New era for Global trade gets underway at APEC

The Asia-Pacific Economic Cooperation Summit in Lima from November 19-20 will take place just two weeks after the election of Donald Trump affirming his protectionist trade policies, and killing off any chance for a U.S. pivot to Asia through TPP. One expert says the result will be a heightened profile for Asia in Latin America.

SAO PAULO, BRAZIL (REUTERS) – As the 21 member states begin arriving in Peru for the kickoff of the 2016 Asia-Pacific Economic Cooperation (APEC) summit in Lima, the consensus that global trade is a universal good is under attack in a way not seen in at least two centuries.

As a result, the proposed 12-country Trans-Pacific Partnership (TPP), which excludes China and Russia, appears unlikely to come into law in a way that would allow Washington to “pivot to Asia” in the way it had foreseen.

In such a vacuum, Asian powers should be able to define their own trade rules, perhaps discarding Western norms on labour and environmental protections. And they will also likely be able to grow their sphere of influence in Latin America as the United States recedes from the global stage, as Cynthia Arnson, the director of the Latin American Program at the Washington-based Wilson Center, told Reuters in an interview.

From November 19-20, leaders from China, Russia, the United States and Japan will be in Lima for meetings, taking place just two weeks after the surprising election of Donald Trump as the 45th President of the United States.

During his election campaign, Trump took a protectionist stance on trade issues and labelled the Trans-Pacific Partnership (TPP) championed by outgoing President Barack Obama a “disaster”. He has also railed against the NAFTA trade deal with Canada and Mexico as a U.S. job killer.

There is now little chance of TPP coming up for vote in Washington before Trump’s inauguration in January.

“The common wisdom now is that TPP is dead. There had been some hope that during the lame duck session between the presidential election and when the next president is inaugurated in January, that during this period of time, without the political pressure of either campaign, no one running for office, this would be able to be presented to the U.S. Congress and would be approved. And I think that the result of the election with both candidates campaigning against free trade, but most especially, Donald Trump campaigning against free trade agreements that were seen as exporting U.S. jobs, that this is really a non-starter,” Arnson told Reuters in an interview.

In the wake of Trump’s surprise victory, Peruvian President Pedro Pablo Kuczynski, and the host of the APEC summit, told Russian media Pacific-rim countries can forge a new trade deal that includes China to replace the U.S.-led TPP.

China, leading talks on a deal seen as an alternative to the TPP – the Regional Comprehensive Economic Partnership (RCEP) – said this month that the Pacific-rim area needs a free trade deal as soon as possible and that it would seek support for one during the summit in Lima.

China, for its part, is among the Asian nations raising its profile in Latin America. Last year, China pledged a $250 billion dollar investment in Latin America over the next 10 years as part of a drive to boost resource-hungry China’s influence in a region long dominated by the United States.

China and Latin America are to cooperate on energy, infrastructure construction, agriculture, manufacturing and technological innovation.

Other Asian nations looking to Latin America include South Korea. Last year, South Korean President Park Geun-hye made a four-country swing through Latin America to strengthen economic ties and free trade agreements like the one Seoul has with Chile.

With the rise of Trump, and the expected lowering of Washington’s trade profile, this trend is expected to continue, Arnson said.

“The continuation of TPP among the signatories without the United States would simply mean that there would be greater integration between those Latin American countries and the countries of Asia. A country like Chile, a country like Peru already has as its number one trade partner, China. And this will accelerate that trend. And will also provide a needed alternative option for Mexico other than the United States. And so the integration of those economies will continue apace and the United States will be left out of that dynamic,” Arnson said.

The original TPP agreement was negotiated for more than five years and signed in October 2015. It was aimed at reducing trade barriers erected by some of the fastest growing economies in Asia and boosting ties with U.S. allies in the region in the face of China’s rising influence.

It was to cover 40 percent of the world’s economy.

And all along, there was widespread grassroots opposition to the TPP in many countries. Opponents have criticized the secrecy surrounding TPP talks, raised concerns about reduced access to things like affordable medicines, and a clause which allows foreign investors the right to sue if they feel their profits have been impacted by a law or policy in the host country.

Washington promoted the deal not just as a way of beating out the East, but as a way to promote Western workplace values, Arnson said.

“Right, well I think there was a great effort on the part of the United States and other advanced economies to keep trade deals from simply being a race to the bottom, to have companies move their production facilities to places with very lax environmental or labour standards. So there was the inclusion of those kinds of things, and I think that overall, labour and environmental protections are likely to be softened without the United States playing an active role in insisting on their implementation,” she added.

The original TPP was a free trade agreement between countries located around the Pacific Ocean, including Australia, Brunei, Canada, Chile, the United States, Japan, Singapore, Malaysia, Mexico, New Zealand, Vietnam and Peru.