US retreat on trans-Pacific trade could see China step in

The door could be opened again for China to join the world’s largest regional trade agreement, the Trans-Pacific Partnership.

Trade Minister Steven Ciobo in Peru. Picture: Kym Smith

The door could be opened again for China to join the world’s ­largest regional trade agreement, the Trans-Pacific Partnership, if the US pulls out of the deal, as threatened by president-elect ­Donald Trump.

The Australian has been told that during closed-door meetings yesterday among member ­nations of the TPP at the Asia ­Pacific Economic Co-operation summit in Peru, an option of “going it alone” without the US was raised as a “serious” ­consideration.

Several of the Pacific Rim leaders had informally agreed they should press ahead to ratify the free-trade deal to reduce tariffs among the 11 remaining members.

It is understood Canada, New Zealand, Mexico, Chile, Peru and several of the Asian country members were engaged in discussions about the idea. Australia was also supportive, with sources confirming to The Australian that Trade Minister Steve Ciobo had told a TPP breakfast at the start of the APEC summit on Friday that the pact should proceed regardless of the US position.

In the event of the US walking away, as is widely expected under a Trump administration, there was discussion about the potential for China, originally ­excluded from the final TPP agreement, to join. Chinese leader Xi Jinping came to APEC with a strengthened position on trade negoti­ations with the TPP in tatters, pushing the case for a separate trade deal among ASEAN nations including Australia but notably excluding the US, under a ­Regional Comprehensive Economic Partnership.

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In the official “leaders’ retreat” meetings closed to media, the issue of a Trump presidency overshadowed discussions among all the 21 APEC leaders.

US President Barack Obama urged other leaders to not rule out Mr Trump backtracking or at least modifying some policy, particularly regarding free trade, once the “reality” of the Oval Office sank in.

He said the TPP, central to the US strategic interests in its pivot to Asia and regarded as a mechanism to counter China’s economic might in the region, was far from dead and urged other countries to keep arguing the case for it.

“Our partners made clear they want to move forward with TPP,” Mr Obama said after meeting leaders in Peru. “They would like to move forward with the US.”

It has been widely assumed that the TPP, which would have spanned a Pacific Rim trade deal covering annual trade of $27 trillion and representing 40 per cent of the world’s GDP, had been all but killed off by Mr Trump.

It was also assumed that without the US, the TPP would not only have to be rewritten but also would be a significantly dimin­ished arrangement.

However, a source privy to the discussions in the meeting confirmed several one-on-one talks among TPP member nations were focused on trying to push ahead regardless of the US on the basis that the TPP still presented benefits to the other member economies. The question was what the TPP would look like without the US. There was not a single country within the TPP community that believed the agreement was dead.

Insiders said they had been surprised by how seriously the idea was being pursued, but the consensus was that a “wait-and-see” approach should be adopted until a Trump administration’s intentions became clear.

If the US should withdraw, the view among several leaders at the meeting was that China could be asked to join, presenting significant implications for long-term US strategic “soft power” engagement in the Asia-Pacific region and adding pressure for a potential US rethink.

While Malcolm Turnbull spent 50 minutes with Mr Obama yesterday in his final summit as President, the Prime Minister also spent 90 minutes with Mr Xi the previous night, sitting next to him at a formal dinner.

Mr Turnbull would not be drawn on backroom rescue talks for the TPP. He told The Australian he was interested in trade deals that were fair and benefited Australia but said trade liberalis­ation could be pursued only when it ensured people were not left ­behind.

“This was an important meeting at an important time,” he said. “On the TPP, we will play the long game if necessary and we will keep making the case that it is economically and strategically ­important. I’ve been here standing up for Australia — for Australian jobs and Australian business which benefit from our big export trade deals.”

It was a message echoed by Mr Obama, who said while protectionism should be fought, the case for free trade needed to be better articulated.

“That’s why I firmly believe one of our greatest challenges in the years ahead across our nations and within them will be to make sure the benefits of the global economy are shared by more people,” he said.