World Economy

Who needs the USA? These 11 countries are trying to cement a free-trade deal without it

Key Points
  • Despite the stark challenges ahead, Trans-Pacific Partnership members appear committed to forging ahead with a new agreement without the U.S
  • And even without Washington, the deal remains highly significant for remaining members, analysts say
Who needs the USA? These 11 countries are trying to cement a free-trade deal without it

While last week's talks between Trans-Pacific Partnership states failed to produce any major breakthroughs, they did demonstrate members' commitment to inking the wide-spanning free trade agreement.

Since President Donald Trump's administration withdrew the U.S. from the deal, TPP signatories face a daunting task in finalizing a new framework by November — the agreed upon deadline. But under Tokyo's leadership, the group, known as the TPP-11, seems up to the challenge, experts said.

"The TPP-11 countries recognize that a 21st Century, multi-party regional trade agreement in Asia Pacific is very much needed, with or without the United States," said Steven Okun, vice chairman of the Asia Pacific Council of American Chambers of Commerce.

Vietnam's Minister of Trade and Industry Tran Tuan Anh held a TPP conference on the sideline of an Asia-Pacific Economic Cooperation meeting in Hanoi on May 21, 2017.
HOANG DINH NAM / AFP / Getty Images

The current "spaghetti bowl of bilateral trade deals" across the region fails to address issues faced by multinational businesses, such as compliance with multi-jurisdictional supply chain regulations and intellectual property rights behind borders, he explained.

A TPP deal is widely expected to address those issues in addition to providing duty-free access for nearly all goods, opening up services and investment and ensuring cross-border data flows.

"All of these upsides to the TPP apply with or without the U.S., so it is not surprising that the remaining members are looking to move forward even without U.S. participation," Okun said.

On the sidelines of last week's meeting of chief negotiators, Japan's Kazuyoshi Umemoto said members had decided to embrace a new framework to take into account Washington's absence. More discussions were needed on whether to revise trade and investment rules from the original pact, he added.

The 11 chief negotiators are now expected to meet again in August or September, Japanese media reported.

"There is a considerable international backlash against globalization and free trade, evident from the U.S. decision to withdraw from the TPP, so Asia-Pacific governments are giving a high priority to making progress with trade liberalization through a number of initiatives, including TPP-11 and the Regional Comprehensive Economic Partnership," said Rajiv Biswas, Asia Pacific chief economist at IHS Markit.

These are the sticking points in pushing forward a TPP deal without the US

Thursday also saw the 11 states decide to lower the strict threshold for a deal to come into force, Miha Hribernik, senior Asia analyst at Verisk Maplecroft, said in a recent note, explaining that "the original document had to be ratified by six countries, accounting for at least 85 percent of the total gross domestic product of the original twelve signatories — an impossible task without the U.S."

Still, internal divisions between members, particularly Vietnam and Malaysia who are seeking to renegotiate the earlier terms, are among key obstacles to a new accord.

On this front, Biswas anticipated the group would achieve progress, adding that in advancing a new agreement, the TPP-11 may be hoping for other Asia-Pacific countries to join.

And despite members losing increased U.S. market access as a result of Washington's withdrawal, "a TPP-11 deal would still provide greater access to economies such as Australia and Japan, and give each of the TPP-11 a commitment for market liberalization, which will be in the long-term interest of each member," Okun said.