TPP could make the US – not China – the big loser

By Hu Weijia Source: Global Times Published: 2015-10-7 22:18:01

Ongoing negotiations over RCEP likely to offset TPP impact

This week’s announcement that 12 Pacific countries had successfully concluded Trans-Pacific Partnership (TPP) trade talks has attracted a lot of attention. The TPP, which aims to free up trade in 40 percent of the global economy, includes major economies like Japan and Australia, but it excluded China.

The TPP negotiations have triggered public concern over whether it will isolate China and overwhelm the Chinese economy. But it is not wise to draw simplistic conclusions, and the negotiations’ negative effect on China’s economy should not be overblown.

There is no doubt that the TPP carried strong political symbolism. It is perhaps an achievement for the Obama Administration in economic diplomacy as part of its rebalance to the Asia-Pacific region, but the deal is expected to have a limited impact over the Chinese economy.

Geared to form new rules that could dominate the world trade system in the future, the TPP insists on its high standards over issues such as lifting barriers to market access. However, each of the 12 member-countries has a different development level and it is hard for some of them to meet the high standards required by the TPP. Even though the TPP talks have proven successfully, the TPP still faces huge challenges when the deal is implemented.

Since the Asian economy is deeply interdependent, the TPP will have limited vitality without China’s participation, which is Asia’s largest economy. Some analysts said the TPP will lead to massive migration of trade and investment activities in the Asia-Pacific region, partly because it would further elevate ties between the US and Asian countries, which may reduce some Asian economies’ dependence on China. But, fortunately, the ongoing negotiations over the Regional Comprehensive Economic Partnership (RCEP) is likely to offset the impact of the TPP.

Reports said the negotiations over RCEP will conclude by the end of 2015. If the RCEP is reached, it will significantly bolster economic ties between China and Asian countries.

In contrast, it is possible that the US will suffer greater losses than China in terms of trade and investment. Some US officials view the TPP as an important step to boost its exports and spur the US economy, but excluding China from the TPP negotiations may actually run counter to their desires, because China is a key market for the US.

Indeed, as products from TPP member-countries enjoy preferential market access, the TPP will pose a severe threat to China’s exports to the US, but it should be noted that US firms, who have established processing bases in China, may suffer those losses.

The negative effect of the TPP on the Chinese economy should not be overblown. Even though Chinese authorities said they will take an open attitude toward the deal, joining may not be best way forward for China at present because it is difficult for the country to meet the TPP’s high standards. China should follow its own pace in economic reform and opening-up to outside world to avoid disruptions to its economy.

The author is a reporter with the Global Times.

Posted in: It’s Your Business

About Uy Do

Banking System Analyst, former NTT data Global Marketing Dept Senior Analyst, Banking System Risk Specialist, HR Specialist
This entry was posted in China view, opinions, RCEP, TPP and tagged . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s