Instead Of America. As trump has given China a chance at global leadership

If someone accused Donald trump of inconsistency and unpredictability, the first decree of the President showed that the new occupant of the White house will be consistent and predictable — at least initially. During the election campaign he repeatedly promised after the victory immediately withdraw the country from the TRANS-Pacific partnership (TPP), the same thing he said on November 21, speaking of the first one hundred days in power. And here on 23 January, true to his word, trump one stroke of the pen buried almost ten years of two previous American administrations.

As stated in the decree, trade remains an important priority for the White house, but the new administration “intends to discuss future trade deals with individual countries on a bilateral basis”. A reminder of what America once was the engine of the creation of TPP, there was only a tab on the empty site of the office of the U.S. trade representative now, however, instead of the text of the agreement, and beautiful slides of how the TPP will be beneficial for American consumers and producers, the link displays on the page with the main slogan of economic programs trump: “America first.”

Scrap is the master key

Burying TTP, trump easily scored points with the electorate, almost without effort. The agreement, signed by twelve Nations (Australia, Brunei, Vietnam, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, USA, Chile, Japan) 4 February 2016, has not yet entered into force — for this purpose it should be ratified by States representing at least 85% of the GDP of the block. Congress to document attitude is so ambiguous that even Hillary Clinton, who as Secretary of state, the United States actively promoted the TTP during the election campaign was forced to distance itself from the agreement and promised to consider its ratification only after “substantial revision”. The calculation of the Democrats was based on the fact that Hillary will win the elections, and in November-December the Obama administration dragged the ratification in Congress during the session “lame ducks.” But the victory trump has confused all the cards.

The hostile attitude of the new Republican administration to the TTP can be attributed to four reasons. First, although the agreement gives the benefits to the U.S. economy as a whole, but takes the industry of those States that provided Trump the victory. According to calculations of the Institute for international Economics them. Peterson (PIIE), by 2030 TPP would add 0.5% to us GDP (+$131 billion) and 9.1% for exports (+$357 billion). But, as the study of the Commission United States international trade, the win was achieved due to the success of major multinationals in the most innovative sectors, but the manufacturers of auto parts, soybeans, tobacco, textiles and medicines would have lost. Given the geographical location of these industries, trump initially focused its campaign in several key States (e.g., North Carolina) on the promise to withdraw from the TPP — and he was right.

Second, the agreement in its current form really has some serious flaws for American interests. Some points of agreement were discussed in a hurry in the middle of 2015 — when Obama was still trying to get her to sign and ratify the agreement before the start of the active phase of the presidential campaign. As a result, the agreement lacks a mechanism that would protect parties from unfair manipulation of the exchange rate in order to enhance the competitiveness of their products.

In addition, questions surround the provisions on rules of origin — for example, they enable Japan duty-free export to the USA machine, assembled from Chinese components (no wonder the PIIE study shows that for the first time, China might even benefit from the establishment of the TTP, increasing duty-free export of its goods to the U.S. market through third countries).

Thirdly, the trump team sincerely believes that the multilateral trade interests of the United States is worse than bilateral agreements. In agreements with multiple parties America has to make difficult trade-offs, and small countries can put pressure on Washington consolidated front (negotiations within the TPP on agricultural products or patent rights on drugs is an example). And bilateral negotiations, on the contrary, the US can put pressure on a partner all the weight of its economy and the size of the market, and therefore achieve more favorable terms. This logic professed by the President and his Minister of Commerce Wilbur Ross, who led the Council for trade economist Peter Navarro.

Finally, TTP is one of the main projects of the presidency of Barack Obama, the economic core of its strategy of “turning to Asia”. Cancel a conceptual complex agreement, which does not really understand the Congress and voters — an ideal first step in order to begin to dismantle the legacy of the previous administration. But TTP is much more complex and ambitious project than a simple free trade agreement. Apart from zero tariffs on 98% of tariff lines, the TTP includes a broad array of heads, regulatory standards for trade and investment: from non-discriminatory access to public procurement and fighting corruption to protection of the rights of workers and the protection of intellectual property. In these chapters, the Obama administration could package those rules, which the United States and developed countries for many years trying to promote the WTO in the framework of the unfinished Doha round.

Creating a compact group of like-minded countries, Washington hoped that active duty-free trade within the TPP will force other countries in the Asia-Pacific region sooner or later ask the TTP. For example, China, left behind the partnership, would risk losing millions of jobs — they would rapidly flowed into Vietnam. Standing in the queue to accept new candidates would be forced to adopt stringent standards, the formation of which they can not influence. Thus, Washington will secure its leadership in writing rules of global trade, best for advanced American corporations, and at the same time would open for US the giant markets like China and India, now protected by protectionist redoubts.

