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25/09/2016

As TPP nears final agreement, EU needs a pivot to Asia, experts say

Trade & Society

As TPP nears final agreement, EU needs a pivot to Asia, experts say

Trans-Pacific Partnership map. [CCTV]

The Transpacific Partnership (TPP) involving the United States and eleven other Asia-Pacific countries might be concluded this week. Trade pundits say now is the time for the EU to think big on its Asian market access strategy.

An eleventh hour decision was taken last week to hold a new round TPP talks in Atlanta, in order to conclude negotiations that have been ongoing for six years. Last week’s TPP move comes as an attempt to seal the deal, which negotiators say is very close to being wrapped up. Success is not guaranteed this week, but conclusion now only seems to be a matter of time, according to persons familiar with the talks.

The TPP was launched in 2009 by the Obama Administration as part of its so-called ‘pivot to Asia’, and as a means for maintain Washington to maintain its foothold in a region in which the economic and political rise of China is of increasing concern. With Japan having joined the talks in 2013, TPP is expected to cover about 40 percent of world trade.

The US is clearly securing preferential market access in a region that the Asian Development Bank thinks will  produce more than half of the world’s output by 2050. China responded with its own regional trade integration initiative, RCEP, covering East and South East Asia, and potentially India.

“The TPP will change the competitive relation between European and American firms as far as access to the Asia-Pacific market is concerned,” scholars at the European Centre for International Political Economy warned in a brief published last year.

André Sapir, Senior Fellow at the Bruegel think tank, told Borderlex: “The more successful TPP will be in liberalizing trade among participating countries, the more likely will be the damage for EU trade with TPP countries, and the greater, therefore, the incentive for the EU to conclude bilateral trade deals with TPP members such as EU-ASEAN, EU-Japan and TTIP.”

The EU is already firmly engaged in the race for access to Asian markets. For instance, the EU is negotiating a free trade agreement with Japan, the world’s fourth largest economy. It concluded talks with Vietnam, a dynamic emerging market of 90 million people, in August this year. Three years ago, it sealed an FTA with Singapore, but has not yet ratified it. All three partners are part of TPP. The talk in Brussels is that bilateral free trade agreements will be sought with all TPP members in the coming years.

No strategy equivalent to TPP

But Brussels might be advancing too slowly.  “While Europe negotiates bilaterally with some TPP countries, it has no strategy equivalent to the TPP, which could be continually employed to build a larger system for trade policy cooperation in the Asia-Pacific region and to address global commercial problems,” the ECIPE paper argues.

Some think the EU needs to think and act bigger – and quickly – in response to TPP.

Patrick Messerlin, Emeritus Professor at Sciences Po told Borderlex that the biggest loss from TPP “will be the fact that EU exporters will be disadvantaged on the US and Japanese markets for all the products exported by the US, Japanese and other TPP exporters”.

In response to TPP, Messerlin believes that “the EU should accelerate the trade negotiations with Japan and amplify its regulatory cooperation with this country, develop a much more aggressive pivot to Asia, by examining seriously the option to join RCEP, and continue to negotiate TTIP”.

Shada Islam, Director of Policy at Friends of Europe, told Borderlex that after TPP, “opening talks quickly on an EU-ASEAN FTA becomes more strategically important. Step by step, the EU could be even more ambitious by exploring a possible EU-ASEAN-Australia-New Zealand FTA. And why not reflect on a trade and investment deal as part of ASEM, the Asia Europe partnership”.

The Commission is expected publish a new trade strategy for the EU “very soon”, Cecilia Malmström, the EU’s trade Commissioner said on Friday (25 September). The document will indicate whether Brussels wants to be bold.

The parties to TPP are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.  The TPP group accounts for one quarter of EU trade.