With freshly inaugurated US president, Donald Trump opting out of the Trans Pacific Partnership (TPP) backed by 12 nations, it remains to be seen whether the other 11 countries prefer to carry on with a modified charter to maintain ease of conducting business.
The 12 countries included in the agreement were Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, United States and Vietnam. According to the original charter, even if six countries ratify the agreement provided they account for 85 percent of the total GDP of the 12 countries, the agreement will stand valid.
Simple as this might sound, the twist is that the US alone accounts nearly for 67 percent of the GDP of the 12 countries. In fact, the US and Japan together account for 79 percent of the GDP of the 12 participating countries. In short, without the participation of the US, the clause that has been fitted into the charter cannot be fulfilled. This implies that if the 11 countries other than the US decide to go ahead with the trade agreement (TPP) they will have to modify this clause of the charter and draft a fresh proposal.
Interestingly, the TPP which was initiated way back in 2015 has witnessed a strong anti-China pitch in favor of it and an equally strong counter-thrust in favor of protecting US jobs against it. While the former president Obama was of the opinion that China should not dictate terms in world trade and the Asia Pacific region should be led by the US for purpose of trade, the incumbent President Donald Trump expressed the sentiment that the TPP will take away jobs from the US locals to overseas destinations and this was undesirable.
Interestingly, Australian government is right now contemplating a “Plan B” in which the rest of the 11 countries can frame their own trade agreement and go ahead as proposed initially. However, the Australian government is yet to come out with a model that would suggest in what manner Australia would benefit from this agreement given the new situation.
Needless to say, right now there is an air of uncertainty on how to go ahead with the TPP as each of the participating countries is forced to re-evaluate the benefits it would accrue to each of them. Interestingly, international ramifications apart, it also has generated a cautious optimism in India and Bangladesh.
For, Bangladesh’s key competitor in RMG export, Vietnam which was a signatory to the TPP will now cease to get preferential treatment of zero duty. This will tilt the balance in favor of India and Bangladesh substantially especially in the garment sector. However, the note of caution comes in as Trump has indicated that he would opt for bilateral treaties instead of the TPP.