Daily Times

A new Asian century heralds the tectonic shift in the economic power matrix of the globe. With the trumping of Trans-Pacific Partnership (TPP) by the new US President, the decks have been cleared for the new kid on the Asian block, i.e. China. The recent revocation of TPP would go a long way in cementing China’s leadership role in the new regional economic and trade partnership emerging in the Asia-Pacific region sans America. Some specious arguments and the election campaign mentality have resulted in the desultory promptitude in Trump’s fatal pronouncement on the TPP, an economic vehicle that promised to anchor USA’s economic interests deep enough in a region towards which the economiccentre of the gravity of the world’s economy is gravitating slowly but surely.

The six million manufacturing jobs lost to North American Free Trade Agreement (NAFTA) weighed heavily enough on the job deprived habitués of the rust belt over whose discontentment Trump slid into power, disallowing a contrarian view on the global trade alignments. There was no time for a cold and rational calculation of the cost-benefit implications of the new economic Monroe’s doctrine embraced by the new Republican administration as long as a prompt libation was offered to propitiate the fear demons of Trump voters. Little thought was given to the fact that the decision to relocate the manufacturing bases overseas by the US firms was a conscious decision by prudent corporate strategists to keep the US industrial products competitive in a global market going awry in the wake of the international financial crisis of 2008.

Decisions taken on the spur of the moment without due diligence would always boomerang in the shape of unanticipated consequences. At a time when the Asia-Pacific region needed US engagement and solid leadership, the withdrawal message has sent a signal for the economic parvenus in the Asia-Pacific to look for a Chinese umbrella. In order to understand the significance of TPP and the impact of US disengagement from it, a bit of background information is apposite. TPP was a global and regional economic partnership tying the USA into a multilateral Free Trade Agreement (FTA) with other Asian countries besides China, Japan, Republic of Korea, Australia, New Zealand, and India. The precursor to TPP ie Asia-Pacific Economic Cooperation (APEC) agreement had failed to deliver despite remaining in force for long. There was a need felt on the part of the USA to stitch up a new trade agreement tapping the economic potential of the Asia-Pacific region.

The US decision to engage with TPP was twofold, one to boost own exports in East Asia and the other to contain the rise of China. The decision was to benefit USA more than the other economies of the region as the proportion of the emerging economies in the global wealth had increased to 37 percent, reducing the developed countries’ share to 63 percent. The emerging markets were showing promise with 70 per cent of world exports emanating through them out of which 50 percent alone belonged to BRICS countries. The US allies like Japan and Australia were also keen on the US lead role in an economic partnership since they viewed US involvement as a security hedge against the dominant Chinese influence in the region. The economic advisors of Trump, however, peddled the benefits of a US withdrawal from TPP in terms of bringing manufacturing jobs back home, preventing US exposure to global competition of multiple tariffs of emerging economies, and reaping benefits of a bilateral free trade regime with most of the trade partners.

Trump administration has not however weighed in the trade preferences of the Asia-Pacific nations including Association of South East Asian Nations (ASEAN) that view bilateral deals with multiple nations more of a liability compared to the level playing field offered by the multilateral free trade agreements like TPP. That the US would abjure claim to an economic leadership role in a region of emerging global wealth leaving the field clear for an ascendant China was a bet very few had placed hopes on. For China and its string of pearls policy, the current development is a godsend for its economic dominance via One Belt One Road strategy. If the Trump administration makes good on its threats of levying 45 percent tariff on Chinese exports, the Chinese countermeasures would be facilitated through a leadership role in the new post-TPP economic alignments in Asia-Pacific region.

The European sovereign debt and Japanese fiscal deficit are also some of the factors that are pushing the emerging economies towards a regional integration to take advantage of the global economic power shift towards Asia-Pacific. China already has started filling the post-TPP leadership vacuum by propping an alternate to TPP in the shape of Regional Comprehensive Economic Partnership (RCEP), an economic grouping comprising ten ASEAN countries i.e. South Korea, Japan, Australia, India and New Zealand. In one fell swoop, therefore, Trump has upended the Obama administration’s famous “rebalancing theory” of the world economy, according to which the USA was to reduce its consumption along with a concomitant increase in finished industrial goods to reduce its unsustainable fiscal deficit. The US loss therefore in Asia-Pacific is China’s gain which China is keen to capitalise upon through open trade markets and economic integration.

What do these emerging trade and economic alignments portend for countries like Pakistan? After US withdrawal from TPP, a new engagement paradigm via bilateral free trade agreements with Asian countries would be the norm. India, Australia, and Japan would be wooed aggressively by the USA to wean them away from a Chinese-led multilateral free trade regime like RCEP. Though Pakistan being a smaller economy as well as an active participant in Chinese OBOR strategy might not get the same amount of attention as India still it should be prepared to steer a balanced course through active engagement with China as well as the USA regardless of her diminished importance vis-à-vis India. By facilitating CPEC component of OBOR, Pakistan would be doing China a great favour without losing her relevance to the USA as a regional ally advancing US security interests by leveraging her geostrategic location. Pakistan’s geostrategic location vis-à-vis US security interests in Afghanistan, CPEC’s centrality in Chinese OBOR strategy and her new leadership role in emerging Asia-Pacific economic grouping i.e. RCEP offer gilt-edgedopportunities that need to be optimally capitalised through astute politico-economic policy making and bold implementation.

The writer is a PhD scholar at NUST and can be reached at rwjanj@hotmail.com