China Could Emerge as Free-Trade Kingmaker if U.S. Turns Inward

Pacific Rim leaders have vowed to press on with free-trade negotiations, though they could now have a greater focus on China, rather than the U.S, following Donald Trump's election as president.

Trump has pledged to pull the U.S. out of the proposed Trans-Pacific Partnership, a momentous free-trade deal that would have made it easier for CEOs across 12 different countries—including Japan, Mexico and Canada—to exchange goods and services.

He has also threatened to slap large import tariffs on goods imported into the U.S. from countries such as China and Mexico, earning him a rebuke from business leaders including Ford CEO Mark Fields and Berkshire Hathaway CEO Warren Buffett.

“We reaffirm our commitment to keep our markets open and to fight against all forms of protectionism, which weaken trade and slow down the progress and recovery of the international economy.

The TPP doesn’t include China, which has separately been pursing a free-trade deal with Asian nations of its own, the Regional Comprehensive Economic Partnership, or RCEP. China’s plan doesn’t currently include South American nations, though Asia’s biggest economy is growing increasingly open to allowing other countries join the current 16-member bloc. Canada, meanwhile, has said it’s keeping its options open regarding future trade deals, while Australian officials have said they are considering the China-led RCEP.

Officials from various countries, including U.S. president Barack Obama, continued to back free trade in Peru over the weekend at a summit for the 21-country Asia-Pacific Economic Cooperation, or APEC, group.

“We reaffirm our commitment to keep our markets open and to fight against all forms of protectionism, which weaken trade and slow down the progress and recovery of the international economy,” APEC said on Sunday following the summit.

Whether the TPP will still be ratified without U.S. participation remains to be seen. It’s also unclear whether Trump will completely pull out of negotiations, with some delegates speculating that he could perhaps back a watered-down version that offered more protection to U.S. workers and less environmental regulation.

“I believe that TPP is a plus for America’s economy, America’s workers, American jobs,” Obama told a press conference at the summit. “I think not moving forward would undermine our position across the region and our ability to shape the rules of global trade in a way that reflects our interests and our values.”

In the meantime, business leaders face a difficult period of uncertainty while they await details of Trump’s policy position.

“It is still unclear what Trump’s policies will be,” Honda CEO Takahiro Hachigo said at a briefing in Tokyo this morning. “We can’t suddenly make production changes and that is a problem not just for us but for all automakers in the U.S.”


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