South Korea. Together they make up 30 percent of global GDP and a quarter of world exports.
The goal of many of the members is to finalize the RCEP by the end of 2017, but they still have a considerable way to go. Among many other issues, India frets that it will be overwhelmed by manufactured products from China, even if New Delhi is confident it can compete on services.
Some see the RCEP as an alternative to the TPP, but that’s not really the case. The RCEP is mainly an effort to harmonize the differences between the various trade deals that the ASEAN countries already have with the other six RCEP countries. The RCEP is not as ambitious as the TPP on issues like labor, the environment, intellectual property, state-owned enterprises, and the digital economy.
Whichever trade regime—the TPP or the RCEP—is completed first could play an important role in setting a precedent for the future regional trading architecture. This has prompted Japan and Australia, among others, to push hard to rescue the TPP or to bolster the RCEP to include more rigorous TPP-like elements.
At the same time, an August 7 analysis by Politico Magazine (http://www.politico.com/magazine/story/2017/08/07/trump-tpp-deal-withdrawal-trade-effects-215459) found that TPP-11 members were involved in a surprising 27 separate trade talks, including among themselves, with other countries such as China, and with trading blocs like the European Union (EU). The magazine pointed out that these negotiations could particularly hurt the U.S. agriculture sector, which was expected to see trade increase $10 billion over 15 years under the TPP, according to the International Trade Commission.
Australia, New Zealand, and the EU are negotiating to lower tariffs that would give them a competitive edge over U.S. agricultural exports, Politico reported. A Japan-EU deal will give European pork producers a two-dollar-a-pound leg up over exports from the United States. Another deal will remove a 15 percent tariff on European wine that U.S. exporters will continue to pay. Politico also cited the example of Australia negotiating a 19 percent tariff cut on beef exports to Japan that American farmers will continue to pay.
Congress has many priorities when it returns to Washington in September, but it ought to consider doing American consumers and producers a favor by holding hearings on how much pulling out of the TPP is costing the U.S. economy at a time when other countries are charging ahead with preferential agreements that exclude the United States.
It is great that President Trump has agreed to attend the APEC summit in November, but what will he bring to the meeting beyond calls for about half of its member economies to reduce their trade surpluses with the United States? Other leaders, including Chinese president Xi Jinping and Japanese prime minister Shinzo Abe, will arrive ready to tout their various market opening agreements and negotiations during the accompanying APEC CEO summit.
Few if any countries want to exclude the United States from the economy of the Asia Pacific. China today is the largest market for most Asian countries that earlier looked to the United States as their primary economic partner. But most of those countries still want the United States to play a role in economically balancing China because they recognize the dangers of depending too much on one market. U.S. allies and friends like Japan, Australia, and Singapore saw the TPP as a way to keep the United States engaged in the region at multiple levels beyond American security arrangements.
Trump earlier promised a raft of “beautiful” trade deals to replace the TPP, but after seven months in office the new administration has done little to spell out a detailed strategy about how it plans to engage the most economically vibrant region of the world. Observers might be forgiven for wondering if “America First” is going to result in America left behind.
Murray Hiebert is senior adviser and deputy director of the CSIS Southeast Asia Program.
Biweekly UpdateIndonesian police uncover plot to bomb presidential palace, arrest five suspected militants
Indonesian police on August 15 arrested five suspected Islamic militants and seized chemicals intended for an attack on the presidential palace at the end of August. The plot was uncovered during a raid by police counterterrorism unit Densus 88 in the city of Bandung, and unveiled several bombing targets including a local police headquarters. Indonesian authorities have identified the attackers as part of Jamaah Ansharut Daulah, a local terrorist network with ties to the Islamic State.
Malaysia and China launch $13 billion rail project
Malaysia and China on August 9 broke ground on a $13 billion rail project connecting the east and west coasts of peninsular Malaysia. The planned 430-mile East China Rail Link is expected to serve as an alternate trade route connecting the South China Sea to the Strait of Malacca. The project, a major part of China’s Belt and Road Initiative, is expected to be financed with a soft loan by the state-owned Exim Bank of China. The China Communication Construction Company has been awarded building rights.
