- Trade ministers of TPP member countries, ex-U.S., are huddling on the sidelines of APEC talks to discuss resurrecting the trade deal after Trump ditched it.
- Deborah Elms, executive director of the Asian Trade Centre, said negotiators may leave in dormant U.S.-centric provisions to allow the country to re-enter TPP later.
Trade ministers huddling on the sidelines of the Asia-Pacific Economic Cooperation talks in Hanoi, Vietnam, are faced with some tough challenges in resurrecting the TPP trade deal since U.S. President Donald Trump ditched it.
Aside from steering countries away from competing trade pacts, the architects of the Trans-Pacific Partnership must make it viable for the remaining 11 members while keeping a door open to a future re-entry of the U.S., which accounted for 60 percent of the group's total gross domestic product (GDP).
That's a tall order, but Hanoi is set to provide a platform for the 11 to huddle up and possibly come up with Plan B. "The TPP is clearly diminished with the U.S. out, but they will try and resurrect it," said Arup Raha, Chief Economist at CIMB.
In an exclusive interview with CNBC, Japanese Prime Minister Shinzo Abe said his country wants to the U.S. to return to the deal, but said the remaining members should stay united and not waste years of efforts.
"We have finally come to an agreement on the rules of free and fair trade," he said. "Since we have come thus far, Japan must now take on a leadership role and bring the talks forward."
Abe followed up those words with some action this week, when he met in Tokyo with the Prime Minister Bill English of New Zealand.
Both nations have ratified the trade agreement, and English said both countries "can and will" take a leading role in getting the trade pact back on track.
Though Japan appears to want to take point on the TPP, Tokyo will have to tread carefully given the delicate political balance in the region.
"For Japan, this is a political move to neutralize China," said George Yeo, a former Singaporean trade and foreign minister. A free trade agreement between the U.S. and Japan lay at "the heart of TPP," Yeo said. "Without the U.S., it is hard for Japan to give concessions on agriculture."
Trade experts and diplomats, though, are confident the deal is worth pursuing without the Americans.
Deborah Elms, founder and executive director of the Asian Trade Centre, said though access to the U.S. market won't be tariff-free, the outright level is "generally very low." The real benefit of the TPP lies in market access to countries within the framework of the deal "where tariffs fall to zero," Elms explained. "It's a win-win for the 11. Services and investment access is amazing."
But selling that message to domestic audiences will be challenging when even free trade champions such as New Zealand appear divided on the TPP's merits.
"It's really razor-thin benefits," New Zealand's Green Party trade spokesperson Barry Coates told TVNZ1.
TPP's backers may have to wield the red pen. Peru is understood to be pushing for provisions related to the pharmaceutical sector, while "there's a whole lot of rules" Vietnam wants changed on the garment sector, the Asian Trade Centre's Elms said.
Does this imply minor tweaks or root and branch changes?
The core of TPP, according to Elms, may not require going back to the drawing board if U.S.-specific provisions are left "dormant" – an olive branch effectively allowing Washington access at a later stage. "That's the big debate. Do we leave it as it is or remove them outright?"
Japan wants the U.S. provisions to stay, Elms said. "Crucially, Japan doesn't have to go back to the Diet and re-ratify it" if U.S. chooses to re-enter the TPP down the road.
TPP's promoters are fighting against a backdrop of what some see as U.S. disengagement on trade in the Asia-Pacific region, and a vacuum that's being filled by China, which has been positioning itself as a defender of globalization.
"Momentum on market integration and trade is being tested in ways we have not seen since these forces transformed the Asia-Pacific into the engine of the world economy," said Alan Bollard, Executive Director of the APEC Secretariat, in a statement.
Leading policymakers in the TPP countries have expressed a willingness to participate in the Regional Comprehensive Economic Partnership, or RCEP, which is supported, but not led, by China. Opinion is divided. Some believe the agreements may combine in the future, while others see them as qualitatively different.
"The RCEP competes with the TPP, but is a different animal," CIMB's Raha said. TPP is "more about tariff reduction" while India's participation in RCEP "is likely to be a bottleneck."