From the broad geopolitical and macroeconomic perspectives, the USA’s withdrawal from the Trans-Pacific Partnership (TPP) preferential trade agreement strengthens China’s position on the global economic stage and puts China at the forefront of ‘re-writing the rules of international trade’.
China is now empowered to lead the way on global trade deals, most notably through its leadership role in the Regional Comprehensive Economic Partnership (RCEP) trade pact, likely to conclude and be implemented by the end of 2017.
The RCEP agreement comprises 16 economies across the Asia Pacific region, which, according to the Asia-Pacific Research Network, embrace half of the world’s population (3.5 billion people), 38% of the world economy and nearly 30% of the world’s trade volume.
Compare that to the TPP’s 12 nations with 750+ million people, annual gross domestic product of nearly USD 28 trillion that represents roughly 40 percent of global GDP, and one-third of world trade.
However, for the time being, the TPP may not be completely dead-and-buried. There seems to be some interest in pursuing an amended TPP without the United States – with some calling it the ‘TPP 11’ and others naming it the ‘TPP 12 minus 1’ – seemingly with Japan now taking the lead.
A left-field option would be for China to join the amended TPP 11, although that would result in so much overlap with the RCEP (eight common participants), that it might make more sense to invite the four Americas-Pacific members of the TPP (Canada, Chile, Mexico and Peru ) to join the RCEP.
Over the medium term, the RCEP paves the way for the FTAAP – the Free Trade Area of the Asia-Pacific – which embraces all 21 APEC economies – including China and the USA.
Whatever happens, we will definitely see more changes on the world trade playing field – with impact on the related freight flows. More uncertainty is certain in the year ahead – Expect the Unexpected!