Trade war in the Pacific

The US led Pacific group’s first attempt to frame an agreement on the proposed Trans Pacific Partnership (TPP), excluding China, has got a setback in its first hurdle. More than the twelve countries in the TPP, the rest of the world were keenly watching the just concluded Maui meeting in Hawaii held on Tuesday.

The TPP is a mega trade bloc mainly comprised countries that are disappointed with the slow trade liberalization measures under the WTO. At the same time, the bloc reactivates the geopolitical rivalry against China as Beijing is the notable absentee in the bloc.

The TPP is comprised US and its traditional allies in the Pacific including Japan, Australia and New Zealand besides Singapore Vietnam, Malaysia and Brunei from the ASEAN. Chile, Mexico, Peru and Canada complete the list of the remaining members.

Meeting of trade minister of US and eleven other members extending from Japan to Chile failed to reach an agreement stumbling on issues including auto sector, pharmaceutical IPRs and dairy products.  

A much concerned observer of the turnaround of the meeting was China. Beijing sees the entire TPP idea is a part of the geopolitical game aimed to exclude it from the mainstream trade liberalization agenda in the Pacific.

When TPP has excluded China, everything was clear that the Partnership is going to be a form of trade war between the US on the one side and China on the other.

The world’s economic weight is tilting towards Pacific and East Asia. GDP, invention, trade and other major indicators show that the region is the fastest growing one in the world. It is even pushing back the traditional bastions of prosperity – Europe and North America.

Failure at Maui is not the end of TPP, it just remind about the difficulty of getting into a consensus when decisions have implications on reciprocal welfare. For the time being, the members are more protectionists in their effort to liberalize trade. Step by step consensus may come in the near future and TPP may be realized. But an important precondition is that the lead runner in the group- the US should soften its stand on IPRs.