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Winner and losers – TPP got trumped

February 23, 2019

During the election campaign, Trump blasted international trade deals, tapping into a deep well of popular anger over the effects of globalization. Now, President-elect Trump’s first victim could be the TPP that he slammed as a “disaster done and pushed by special interests who want to rape our country.”

China will probably emerge the biggest winner from the demise of the TPP (Trans-Pacific Partnership). The TPP links America with 11 countries and would have been the biggest regional trade deal in history, spanning 40% of global GDP and a third of world trade. China was left out of any TPP talks. Beijing-backed Regional Comprehensive Economic Partnership (RCEP)’s involves 16 nations, is slightly smaller, accounting for 30% of global GDP and a quarter of world trade. Moving ahead on the RCEP, long designed as a counterweight to the TPP, would give China greater economic sway in a region where it seeks to dislodge American influence. The RCEP would complement its massive “One Belt, One Road” initiative now underway, which aims to build roads, ports and highways through much of Asia. All 10 countries of ASEAN as well as China, Japan, India, South Korea, Australia and New Zealand are involved in the RCEP which has gone through 15 rounds of negotiations since 2013.

Countries which rely heavily on free trade, particularly Singapore and Vietnam stand to lose the most from the imminent death of the TPP which is expected to add as much as 0.5% p.a. to Singapore’s GDP growth (and 1% p.a. to Vietnam’s) with a TPP deal. The RCEP is not expected to benefit Singapore much as it already has free-trade agreements with other member nations, in a recent study by HSBC.

On the other hand, countries which were originally left out of the TPP but included within the RCEP framework stand to win most from a new world trade paradigm. These include Thailand, the Philippines and others who are close to China, such as Laos and Cambodia. The four ASEAN nations are expected to gain significantly from both the RCEP and the One Belt One Road initiative.

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