TPP can succeed without the US

The United States signed the Trans-Pacific Partnership (TPP) trade deal last year, then decided not to implement it. The 11 other signatories have given themselves until November to decide whether to go ahead anyway. They should not need that long. The deal as it stands is far better than none.

Contrary to warnings from some quarters, America’s absence need not kill the agreement. Negotiators mainly have to change the clause that says it must be ratified by countries accounting for 85 per cent of the 12 members’ gross domestic product (the US’ is 60 per cent). Other provisions dealing specifically with the US will need to be adjusted or ignored, but if the 11 want to proceed, they can.

Some are hesitating. Malaysia and Vietnam, whose Prime Minister visits the White House this week, say they made concessions only in return for better access to the massive US market. Yet, apart from a few areas such as textiles, footwear, agriculture and some motor vehicle products, the US market was already pretty open. Without the US, expanded intra-regional trade will deliver smaller benefits, but the deal is still a net plus.

The fact is, many of the so-called concessions granted during the talks do not require reciprocal sacrifices to make sense — they are valuable in their own right. The TPP requires for instance, structural reforms in Japanese agriculture and Vietnam’s state-owned industries. The respective governments understand that those changes are necessary to raise productivity and living standards, but they are politically challenging. The TPP is a way to carry them forward.

In other ways, too, there is more to the deal than lower tariffs. The TPP offers a standard-setting rulebook for doing business globally in the 21st century, covering intellectual property, digital trade and environmental protection.

If it goes ahead, membership is likely to grow. Before long, South Korea and Indonesia will feel inclined to sign up. Nations far from the Pacific Rim will look to TPP rules for guidance on how to stay competitive.

The only party to lose in this scenario is the US. It will forgo the gains in trade it would have enjoyed, and it will have less leverage in future trade talks with Japan, Canada and Mexico.

Some US companies may shift operations to other TPP members to take advantage of concessions originally won by US negotiators. If that is how things unfold, the US might ask to be let back in.

Malaysia has proposed a different way forward — a more exhaustive renegotiation of the pact. This seems ill-advised. It would make things difficult for countries such as Japan and New Zealand that have already ratified the TPP, and would delay implementation far past the end of this year.

Better to bank what has already been achieved, then build on that.

No question, this would be a smaller success than the TPP’s architects had hoped, but a notable achievement nonetheless. BLOOMBERG