Column - Trump, TPP and trade policy

NOT only did the US pull out of the Trans Pacific Partnership (TPP) but US President Donald Trump's 2017 trade policy agenda, which was released on March 1, came as a rude awakening to reality, a reconfirmation of Trump's economic nationalism.

The Trump trade policy agenda firmly puts America as the top priority over any other consideration. The intention is to increase job creation in the US and draw American investment back to the US. But more threatening is that the Trump administration will not comply with World Trade Organisation (WTO) rules if it is found to be in conflict with US interests. The US will take an aggressive view of WTO rulings that are deemed to infringe on US sovereignty.

As the US moves into a protectionist phase, this raises questions of the next steps to be taken for Malaysian trade policy.

With the US withdrawing from the TPP, the logical possibility is for the remaining states to agree to a minus US formula.

The international media has reported Malaysia as reacting "cooly" towards a "minus one" TPP. This was in reference to an agreement that excludes America in what was originally a 12-nation free trade agreement.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed was candid in asserting that a TPP without the US would not be attractive to Malaysia. The biggest gains to Malaysia would come from the US, with Canada being a second.

Links with Singapore, Vietnam and Brunei are covered under other agreements. Chile and Malaysia have a free trade agreement and the same applies to Japan, Australia and New Zealand. Mexico and Peru are unlikely to be basins of attraction.

But the failed TPP could come up with a different flavour since Chile has managed to bring China, Colombia and South Korea to the meeting that was held at Vina Del Mar in Chile on March 14.

True, US absence will be seriously felt and China's presence could make a difference, but again not a significantly powerful difference to Malaysia since China is already included in the Regional Comprehensive Economic Partnership (RCEP).

Then again, we may not have seen the last of the TPP. There are reports of deep disagreement within the White House on how the Trump's trade policy should go. It appears that there is a split between the economic nationalists who are suspicious of trade agreements that are seen to do no good to the US, and the pro-Wall Street veterans who support the status quo.

A fresh burst of optimism comes from the setting up of the bipartisan Asean Congressional Caucus, which aims to strengthen US-Asean ties and build awareness on Asean issues in Washington.

This is a significant move, one that is in line with the fact that Asean is America's fourth largest export market. The latter is good enough to fuel the enthusiasm of those leaning towards Wall Street.

If Malaysia dismisses the redesigned TPP as not tailored to meet its needs, what is the path forward? The answer appears to be in anchoring with the RCEP. Asean is Malaysia's strongest bet and most dependable platform for trade deals.

However, the RCEP has its own set of problems. Indonesia is probably not likely to throw its weight behind the Asean or RCEP since the new leadership in Jakarta would like to speed along more swiftly and, perhaps, on its own. Indonesia realises that the size of its market could reap it benefits that it can harness without having to go through the tedium of multilateral negotiations and agreements.

India poses problems of its own because it has a national agenda that is unique to it. Besides, India does not feel compelled to liberalise with the swiftness that other Asean member states need to. In some ways India and Indonesia have similarities – they both have huge markets and would rather liberalise at their own pace.

Asean was set to deliver the RCEP agreement by the end of 2016. That did not work out. RCEP can very well renege on its promise to accomplish the agreement by the end of 2017.

Still, Asean is the only game in town with the TPP game having gone bust. But that need not stifle other creative solutions. One of them can be the search for a bilateral deal with the US. This is hardly going to be easy with Trump's nationalistic and restrictive view of fair trade. Still, it is useful to send out feelers and to explore how Malaysia could deepen its trade and investment ties with the US.

It appears that while the trade minister is right to react cooly to TPP-1, it is not enough that he bet entirely on Asean. It is time to toss a couple of ideas around to figure out how Malaysia is going to handle the difficult decade.

Shankaran Nambiar is author of the recently published, Malaysia in Troubled Times. The views expressed in this article are his own.