Sun is going down on era of US influence in Pacific

The concerns of the rest of the world count for nothing in US presidential elections but the trashing by both candidates of the Trans Pacific Partnership agreement attacks the economic foundation of Barack Obama’s “pivot to Asia”, heralded in his 2011 speech to the Australian ­parliament.

Walking away from the agreement, as both Hillary Clinton and Donald Trump have advocated, would undercut US business interests in the region and embolden those who believe China can provide a stronger guarantee of economic and strategic security.

Australia, which is the strongest base for US enterprise in the ­region after Singapore, can only suffer from the resulting loss of US influence.

Obama was surprisingly frank about the true intent of the TPP when negotiations concluded in October last year.

“We can’t let countries like China write the rules of the global economy,” he said. “We should write those rules, opening new markets to American products, while setting high standards for protecting workers and preserving our environment. That’s what the agreement reached today in ­Atlanta will do.”

The TPP does indeed put an American stamp on the rules of commerce among the 12 parties to the agreement, which include Vietnam, Malaysia, Japan and Singapore, as well as Peru, Mexico, Canada and New Zealand.

There are strong rules for ­intellectual property protection, ­requirements that state-owned enterprises operate on a commercial basis, free from subsidies, and there are prohibitions on tariffs on electronic commerce or re­strictions on cross-border data transfers.

While cutting tariffs on goods, the TPP also restricts the ability of its members to erect barriers to foreign investment or the entry of services enterprises.

The TPP includes “investor-state” provisions enabling international companies that believe they have been discriminated against to seek arbitration in a third country, although there are carve-outs for environmental and health regulation to prevent the kind of action Philip Morris took against Australia’s cigarette plain packaging legislation.

South Korea, Indonesia, Taiwan, Thailand and, under its former administration, The Philip­pines had expressed interest in joining the TPP, which promised to establish a fertile climate for 21st century commerce.

However Trump has likened the TPP to “a rape of our country” that would destroy manufacturing jobs. “Globalisation has made the financial elite who donate to politicians very wealthy,’’ the presidential candidate says. “But it has left millions of our workers with nothing but poverty and heartache.”

Clinton, who endorsed the TPP when she was secretary of state, has become a critic citing two failings in the text: the absence of any provisions on currency manipulation, which she says explains China’s persistently large trade surplus with the United States, and weak “rules of origin”, which she says would allow motor vehicle imports to the United States containing substandard components from non-TPP members.

Obama has said he will attempt to push ratification of the treaty through congress following the election in the final months of his administration. Republican congressional leader Paul Ryan has ruled this out, saying the TPP in its final form lacks sufficient congressional support, with many ­arguing that such a move would lack legitimacy following a presidential election in which both candidates were implacably opposed.

Some hope that Clinton would, if successful next week, find a way of resurrecting the deal but the surly mood of the US electorate that has put Trump within striking distance makes that less likely.

This leaves the 11 members of the TPP who have negotiated with the US in good faith for the past seven years in limbo. Singapore’s deputy prime minister, Tharman Shanmugaratnam, has warned that the collapse of the deal would be a setback for the standing of the US in Asia, saying it is about more than simple economics. “It’s about a reputation for openness and wanting to engage and deepen relationships for two-way benefit,” he said.

China will fill the vacuum. China is already the largest or second largest trading partner of every country in Asia and is ­increasingly rivalling the United States as a source of foreign investment. US official figures put ­investment in Asia and the Pacific at $US540 billion ($710bn), while analysis compiled by the American Enterprise Institute put Chinese investment at $US270bn. Within the 10-nation ASEAN group, new Chinese ­investment totalled $US8.2bn last year, up nearly 20 per cent, while US ­investment fell 7.5 per cent to $US13.6bn.

With The Philippines’ populist leader, Rodrigo Duterte, threatening to jettison relations with the United States in favour of China, it cannot be assumed that Asia will remain an American sphere of ­influence as it has since the Second World War. Duterte signed $US13.5bn in deals on his recent visit to China. Manila is 1000km from Guangzhao but 11,000km from Los Angeles.

US relations with Malaysia are rocky over the claims of massive corruption by Prime Minister Najib Razak and the ­seizure by US prosecutors of assets ­allegedly purchased with stolen Malaysian funds. Razak is in China on a state visit this week on a mission to build military and economic relations and there are concerns his loyalties could switch.

The military regime in Thailand has also strengthened its relationship with China in response to deteriorating relations with the United States.

Singapore, which is home to $US228bn of US investment and whose prosperity has been tied to the strength of commerce between Asia and the United States, is most at risk in the new environment.

Vietnam, which has had to make deeper reform commitments than any other nation to meet the TPP standards, saw the US-led zone as a counterbalance to China and is also exposed by its prospective failure.

Australia has bilateral trade agreements with the US, Japan and Singapore, and the incremental liberalisation to its dealings with other members of the TPP would bring little immediate benefit. But the long-term gains would be large in a broad and expanding zone in which the rules of commerce reflect trade in intellectual property, services and investment rather than the shipment of phy­sical goods.

The alternative is a world in which the United States imposes unilateral sanctions on China for its alleged distortions of bilateral trade, which would be bound to bring economic retaliation.

With growth in global trade ­already at a standstill, the emergence of trade wars between the world’s two largest economies would bring no winners.