If Trump Abandons the TPP, the Biggest Winner is?

Dec 13, 2016

The phrase “Thucydides Trap” refers to the likelihood of tensions and even war between an established power and a rising challenger. Even before Donald Trump’s election to the U.S. presidency, the relationship between the U.S. and China was often cast in these terms, with analysts such as Graham Allison concluding that war was not an unimaginable outcome. How, if at all, do Trump’s election and recent pronouncements influence our assessment of that relationship?

It’s significant that Trump did not, in his first post-election video address, mention his proposals from the campaign to declare China a currency manipulator or to slap punitive tariffs on Chinese imports. Such steps may, of course, still be on their way. And if they are taken, they may yet provoke a meltdown of globalization. In the words of Xi Jinping at his steeliest, there is no alternative to cooperation. If the U.S. did try to “punish” China on trade, the Chinese could retaliate in kind against the likes of Boeing or Apple — or even dump U.S. governmental debt.

That said, the Chinese may cut Trump some slack because of the great gift he has bestowed on them: Trump has stated that he will abandon the Trans-Pacific Partnership trade deal on his first day in office. In some sense, this was not news. Although a few of the faithful had continued to hope for a vote on TPP in a lame-duck session of Congress, the opposition to TPP from both leading candidates for president, as well as the fact that it proved to be such a rallying cry, did not bode well for the trade deal. And any lingering possibilities of U.S. involvement in the TPP were killed off by the election.

The abandonment of TPP marks the end of a U.S. pivot toward Asia aimed partly at ensuring that it not coalesce around China (which was never going to join the trade deal, given the restrictions it would place on Chinese state-owned enterprises and state planning). Between U.S. disengagement and local disenchantment (e.g., the Philippines’s radical shift, under Rodrigo Duterte, to the Chinese camp), a bulwark against China now seems a remote possibility.

Of course, the U.S. continues to have security agreements with Japan and South Korea. But both countries are on Trump’s shortlist of nations that run unacceptably large trade surpluses with the U.S. And as the example of the Philippines indicates, the switch from having a special relationship with the U.S. to cozying up to China can take place rather quickly. Halfway around the world, NATO has been shaken by Trump’s questioning of its “all-for-one” defense clause and how its economic burdens are shared — as well as Europe’s internal problems. And, of course, the credibility of a military alliance can be damaged much more quickly than it can be built up again.

The broader point is that if established security relationships are subject to the strict calculus of economic self-interest, that can totally transform them — and at a fundamental level, weaken them. The U.S. becomes security-for-hire rather than a security guarantor. And over a longer timeframe, there would be less and less of old alliances. The geopolitical map might collapse into the economic one, with unappealing implications from a U.S. perspective because China would become an even stronger player on the global stage.

To see this, look at the trade-focused map below, with countries colored in terms of whether the U.S. or China is their larger trading partner. The U.S. leads in a few places, particularly in the more proximate parts of the Americas, but China leads more broadly. Extrapolations indicate that by 2025, the Chinese sphere of trade leadership will extend even farther, with the U.S. forecast to lead only in the part of the Americas that is north of the equator. If this seems too surprising to be true, it is worth noting that its logic is already reflected in the “Look South” export strategy that the U.S. Department of Commerce developed under the outgoing administration.

The trade leadership map underlines the point that if the U.S. walks away from key geopolitical initiatives like the TPP and if it waters down its treaty commitments, the basis of competition for global influence shifts to a purely economic one — and the Chinese rather fancy their chances. Having spent some time in China this week to talk to local experts, I’ve seen that Chinese social media has been very enthusiastic about Trump’s election representing a great opportunity for the country. Chinese official media, while more guarded, has been emphasizing that the U.S.’s European and especially Asian allies are now likely to be abandoned, and that China, unlike the U.S., is a reliable partner for everyone.

The allies involved — such as Japan, where I also spent a couple of days — aren’t convinced by the Chinese line, but they are definitely concerned about recent developments. It seems that round one goes to China.

Source: HBR.ORG