TPP will be the linchpin of Asia rebalance for the United States

The U.S. administration’s policy of “re-balance” towards Asia has been designed to achieve two objectives: to embed them more deeply into the world’s most dynamic economic region and to prevent a regional vacuum from being filled predominantly by China. There are 3 pillars to this re-balance: political, security and economical.

(http://www.brookings.edu/blogs/order-from-chaos/posts/2015/07/28-tpp-linchpin-asia-rebalance-bader-dollar)

The first two pillars have been installed very well after the strengthening of alliances with Japan, South Korea, Australia and Philippines, relaxation of arms embargo on Vietnam and frequent summits with China. But the economic component has had only few accomplishments. Due to China’s reluctance to open up its economy, it has slowed down the U.S.-China negotiation on the investment treaty. Reform of IMF has been blocked by the US representatives. In this context, TPP is vital if the re-balance has to be seen and to impress a region that shows lot of promise in economic growth and openness.

Some economists have made possible estimates of benefits of the TPP agreement saying that big gains will obviously go to large economies. The U.S stands to gain $77 billion annually and Japan’s potential gains are even larger at $105 billion. The big winner relative to size is Vietnam which is discussed in one of the articles. But still these are static estimates and the overall gains to TPP-12 are modest. The long-term effect will depend on how the other countries react to it.

China will suffer the most loss equal to gain of Vietnam but since China’s market is large, it amounts to a very small percentage. Most of the current TPP countries hope that China is eventually attracted to join. The benefits of any deep liberalization agreement that includes China will be many times greater than agreements without China.

But will TPP process be complete by February deadline? Will the Presidential Election affect TPP?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s