TPP Sparks Reactions from Rising Powers

Policy Alert #111 | November 2, 2015

Earlier this month, twelve Pacific Rim countries, including the United States and Japan, reached a final agreement on the Trans-Pacific Partnership (TPP), the largest regional trade pact in history with its member states accounting for nearly 40 percent of global GDP. The pact also constitutes a cornerstone of President Obama’s “rebalance” toward Asia. In this Policy Alert, we examine commentary from China, Russia, Japan, South Korea, and India on the trade deal.

CHINA

Chinese commentary urged the government to push forward with the China-led Regional Comprehensive Economic Partnership (RCEP) while downplaying the potential impact of the TPP for China.

• He Yafei, vice-minister of the Overseas Chinese Affairs Office of the State Council and a former vice foreign minister, described TPP as both a challenge and opportunity for China as it comes at a critical moment when China tries to engage more deeply and widely in global governance. “The TPP could even provide impetus for China’s efforts to deepen its economic reforms,” he wrote on the China-US Focus website.
• Xu Man, a researcher at the Ministry of Commerce’s International Trade and Economic Cooperation Institute highlighted the breadth of China’s regional FTAs and noted that “China is pushing for a quick realization of the RCEP” in response to the TPP.
• Zhang Jianping, director of the International Economic Cooperation Institute of the National Development and Reform Commission echoed Xu’s thoughts in the China Daily.
• “It seems somewhat farfetched to suggest that the US can stop China’s development merely by achieving the TPP agreement. China has already been a leading economy globally…there is no way China can be isolated from international economic cooperation,” opined Eddy Li, president of the Chinese Manufacturers’ Association of Hong Kong.
• Jia Wenshan, a professor at the International Academy for Intercultural Research at Renmin University of China, said that the US would accept China in the TPP only if it met certain conditions. Jia said those conditions favor multinational corporate interests and global capital and undermine the traditional notions and interests of nation-states, unlike the WTO, which maintains a balance between free trade and national autonomy. “My interpretation is that such an invitation could be understood as a veiled challenge to China or as an intent to shape China’s future development in the US-preferred direction, as China is still in the final phase of national unification,” he said.

RUSSIA

Russian officials expressed serious doubts about the TPP, citing the secrecy surrounding trade agreement’s negotiations as a point of concern.

• Moscow is alarmed over the secrecy of the economic Trans-Pacific Partnership agreement and hopes the agreement will become public at some point, according to Alexander Shchetinin, the director of the Russian Foreign Ministry’s Latin American Department. “We haven’t read what’s been signed and basically no one’s read it. Therefore, in order to assess this, we need to know what it’s about. We believe that since no one knows anything about it to be an extremely negative factor. We are alarmed by the fact that the rules of international trade are beginning to be broken up into regional agreements instead of universal rules of international trade and this mosaic is being created from completely different trade relations without any sort of unified denominator,” he told RIA Novosti in an interview.
• Russian Economic Development Minister Alexei Ulyukayev called the TPP trade agreement “a serious challenge for all countries including Russia.” He added that the establishment of preferential and non-preferential trade associations should be the response to the TPP.

JAPAN

Japanese newspapers remained at odds with the strategic goals and economic benefits of the TPP.

• The Sankei Shimbun welcomed the conclusion of the TPP as a foundation for a “new economic order” based on freedom and prosperity in the Asia-Pacific, designed to check China’s economic and military “hegemonic” ambitions in the region.
• Describing the TPP as “a tool for the U.S. to counter China’s growing economic and military influence in the Asia-Pacific region,” the Nikkei Shimbun stressed that the trade pact should “unite Asia-not divide it.” Increased flows of goods, investment, people, and information “would reinforce the TPP’s role as a basis for Asian peace and stability, rather than a tool of U.S. geopolitical strategy.”
• The Asahi Shimbun claimed that as the U.S. and China “are competing fiercely for hegemony” in the Asia-Pacific, it is “crucial” to get Beijing involved in the trade deal to “promote political stability in the region.” The newspaper also emphasized the need to provide protective measures for Japan’s vulnerable agricultural products, such as rice, beef, and pork.
• “The government should step up efforts to enhance the agricultural industry’s international competitiveness instead of pork-barreling,” contended the Mainichi Shimbun. Instead of handing out subsidies, the government must promote structural reforms and “take advantage of the growing popularity of Japanese food overseas in efforts to establish Japanese agricultural products as an international brand.”
• The Yomiuri Shimbun argued that trade liberalization under the TPP “should be utilized to expand growth” with an expected increase in Japan’s exports of its industrial products, such as automobiles and electronics. As for domestic oppositions to the trade deal concerning agricultural products, the newspaper noted that the country “has won the largest number of exceptional measures” keeping the tariff-free rate at 81 percent, the lowest rate among the twelve member states.
• While the trade deal was “crucial for deepening the alliance with the U.S.,” “this should not cloud the assessment of what Japan will gain and lose economically,” warned The Japan Times. The expected increase in Japan’s export “might need to be taken with a grain of salt,” as “many Japanese manufactures have shifted their production offshore” while the weak yen since 2012 “has not boosted export volume as much as expected.”

