WITHDRAWAL FROM TPP
HAS FORCED THE U.S. TO CONTAIN CHINA

                                                                                                         

 In 2017, I argued that U.S. grand strategy should prioritize the creation of a Pacific Community in Asia. Like NATO and the European Union in the Atlantic, this Pacific Community would help install a rules-based regional order, integrate the Asian economies, and institutionalize peace in the region. The foundation for this Pacific Community was the Trans-Pacific Partnership (TPP).

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TPP offered a pragmatic roadmap for integrating China into a rules-based regional order. This would ease the transition to a more China-centric Asia. Instead, the Trump administration withdrew from TPP and launched a trade war against China. This shocked experts on both sides of the Pacific, drove a wedge in U.S.-China relations, and has since forced the U.S. to pursue what looks like a policy of containment.

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U.S. withdrawal from the TPP was a colossal mistake. To put it simply: states that join multilateral trade agreements like TPP establish the rules that govern trade, reap the benefits of further economic integration, and gain negotiating leverage over nonparticipant states that want access to their markets. As the number of states who agree to the same legal framework increases, more nonparticipant states are incited to abide by the rules because nonadherence eventually renders their economies uncompetitive.

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A U.S.-led TPP encompassed states that represented ~40% of global gross domestic product (GDP). Its U.S.-less successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), only represents ~13.5% of global GDP. Instead of signaling to China that 12 Pacific economies accounting for ~40% of global GDP agreed to conduct trade according to the same legal framework, the Trump Administration failed to lead by example and withdrew from the TPP.

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The Trump Administration did not have the perspective to realize that TPP was part of a greater strategy to build an international rules-based economic order. While a U.S.-led TPP represented countries that accounted for ~40% of global GDP in the Pacific, similar rules-based economic orders already existed in North America (~30% of global GDP) and in Europe (~15% of global GDP). Since 2019, the preexisting rules-based economic orders in Europe and North America are also complemented by a free trade agreement between the European Union and Japan (~25% of global GDP). Altogether, this international rules-based economic order would have encompassed more than 50% of the global economy.

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The pressure created by a comprehensive multilateral agreement like TPP was an excellent opportunity for the U.S. and its allies to ensure that the transition to a more China-centric Asia is as peaceful as possible. Given that U.S. influence over China’s policy decisions ranges from limited to nonexistent, joint U.S. and Chinese accession to the TPP would have opened the door to resolving disputes related to climate change, currency devaluation, intellectual property, cybersecurity, data protection, privacy, and maritime border demarcations. To be clear, any negotiating leverage the U.S. may have held over China through TPP has since evaporated.

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The Trump Administration’s withdrawal from TPP has emboldened China to continue asserting itself in the neighborhood. Whether threatening forced reunification with Taiwan or island-building in the South China Sea to expand its Exclusive Economic Zone, gone are the days of Deng Xiaoping’s “hide your strength and bide your time.” While China’s successful authoritarian model of development makes the world less safe for democracy, U.S. protectionism also has unintended consequences.

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Albeit for legitimate cybersecurity concerns, banning companies like Huawei from operating in the U.S. only incites China to invest more resources into important industries where U.S. companies are dominant. For example, Huawei is developing HarmonyOS as an alternative operating system to compete with Western staples like Android (71.55% of global market share) and iOS (27.8% of global market share). While Google and Apple maintain their respective market share, for the time being, they do not have access to the same resources as the Chinese state.

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Moving forward, China’s competitive pricing and equal or higher levels of technological sophistication will continue expanding its global market share. For example, consider the growing market share of Chinese cellphone companies in emerging economies: as of September 2022, Huawei (11.47%), Tecno Mobile (10.31%), Infinix (6.76%), Xiaomi (5.69%), OPPO (4.3%) have more market share (38.53%) than South Korea’s Samsung (32.73%) and the U.S.’ Apple (13.21%) in Africa.

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To be clear: U.S. strategy should have focused on getting China to the negotiating table and developing a set of rules that the competitive economies of the Pacific can agree on. U.S. adherence to TPP would’ve given the signatory parties – which included three of China’s top five trading partners – significant negotiating leverage over China. Now, that negotiating leverage is gone, and the U.S. meeting China halfway seems more distant with every passing day.

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Worst of all, domestic pressures in the U.S. and other democracies make entering new comprehensive multilateral agreements like TPP improbable if not impossible. Moving forward, trade agreements will be bilateral rather than multilateral and focus on individual issues instead of multiple questions at a time. The 2019 U.S.–Japan Digital Trade Agreement is a good example.

 

Unfortunately, the Trump Administration’s withdrawal from TPP has forced the U.S. to disentangle the U.S.–China relationship and pursue what looks like a policy of containment. Nothing illustrates this better than the inability for the U.S. and China to cooperate during a global pandemic.

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While strategic competition between the U.S. and China seems inevitable, competitive coexistence remains preferable. The Trump Administration blew a once-in-a-generation opportunity to strengthen the relationship between the two most powerful states in the international system. This colossal mistake will not be forgotten any time soon.

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Originally published by 19FortyFive on November 3, 2023.