Why Europe Needs to Take TPP Seriously

There’s no point any longer in pretending: The geo-economic race over the Asia-Pacific is now on – and in the open.

Will the TPP coalition declare victory at the next week’s APEC summit – and steal the show from the Chinese host? Is there enough time for Amari and Forman to resolve their issues? Could China mount a counteroffensive in the form of a “breakthrough” on RCEP (a jab at the US, who is not invited), or its own FTA with Korea (a jab by Premier Li and President Park, who are only united in their common animosity for PM Abe)?

Pan-Asian trade deals are now high politics and prime time entertainment rolled into one. It’s the burning issue for commerce ministers everywhere – except in Brussels, still deep in introversion and shellshocked over TTIP. But Europe always took TPP with a pinch of salt, questioning whether TPP is even feasible, having failed its own attempt for a pan-Asian trade deal. Indeed, it’s far from certain that there will be any FTA entertainment in Beijing next week. But what if the Trans-Pacific Partnership (TPP) is not a doomed initiative – and what if it will actually make inroads into modern trade problems?

Our new policy brief looks to this what if. The Asia-Pacific region is de facto the world’s centre of economic gravity, rapidly turning into the world’s fastest growing consumer market. TPP (or RCEP, if it ever comes into fruition) will indeed change the competitive relation between EU and US firms, as far as access to this market is concerned.

The negotiations now include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam. Influential actors, including South Korea, Philippines, Taiwan, Thailand, (and even China) have formally or informally shown their interest in joining the negotiations. There is no reason to doubt that TPP is the new standard-setter in the Asia-Pacific region – current signatories represent 60% of world trade, which is the same level as GATT in the 1980s:

• The TPP will be the first ‘competing’ economic integration large enough to make a negative impact on Europe. To put it rather bluntly – for every dollar the US economy gains thanks to TPP, the EU will lose a dollar (or 1.03 to be exact).
• In the long-term, there will be further negative effects on the economic fundamentals – a drop in investment, productivity and competitiveness; TPP also presents a ‘deadly threat’ to EU agricultural exports to the TPP countries, as my friend Patrick Messerlin likes to puts it.

Europe negotiates bilaterally with some TPP countries, but has no strategy equivalent to the TPP.

• The ongoing EU negotiations with Canada, Japan, Malaysia, Vietnam and TTIP have been facing “difficulties” due to the political urgency and industry support given to TPP.
• The TPP even add pressure on EU’s existing FTAs with countries such as Mexico and Chile, with whom only old-styled FTAs are in place.
• Australia and New Zealand are currently not being addressed at all, despite being part of both RCEP and TPP.

Obviously, EU trade policy (our ersatz foreign policy in Asia) cannot be underpinned by TTIP and plurilateral initiatives alone.