SANTIAGO, Chile – A trade pact originally conceived by the United States to counter China’s growing economic might in Asia now has a new target: President Donald Trump’s embrace of protectionism.
A group of 11 nations — including major U.S. allies such as Japan, Canada and Australia — signed a broad trade deal Thursday that challenges Trump’s view of trade as a zero-sum game filled with winners and losers.
Covering 500 million people on either side of the Pacific Ocean, the pact represents a new vision for global trade as the United States threatens to impose steel and aluminum tariffs on even its closest friends and neighbors.
Trump withdrew the United States from an earlier version of the agreement, then known as the Trans-Pacific Partnership, a year ago as one of his first acts in office. The resuscitated deal is undeniably weaker without the participation of the world’s biggest economy, but it serves as a powerful sign of how countries that have previously counted on U.S. leadership are now forging ahead without it.
“Only free trade will contribute to inclusive growth of the world economy,” Taro Kono, Japan’s foreign minister, told a group of ministers from Southeast Asian countries in Tokyo on Thursday. “Protectionism isn’t a solution.”
In its original incarnation as the TPP, the pact was conceived as a counterweight to China, whose vast economy was drawing other Asian countries closer despite its state-driven model and steep trade barriers. Not only does the TPP lower trade barriers, it could also prod Beijing to make changes to enjoy the same benefits.
When President Barack Obama was advocating the deal, he said that “America should call the shots” instead of China.
Now, the agreement could in some respects act as a defense against the shots the United States is calling.
The United States has “gone from being a leader to actually being the No. 1 antagonist and No. 1 source of fear,” said Jeffrey Wilson, head of research at Perth USAsia Centre at the University of Western Australia. “If you’re a trade policymaker in Asia, your No. 1 fear is that Trump is going to take a swing at you.”
He added that such fears could prompt countries, however reluctantly, to tether themselves more closely to China. “The U.S. is really delivering the region to China at the moment,” Wilson said.
The new agreement — known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership — drops tariffs drastically and establishes sweeping new trade rules in markets that represent about a seventh of the world’s economy. It opens more markets to free trade in agricultural products and digital services around the region. While U.S. beef faces 38.5 percent tariffs in Japan, for example, beef from Australia, New Zealand and Canada will not.
Once it goes into effect, the agreement is expected to generate an additional $147 billion in global income, according to an analysis by the Peterson Institute for International Economics. Backers say it also bolsters protections for intellectual property and has language that could prod members to improve labor conditions.
Other members include Mexico, Vietnam, New Zealand, Chile, Malaysia, Peru, Singapore and Brunei. Officials signed the deal Thursday in Santiago, Chile.
“The message is that we believe in the value of an open economy and economic integration of countries in order to generate greater prosperity for our people and our nations,” President Michelle Bachelet of Chile said in a recent interview.
“I think that is a tremendously important value at a time when certain sectors of the world are sending messages that run contrary to this choice, preaching messages of nationalism rather than integration,” she added.
China, which has discussed forming its own regional trade pact, has been more positive about the new deal since the United States pulled out, and Chilean officials said Thursday that China had signaled that it may want to join.
It sent a high-level delegation a year ago to Viña del Mar, Chile, where the pact’s members sought to regroup after the United States pulled out. Experts said China could feel the pull if still more countries joined the pact. The pact is also built around fostering trade in sophisticated manufactured goods and high-tech products, and China now produces many of those in abundance.
“It’s hard to ignore rules that everyone else is agreeing to, and they will probably look carefully at these rules,” said Wendy Cutler, a former U.S. trade negotiator who worked on the Trans-Pacific Partnership and is now managing director of the Washington office of the Asia Society Policy Institute.
Wang Yi, China’s foreign minister, said that the government hoped free-trade agreements in the region would play “a constructive role in their respective fields in resisting trade protectionism and building an open world economy.”
The new version of the TPP remains a shadow of its former self. With the United States, the agreement would have represented 40 percent of the world’s economy, giving its provisions added heft. Its impact could be swamped if Trump’s tariffs provoke a global trade war.
In the deal signed Thursday, only 22 of more than 600 original provisions have been suspended, relating to intellectual-property protection and a grab bag of other issues, several of which had been pushed by the United States. Kazuyoshi Umemoto, Japan’s chief negotiator for the partnership, said that if the United States decided to re-enter the deal, those provisions could be reinstated.
“Trump won’t last forever,” said Patricio Navia, a political scientist at New York University. “Countries will return to a path toward globalization and this sends a beacon of hope.”