Depending on who is talking, the Trans-Pacific Partnership (TPP) is either the world's most ambitious trade deal or the most dangerous. But these days a simpler description suffices: it is dead.
With Donald Trump's victory, the U.S. has abandoned TPP, in effect killing the trade pact that was a decade in the works and nearly complete.
The consequences are far-reaching. TPP's collapse removes the main economic plank of President Obama's "pivot" to Asia. It leaves a gaping hole in the architecture of Asian commerce. And it adds to the strong headwinds that are buffeting global trade.
The chances that the United States would ratify TPP had already been dwindling because of growing opposition. With the triumph of Trump, who has called TPP a "terrible deal," even a faint hope vanished.
On the basis of size alone, TPP would have been important, the largest regional trade deal in history. It encompassed 12 Pacific countries, including the U.S., Japan and Canada. Together, they account for two-fifths of the world economy. But what made it all the more significant was its strategic intent. Notably absent from the membership was China. Economically, this made little sense. Studies indicated that including China, the world's biggest exporter, would have substantially expanded the benefits of TPP. But the U.S. wanted to show that it could set Asia's economic agenda. China might eventually have been invited to join TPP, but only after the U.S. had written "the rules of the road," as its negotiators liked to say.
TPP emphasized stronger safeguards for intellectual property, the environment and labor rights (detractors felt it went too far on the first and not far enough on the other two). Matthew Goodman of the Center for Strategic and International Studies, a think tank, considers its collapse a "body blow" to U.S. economic policy in Asia.
It is also a blow to the global economy. Over the years, rich countries have cut tariffs to the point where the main obstacles to commerce now lie in regulations that discriminate against foreign companies. TPP took aim at barriers hidden in government-procurement guidelines and investment restrictions. It would have raised the bar for future trade deals, said Jayant Menon of the Asian Development Bank: "That's where the biggest loss lies."
Global trade is on track to expand more slowly than world GDP this year for the first time in 15 years, said the World Trade Organization. In Asia, exports are set to grow just 0.3 percent this year in volume terms, well below the 8 percent average of the past 20 years. For poorer countries, exports have long been the most reliable way to kick-start development. That route now looks less accessible. If Trump keeps his threat to slap fearsome tariffs on Chinese goods, the fallout could easily tip global trade into outright contraction.
There are a few candidates to fill the void left by TPP. One possibility is that the 11 remaining governments forge on, minus the U.S. Having agreed to the deal in February, they were on the cusp of ratifying it (Japan did so this month). Take out their access to the United States' consumer market and the incentive to give ground in other areas quickly dissipates.
The focus is shifting to whether China might step in with an alternative trade deal. Chinese officials have vowed to push for an even larger regional pact called the Free Trade Area of the Asia-Pacific (FTAAP), tying together 21 countries including the U.S. It will, however, go nowhere.
Optimists can at least point to one trade pact that is close to completion. The Regional Comprehensive Economic Partnership (RCEP) includes China, India, Japan and Southeast Asian countries. But RCEP is far less ambitious, focusing on the basic business of cutting tariffs, rather than more complex regulations.
For Asia's reformers, there is no getting around the disappointment of TPP's demise. Vu Thanh Tu Anh, a Vietnamese economist, said that Vietnam had hoped to use the deal to pressure sluggish state-owned companies to shape up. Shinzo Abe, Japan's prime minister, viewed it as part of his program of structural reform. Even in China, liberal officials thought TPP might prompt the government to loosen its grip on markets in order to join one day.