But Trump this complex concept was to anything: global leadership clearly seems to him an abstract concept, and the market of China, the President intends to access is not complicated pick a global trade regimes and threatening to Beijing scrap of protective duties on Chinese goods.

Leader on call

Won the us economy or lost from the exit still not working of the agreement, to understand not so simple. Probably in response to the calculations PIIE, proving the benefits of TPP for the United States, the new administration will find their “alternative facts.” Much will depend on whether the White house to conclude the TPP is more advantageous bilateral deals. It is obvious that they will be quite different — it is unlikely that the administration will go for such a radical reduction of tariff barriers as envisaged in the TPP, and the partners of America in response are unlikely to be willing to accept such high standards. A bilateral transaction is likely to conclude, were likely to be more similar to the already existing free trade zone and will not produce a revolution in global trade, which promised TTP.

However, immediately after signing the decree to trump a number of leaders of the TTP were quick to say that they will try to create the bloc without the US or will call to negotiate the second economy in the world — China. Both possibilities outlined Prime Minister of Australia Malcolm Turnbull: “of Course, loss US is a great loss for TTP, but we are not going to stop, and China has the opportunity to join TPP”.

Turnbull’s statements is an attempt to save face. A big part involved in the negotiations, officials privately acknowledge that without the US to create the TTP is unlikely to succeed — the American market was the prize for which many countries were prepared to accept high standards. In addition, specific exchanges for each commodity group (rates of duties and the duration of the transition periods) was tied to the United States, and now reaching a new equilibrium may require a couple of years. Finally, Japan in the mouth of the Deputy head of the Cabinet of Ministers of Koichi Hagudi has clearly stated that without the United States the creation of the TTP does not make sense.

Benefit from the solutions while trump gets only one country — China. It is not that Beijing was seriously lost from the creation of the TTP — 2030 PIIE his loss was estimated at $18 billion, or about 0.1% of GDP. But in the long term, China risked losing much more: both investors and jobs. So inside the Chinese leadership’s attitude towards a possible accession were mixed. Many high-ranking officials of the economic block and the foreign Ministry believed that strict opening conditions TTP will help China to carry out structural reforms — in the same way in the 1990s, Beijing has used accession to the WTO. Against were primarily lobbying groups in the public sector and private companies who have achieved outstanding success in the domestic market due to the high-ranking kryshevateley. Now, China can decide how fast he should move to structural reform, not looking at the factor of TTP.

Beijing tried to convert the misses of trump in the symbolic glasses. Already at the November APEC summit in Peru, which took place after the US elections, Chinese President XI Jinping appeared as the main defender of the principles of free trade and called for the speedy establishment of a free trade area of APEC. Cleverly playing on the fears of the American partners, which, due to nationalist and protectionist rhetoric trump’s increasingly question the ability and willingness of the US to be a leader of globalization and Zapadenergo world order, China now presents itself as a responsible global power, which alone and able to support the fading impulse of globalization.

The promotion of the image of China as a player began at the September G20 summit in Hangzhou. The apotheosis was the performance of the BBC in Davos. If earlier China preferred to ignore the world economic forum, trying to tighten the captains of the world of business to your site in Boao, this year China is extremely prudently picked that moment to debut their leader in Davos. The Americans were busy with the inauguration, and other leaders were either to forum or not to the good news.

In these conditions, XI has presented himself as the chief defender of globalization. In a well written speech, the Chinese leader, not to mention directly nor Donald trump nor the United States gave to understand that the American failures were a disappointment in globalisation. “Some people blame globalization for the chaos in the modern world. Indeed, it has created problems, but not because of this to completely abandon globalization. Need to guide her, to minimise the negative consequences of giving to enjoy the fruits of all countries. The global economy is like the ocean, which is not fenced off. But China has learned it is good to swim,” he said.

No specific prescriptions for the treatment of the evils of globalization, si not discharged — except for the extremely vague appeals to mutual interests and shared winnings, and advertise their initiatives such as “One belt and one road” and Asian infrastructure investment Bank (AIIB). But it was enough to make all the world’s media wrote that in the era of trump’s main defender of globalization, China has become a speech, XI praised even usually ultracritical against China Martin wolf of the Financial Times.

Finally, immediately after signing the trump of the decree of withdrawal from the TPP, China has declared that is ready to bear the burden of global leadership. Gathered at a closed briefing in Beijing accredited representatives of the most influential global media, head of international economic cooperation Department of the Chinese foreign Ministry Zhang Jun said, “if you want the China played the role of a leader, we must take on this responsibility.” Simultaneously, Chinese officials said that soon the Asian infrastructure investment Bank will join 25 States and China may reduce its share capital in the Bank, abandoning the right of veto (though, the missing votes would always be able to get at the expense of smaller countries).