Secretary of State Tillerson visits Thailand and Malaysia to bolster ties
U.S. secretary of state Rex Tillerson paid visits to Thailand and Malaysia on August 8 to bolster bilateral ties while urging those countries to maintain pressure on North Korea over its nuclear and missile programs. During his five-hour trip to Bangkok, Tillerson met with Prime Minister Prayuth Chan-o-cha and Foreign Minister Don Pramudwinai while also paying respects to the late King Bhumibol Adulyadej. In Kuala Lumpur, the secretary discussed trade matters and terrorism during a meeting with Prime Minister Najib Razak.
Myanmar government deploys additional troops to Rakhine, as tensions rise
Myanmar on August 10 imposed new curfews and sent hundreds of soldiers to northwest Rakhine State after a recent spate of killings in the region, including the deaths of seven Buddhists near the town of Maungdaw. According to state media, clearance operations were heightened in the May Yu mountain range where the government says Muslim Rohingya fighters remain active. Around 500 additional troops are reported to have been sent to several towns near the Bangladeshi border to tighten security in the region.
Indonesia sees threefold increase in drug-dealer deaths
Amnesty International on August 16 reported that at least 60 suspected drug dealers have been killed so far by Indonesian police in 2017, more than tripling last year’s total of 18. The report followed earlier comments by President Joko Widodo calling for a merciless crackdown against drug dealers who are ruining the future of the younger generation. Widodo’s remarks during the annual state of the nation speech echo a previous order calling for security forces to shoot drug traffickers who resist arrest.
Cambodia creates border brigade after Lao troops cross border
Cambodia established a new military brigade in the northern provinces of Stung Treng, Ratanakiri, and Mondulkiri, on August 16, following a military incursion from Laos into the area five days earlier. Laos pulled out its troops on August 13 after Cambodian prime minister Hun Sen flew to Vientiane and met with Lao prime minister Thongloun Sisoulith the previous day. Hun Sen said the new brigade would defend national sovereignty, not prepare for war, and that it would draw resources from already-existing units.
Philippines conducts new wave of drug raids, killing more than 90
Philippine police escalated the war on drugs by conducting operations dubbed “one-time big-time” against alleged drug dealers beginning on August 14. Within four days, the operations had caused more than 90 deaths, including that of 17-year-old student Kian Loyd delos Santos, which triggered protests across the Philippines. On August 20, Manila Cardinal Luis Tagle and Archbishop Socrates Villegas, the two highest-ranking officials of the Roman Catholic Church in the Philippines, criticized the violent war on drugs. President Rodrigo Duterte admitted on August 21 that Santos’s death could have involved police abuse.
Cambodia arrests 225 Chinese nationals over telecom fraud
Cambodian police arrested 225 Chinese nationals, including 25 women, in Phnom Penh on August 16 on suspicion of operating a telecom scam to defraud victims in China. The arrests followed a raid on a group using similar tactics on August 2 in the western provinces of Siem Reap and Banteay Meanchey, which captured 151 Chinese and 3 Taiwanese. On July 6, Cambodian authorities deported 74 Chinese nationals who were arrested in Phnom Penh and in Kampot and Kandal provinces in the south.
Vietnam fires vice trade minister over corruption charges
Vietnam on August 16 fired Deputy Minister of Industry and Trade Ho Thi Kim Thoa for her alleged wrongdoings at electricity firm Dien Quang Lamp and her illegal appointment of former PetroVietnam Construction Joint Stock Corp chairman Trinh Xuan Thanh. Thanh, who was charged with corruption and causing massive losses to the company, sought asylum in Germany, from where the German government charged he was kidnapped and brought back to Vietnam. Thoa was the Communist Party secretary and chairwoman of Dien Quang Lamp from 2004 to 2010, a time when she and her family held nearly a 35 percent stake in the company worth around $30 million.
Thailand arrests nine suspects for royal defamation
Nine suspects including a 14-year-old boy were arrested and charged with royal defamation on August 18. The suspects allegedly set fire to portraits of Thailand's King Maha Vajiralongkorn and his late father, King Bhumibol Adulyadej, at several sites in the northeastern province of Khon Kaen in May. If the province’s juvenile court accepts the case, it could become the first royal defamation case against a person under 15. On June 9, a Thai military court sentenced a man to 35 years in prison, the longest sentence to date under the royal defamation law.
Photo credit: Chip Somodevilla/Getty Images