4 things to watch now that the U.S. has withdrawn from TPP trade deal

President Trump on Monday started to make good on the trade rhetoric that was a hallmark of his presidential campaign by formally withdrawing the United States from the Trans-Pacific Partnership.

Former president Barack Obama had heralded the ambitious 12-nation trade deal as a way to balance China's rising influence in Asia. Critics said it could cost U.S. jobs. The agreement, known by its acronym TPP, had already stalled before Congress, and so Trump's executive order was a mostly symbolic move. But the U.S. pullout could have far-ranging implications for America's role in the global economy.

Here are four potential shifts to watch in the aftermath of Trump's executive order on TPP.

Without the U.S. asserting its leadership in Asia, China is poised to expand its influence.

The TPP was intended to increase American influence in Asia and balance China's rising power. As my Washington Post colleagues Simon Denyer and Anna Fifield reported in October:

For those who worry about China filling the vacuum, there is a precedent. Congress created another vacuum, experts say, by failing to agree to reforms of the International Monetary Fund to give China and other developing nations greater say.That led directly to China’s move to create the Asian Infrastructure Investment Bank, which came into being last year, and left some of Washington’s closest allies, including Australia and Britain, with little choice but to line up behind Beijing and join.None of this is lost on foreign-policy thinkers in Washington. In August, eight Republican former foreign and security officials warned in Foreign Policy magazine that failure to ratify the trade pact would “cede to China the role of defining regional trade rules, and would be a body blow to U.S. standing and the U.S. economy.”

[China is the big winner as Clinton, Trump disavow hard-fought Asia-Pacific trade deal]

Also watch: Team Trump vows to stop Beijing in the South China Sea

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Team Trump vows to stop Beijing in the South China Sea

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The TPP alternative could put U.S. businesses at a competitive disadvantage.

Because China was not a party to the TPP, it has been actively negotiating an alternative to the U.S. effort, called the Regional Comprehensive Economic Partnership (RCEP), and that agreement might not be as friendly to American businesses. As The Post's Beijing bureau chief, Simon Denyer, wrote in November:

The RCEP would involve much lower standards for the environment, labor rights and intellectual property protection than the TPP and does not include the United States, potentially leaving U.S. businesses at a competitive disadvantage in Asia.“There's no doubt that there would be a pivot to the Regional Comprehensive Economic Partnership if the TPP doesn't go forward,” Japanese Prime Minister Shinzo Abe said, according to the Kyodo news agency.

[If the U.S. withdraws, China wonders whether it is ready to lead the world]

Also watch: Trump: 'We just officially terminated TPP'

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Trump: 'We just officially terminated TPP'

AFP

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The U.S. withdrawal could alter its relations with trading partners.

Trade-dependent countries such as Peru could be unnerved and might look increasingly to China as a new principal trading partner. As Simeon Tegel reported in November:

The Andean nation has long prided itself on its embrace of free trade. It was an enthusiastic advocate of the now-stalled Trans-Pacific Partnership (TPP) and has signed more than a dozen bilateral agreements, including with the European Union, China and Japan, accords credited with helping Peru become one of Latin America’s best-performing economies. One of the mainstays of that growth has been Lima’s trade pact with Washington. Since it took effect in 2009, U.S.-Peruvian commerce has boomed from just under $9 billion in 2010 to nearly $14 billion in 2015, helping haul millions out of poverty here and establishing Peru as an upper-middle-income nation.Americans, meanwhile, have benefited from increased access to Peruvian goods, everything from organic artichokes and quinoa to gold, silver and other metals mined in the Andes.Yet those gains could be at risk if President-elect Donald Trump follows through on his campaign promise to renegotiate U.S. trade deals, in particular the bilateral Peru treaty.[Peru welcomes Obama, but worries its U.S. trade deal could unravel under Trump]

The TPP withdrawal could be a sign of what's to come for NAFTA.

Trump has vowed to renegotiate the North America Free Trade Agreement (NAFTA), a campaign promise that was often mentioned in the same breath as the U.S. withdrawal from the TPP. As Alan Freeman reports from Ottawa, changes to NAFTA would affect trade with both Mexico and Canada: 

So far, Trump’s protectionist tweets have primarily been aimed at automakers who transfer production to Mexico from the United States, although in recent days he has also threatened German carmakers with a 35-percent import tax if they don’t build more cars in the United States. Canada has so far been spared. Ironically, when Trump attacked Toyota this month for building a new plant in Mexico, he didn’t mention that its planned output of Corolla small cars will be transferred from a Toyota plant in Ontario, with no impact on U.S. jobs.Kristin Dziczek, director of the industry, labour and economics group at the Center for Automotive Research in Ann Arbor, Mich., said Canada was never a primary target of Trump voters in Michigan, Ohio and Pennsylvania. “There aren’t a lot of angry autoworkers ticked off at Canadians,” she said in an interview. “I’m not sure an anti-Canada message resonates.”Yet Canada remains vulnerable. Only 12 percent of the cars assembled in Canada are sold domestically, with the vast majority being shipped to its southern neighbour.[Trump has aimed his NAFTA criticism at Mexico. But Canada is now worried.]
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