The TPP Reloaded: A Victory for APAC Trade Liberalization 1

U.S President Donald Trump talked to President's wif Iriana Widodo (Photo: President Office)

by Rajiv Biswas, Asia Pacific chief economist for IHS Markit

Key Points:

  • A framework for a new successor agreement to the Trans-Pacific Partnership (TPP) Agreement without the US has been agreed among the remaining 11 TPP member nations at a meeting held on the sidelines of the APEC Leaders’ Meeting in Danang, Vietnam.
  • The new agreement will be called CPTPP (Comprehensive& Progressive Agreement for Trans-Pacific Partnership).
  • In order to reach a framework agreement, the TPP-11 nations have agreed to suspend 20 parts of the original TPP agreement, as the relative costs and benefits of the original TPP agreement have changed considerably due to the withdrawal of the US from the TPP Agreement.
  • The new CPTPP deal represents a major positive for APAC trade liberalization, with the potential for other Asia Pacific nations to join the new agreement once it is implemented.
  • While the US has withdrawn from the TPP Agreement, President Trump has launched a major new Indo-Pacific strategy during his Asia visit, marking an important shift in US strategic focus towards the Indo-Pacific to embrace India.


The decision of the TPP 11 countries to forge ahead with a TPP deal is a major positive factor for Asia Pacific trade liberalization amidst growing concerns about a populist backlash against globalization and trade liberalization in some OECD nations.

Undoubtedly the economic benefits of the new TPP agreement will be significantly reduced without the US participating, since the US accounted for around 65% of the total GDP of the original 12 TPP member countries. The total size of GDP of the 12 TPP negotiating countries with the US included would have been USD 29 trillion or around 38% of world GDP, while CPTPP ex-US would have a combined GDP of USD 10 trillion or 13.6% of world GDP, with combined annual trade of USD 356 billion.

The TPP deal was one of the major pillars of the Obama Administration’s ‘Pivot to Asia’, and the US withdrawal from TPP represents a significant retreat by the US from APAC multilateral trade liberalization initiatives.

The TPP Agreement contained many path-breaking trade liberalization measures, such as liberalization of government procurement rules and also an agreement on preventing currency manipulation, that would have benefited US multinationals had the US remained part of the TPP deal.

While the US government is pressing ahead with bilateral trade negotiations with many Asian countries such as Japan to try to achieve improved bilateral trade flows, it is no longer part of  the major Asia Pacific multilateral trade liberalization initiatives currently under negotiation, notably CPTPP and RCEP.

Meanwhile, APAC nations are continuing to move forward with an ambitious trade liberalization agenda, including bilateral FTAs between Asian countries as well as major FTAs with other major economies, such as the Japan-EU FTA and the Vietnam-EU FTA.

Although China is not one of the TPP 11 countries, the US withdrawal from TPP has already helped to strengthen China’s economic leadership position in the Asia Pacific.

China is already playing a leadership role on other APAC trade liberalization initiatives, notably the RCEP (Regional Comprehensive Economic Partnership) and FTAAP (Free Trade Area of the Asia Pacific), as well as the Belt and Road Initiative and the creation of the AIIB (Asian Infrastructure Investment Bank).

However, President Trump has launched a new Indo-Pacific strategy during his Asia visit, marking a major shift in US strategic focus towards the Indo-Pacific to embrace India. The first formal talks of a new quadrilateral dialogue comprising the US, Japan, Australia and India were held in Manila on 12 November prior to the start of the ASEAN Summit.

The new quadrilateral coalition is aimed at strengthening regional security co-operation and maintaining a rules-based order that adheres to international law in the Indo-Pacific region, including upholding freedom of navigation in international waters, as well as ensuring the rights of commercial aviation in international airspace.