The Consequences of US Withdrawal fr om the Trans-Pacific Partnership

One of the first decisions taken by Donald Trump after his inauguration on 20 January, 2017, was to sign the decree on the US withdrawal from the Trans-Pacific Partnership (TPP) trade agreement which united 12 member countries accounting for about 40% of the world GDP.

According to initial estimates, TPP was supposed to help increase the international trade volume to $305 billion a year. The estimates suggested that almost half of the trade growth would account for the US which directed almost 60% of its exports to these countries. Moreover, the agreement was of strategic political importance for the United States: Being a TPP member, the US provided preferential access to the markets of the region to domestic producers, creating an advantage over Chinese companies.

The main argument in favor of the US withdrawal from the agreement was protecting American producers and American labor market from potentially high competition from countries of the region wh ere labor costs are low, such as Malaysia and Vietnam. This, according to the new US president, will save jobs and production in the country.
Nevertheless, there is a possibility that Trump’s intention to keep production in the country will be partly unworkable due to the already existing production chains, as well as pressure on the US markets regarding the level of wages and the use of new technologies. Moreover, the withdrawal from the agreement undermines American strategic position in the region, giving way to China that can completely change the economic and trade rules in the region through the Regional Comprehensive Economic Partnership (RCEP) which is being formed with China’s support and involves 16 countries except the US. Also, China can expand trade and economic ties with the Philippines and Malaysia – traditional US trading partners.

It should also be noted that the US withdrawal from the agreement will break the balance of economic benefits between the countries in the region. Such countries as Japan, Malaysia, Vietnam, Brunei, and, to a lesser extent, Singapore will be economically damaged. Japan that was the latest country to join TPP jeopardizes its automotive industry because of the high competition from Mexico. At the same time, Malaysia and Vietnam could increase their exports by 20% and 30% if the United States stayed with TPP, which would allow them to increase their GDPs by 7.6% and 8.1%, respectively, by 2030. However, Australia and New Zealand remain open supporters of the agreement, persuading China and other Asian countries to join TPP after the US withdrew.

Moscow’s official position regarding TPP “remains without consequences.” The US withdrawal from the agreement is unlikely to form a new Russian agenda in the Asia-Pacific region (APR) in the short term, taking into account the fact that the possibilities of increasing Russian exports to the region today are limited by the structure of domestic production. The basis of Russian exports to TPP countries are energy minerals (57.8%), metal products (14.2%), chemical products (7.2%). Japan is the main regional market for Russian goods (45.8%). The share of Russian exports to Vietnam, with which Russia, together with other EAEU members, agreed to create a free trade zone, is only 5.8% from the total volume of trade with TPP.

Yuri Zaitsev – Senior Researcher