SOUTH KOREA

Despite its initial decision not to join the TPP, the Korean government showed interest in participating after the agreement was reached.

• During her trip to Washington earlier this month, President Park Geun-hye expressed desire to join the TPP. “Korea welcomes the TPP agreement reached last week…Having already signed trade agreements with 10 of the 12 TPP member countries, I believe Korea is a natural partner for the TPP.”
• Prior to the visit, Minister of Strategy and Finance Choi Kyoung-hwan said on October 6 that Seoul plans to “consider participating in the TPP in some way.”

Many Korean newspapers criticized the government for not joining the TPP.

• The Dong-A Ilbo criticized Korea’s non-participation in the TPP as a “strategic mistake.” “Korea could be left alone in establishing the new global economic order due to its absence in the TPP.” Non-participation “would cost high price not just in its economy but in diplomatic security as well,” because the TPP “is not just a multilateral economic pact but also a diplomatic security alliance…against China’s growing influence.” For the U.S., the TPP is a test whether Korea is its “value ally” or “unfaithful ally that only takes ambiguous positions worrying about how China would react.”
• “Simply put, for Korea, an export-driven economy with middle power status, being left out of the…TPP or any international grouping of significance means bad business and worse diplomacy,” criticized The Korea Times.
• “Korea should join the TPP as soon as possible,” claimed The Chosun Ilbo. “If Korea is to join the ranks of the world’s advanced economies, it needs to stop dragging its feet over opening its markets out of fear of opposition from various interest groups.”
• “The government does not have to hurry to decide on the TPP as it will take a while for the deal to go into effect,” argued the JoongAng Ilbo. “As we have already struck FTA deals with most of the 12 TPP member nations, substantial benefits from joining the pact are not guaranteed.”
• Ajou University economics professor Kim Han-sung suggested that it would “take a long time for the TPP to establish itself as the new norm for the Asia-Pacific region.” “Rather than overstating the short-term and medium-term losses and paying a steep entrance fee to join the TPP, we ought to adopt a more circumspect approach where we consider the different discussions on other multilateral trade orders.”

INDIA

Indian commentators viewed the TPP as a new challenge for India’s economy.

• Jayanta Roy, a former economic advisor for the Ministry of Commerce and Industry, called the TPP a “wake-up call” for India. Given its continuing slump in export, the nation “has no choice but to ensure that it is not left out of this large group that constitutes its major trading partners… [as] Indian exports will gain $500 billion a year by being an active member of [the] TPP.”
• The Economic Times argued that India “must join” the TPP, and that the country needs to “join the Asia-Pacific Economic Cooperation as a necessary stepping stone to joining the TPP” and carry out domestic reform, including cutting tariffs and reducing import duties.
• Calling the TPP “the advent of new trade challenges for India,” The Times of India stressed that the country “must push domestic reform” and play a more active role in other ongoing trade talks such as the China-led Regional Comprehensive Economic Partnership (RCEP).
• Indian businesses must recognize the “new global realities and challenges” posed by mega trade deals such as the TPP, claimed TNC Rajagopalan, a trade analyst. These trade deals “will erode existing preferences for Indian products in established traditional markets such as the US and the European Union (EU), benefiting the partners to these agreements…[and] are likely to develop a rules architecture which will place greater burden of compliance on India’s manufacturing and services standards for access to the markets of the participating countries.”
• The Hindu cast doubt on the trade deal, showing concerns that it would benefit only large corporations, especially American big pharmaceuticals, and reduce access to generic medicines in developing countries, and that its strategic motive to create a U.S.-centered economic order encircling China “could turn counterproductive,” as Beijing is countering by setting up its own order with new institutions such as the Asian Infrastructure Investment Bank (AIIB).

The Rising Powers Initiative Policy Alert project identifies and tracks the world views of major and aspiring powers in Asia and Eurasia. RPI acknowledges support from the MacArthur Foundation for research on maritime security that contributed to this report.