Asia Urged To Ditch U.S. and Go Ahead With Regional Trade Deal

(Bloomberg) -- Asian countries should pursue a Pacific trade pact even after the U.S. walked away, and its standards should be incorporated into other regional deals, according to a report authored by half a dozen former trade envoys.

Donald Trump withdrew from the 12-nation Trans-Pacific Partnership in one of his first acts as U.S. president, throwing an agreement that covered 40 percent of the global economy into disarray. That's left the other nations scrambling on what to do: Either try and proceed without the U.S., hope Trump changes his mind (or Congress does), or prioritize a separate regional deal being championed by China.

The president has attacked trade deals in general and touted an “American First” doctrine that would punish countries whose policies are deemed by the administration to be undermining U.S. jobs. But the rest of the world shouldn't embrace Trump's protectionism, the Asia Society Policy Institute report argues.

“Just because the United States is less supportive of trade and globalization does not mean that the rest of the world will follow suit,” said the report authored by Wendy Cutler, a nearly three-decade veteran of the Office of the U.S. Trade Representative, and six former trade officials from Australia, China, Japan, Korea, Indonesia, and the Philippines.

“Should protectionism and isolationism prevail, the Asia-Pacific region could become less open and integrated, upsetting the regional economic and security balance,” the writers said.

Read more: How a Trump-China trade war could play out

Trump has not announced specific actions against countries in Asia that he has previously singled out for their trade practices, including China, South Korea and Japan. But his administration has declared the U.S. isn't bound by decisions made at the World Trade Organization and said America plans to defend its “national sovereignty over trade policy.”

New Commerce Secretary Wilbur Ross, who has described China as the “most protectionist” major nation, said last week the U.S. was preparing cases against China and other nations and would pursue “tougher enforcement” of existing trade rules.

The clouded future for TPP -- a higher-valued pact that included provisions for things like intellectual property, state-owned enterprises and environmental and labor standards, has seen some Asian nations turn to the 16-nation Regional Comprehensive Economic Partnership, seen as a more traditional deal.

Taking The Lead

The WTO and Asia-Pacific Economic Cooperation forum should take the lead communicating the benefits of free trade agreements “using concrete terms which are meaningful to the everyday interests and concerns of ordinary people,” the ASPI report said.

The authors concluded that regional trade pacts are the best path for liberalizing trade, raising standards and promoting reforms. “Regional agreements allow countries to simultaneously tap into a number of markets at scales often unattainable through bilateral deals.”

They urged negotiators to take into account the growth of the digital economy and the increasing participation in the global economy of small-to-medium sized businesses. And they called on the U.S. to reconsider its participation in TPP and welcomed proposals by some TPP signatories to go ahead regardless.

Australia is pushing for a TPP without the U.S. At least 11 countries, including China, Japan and South Korea, will attend a March 14-15 summit in Chile on trade where the TPP will be discussed, according to a report by Bloomberg BNA.

The ASPI report recommended RCEP nations seek a “high-quality agreement and not be tempted to adopt the lowest common denominator approach.”

The latest RCEP talks concluded in Japan last week without signs of significant progress, with the next round expected in the Philippines in May.

To contact the reporter on this story: David Tweed in Hong Kong at dtweed@bloomberg.net.

To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Rosalind Mathieson, Ruth Pollard