It is unlikely that China will now be able to seriously lead not only coming off the beaten Americans the way the process of globalization, but even the creation of trading architecture in Asia Pacific. Regional comprehensive economic partnership (RVAP), which Beijing promotes as an alternative to the TTP, unlike the American project does not have a particularly the revolutionary standards — it probably is about combining already existing free trade zones with China, Japan, India, South Korea, Australia, New Zealand and ten ASEAN countries. Moreover, given the participation in the negotiations of the ultra-conservative in matters of trade of India, negotiations on RVAP can go a long time.

Now for the Chinese leadership is not so important to achieve concrete results. To take advantage of the oddities of the US President, to play a little in the leader of the world order, China did not — specific things Beijing does not promise, but because he and bribes smooth. In addition, XI Jinping’s important not only to external audiences but the internal audience. At the end of the year he will have a crucial Congress of the Communist party, and strengthen its symbolic weight because is not too risky feats on the world stage timely.

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That means the death of TTP for Russia? From the point of view of the economy from the establishment of the TTP it did not won and did not lose our country to Asia mainly mineral raw materials and weapons, and these groups of goods in TTP did not fall. To place our high-tech industries with high added value foreigners in recent years, do not rush, so here it is, Russia is hardly lost anyone competition because of not joining the TPP. Therefore, according to the calculations of the Academy and RCI APEC, the creation of TTP would not affect Russia’s GDP, the maximum loss in the long term would not exceed $65.6 million Exports to TPP countries would grow (from 0.01% to 0.03%), while exports to other markets as slightly reduced.

The only lost profit is an opportunity to sell goods to countries through the TPP free trade zone, which the EEU has established with Vietnam. That is why, for example, calculations PIIE July 2016 to demonstrate that in the case of the creation of TPP Russia would increase GDP by 0.1% until 2030 (+ $2 billion), while exports fell 0.5% (+ $5 billion).

However, in Moscow from the collapse of the TTP should be grateful. The text of the agreement, or at least competent essay among officials and experts have read only a few people, but because the General attitude of the unit is best expressed by SVR chief Sergei Naryshkin in the article “the Instincts of colonialists” in the “Vedomosti”, where he called the TPP an attempt of America to Rob other Nations, and at the same time to destroy the WTO. Now, sighing with relief that the insidious American plan destroyed by the hands of the President of the United States, Russia is cooled down from their emotions, to seize this window of opportunity.

The most ridiculous mistake would be a desire to use the chance to promote in the region as the monster that was born in the depths of bureaucratic and expert offices in response to the TPP and economic partnership of greater Eurasia. This geo-economic Chimera in contrast, the same TTP or VREP has no clear outlines. Asian and European diplomats are laughing, yet no one in Moscow was not able to call them at least three specific mechanism of this partnership, and three reasons why any country should strive to join it (if you exclude the assurances that this partnership is incredibly beneficial and leads to economic growth). When foreigners hear that the project includes not only the EEU, China, ASEAN, the EU and Japan with Korea, but also India and Pakistan (because they are now members of the SCO — without them anywhere), their faces frozen ice polite expression to represent a functional trade bloc, where new Delhi and Islamabad about something agree, yet no one can, except the Russians.

While in Asia the busy feelings about trump and the death of TTP, it’s time to quietly bury the Eurasian partnership and cease to mention it at any level. In the end, Moscow is no stranger to rare who remembers the idea of Dmitry Medvedev’s European security Treaty or the idea of Russia to replace the Energy Charter. Most of all, without reminder on the part of Russia on the Eurasian partnership safely forgotten. The freed man-hours of officials and experts who are professionally engaged in trade in Asia is better spent on attainable and really necessary things. First of all, the creation of free trade zones with ASEAN and with its individual countries. It will make sense in and of itself, and will allow Russia to join talks on RWAP.

In addition, freed from the fruitless deliberation of the Eurasian partnership, the experts could spend on further study of TTP. The next U.S. administration can get the document from under the cloth. And considering the possibility of impeachment trump or Democrats win the next elections, this can happen quite soon — don’t forget that even the Vice-President of the United States Michael Pence recently was a supporter of TTP. It is possible that he Donald trump after some time can see the benefits of the agreement and to change the position of agreeing with partners a little more favorable to US terms and presenting it as a new extremely profitable deal. Although now the deal is dead, it is obvious that the experience of negotiating and invented the TTP mechanisms will emerge in global trade — and thus, Russia would do well to prepare in advance, while you still can.