China will not immediately profit from TPP’s collapse

Trump’s executive order of withdrawal from the Trans Pacific Partnership (TPP) on Monday the 23rd came with some surprise. After almost a decade of Obama administration, and after huge resources spent on the “pivot to Asia” strategy, the United States seem to be finally quitting the region, leaving the allies wondering about the reasons of this move and alarming their policymaker.

In a study conducted by Cheong and Tognzon in 2013, has been calculated a very low economic impact of the Partnership on TPP members. Provided these outcomes, it was anyway a containment strategy necessary to keep a geopolitical balance in the Pacific region.

Observers have been discussing this move for days, usually agreeing with each other on stating that China comes out as the true winner, being now capable to exert more influence in the Asia Pacific region. Moreover, some now-orphan TPP countries have suggested China joining the partnership on behalf the United States, thus letting it establishing the trade rules and practices in the region, forcing the US to adapt to them in the future.

With its usual low profile behavior, China has put itself as the natural leader/guide to which countries might be leaning on since the isolating measures of the Trump administration. Even before the US withdrawal from TPP, the Chinese president Xi Jinping stressed the importance of the globalization and the free market at the World Economic Forum in Davos, in a discourse that gave some surprise to whom write about and work with China. Obviously, the situation and the concepts at the core of Xi Jinping’s discourse are not novels in real terms, yet this time they received the official endorsement, and this means a lot in a Chinese perspective.

With the dismantle of the TPP, the attention will now be put on the other Free Trade Agreements proposed by China in several occasions: the Free Trade Area of the Asia Pacific (FTAAP) in 2014 at the APEC summit and the Southeast Asian-backed Regional Comprehensive Economic Partnership (RCEP) launched in 2012. On one side, they really constitute an efficient alternative to the TPP, trying to put together the biggest economies of the Asia Pacific region as a goal. On the other side, the FTAAP and the RCEP have been proposed as a countermeasures right against the TPP and, now that it has been put apart, the talks about both of them will surely slow down, preferring keeping or signing trilateral or, at least, bilateral agreements.

China sees great opportunity in its sponsored behemoth project, the “One Belt, One Road” (OBOR) initiative that has already obtained the financial support by the AIIB which, once again, sees the absence of the United States. Besides the failure of the TPP, we should turn our heads to this initiative, since it is already at a very advanced state and it will involve a geographic area probably more important to the US than the Pacific.

With its massive infrastructure investment and the promise to build up an integrated economy in which to export China’s technologies and production capacity in oversupplied areas such as steel manufacturing, the OBOR initiative might be the real game-changer.

However, the mild connection between Donald Trump and the Russian President Vladimir Putin might mean a threat, or escalating problems, to the OBOR initiative since it encompasses many ex Soviet nations that will then start orbiting much more around China.

Still in middle of the New Year celebration, China will come out with many questions to answer. It can really take the rein of the region, maybe the worlds’. However, with the 19th PCC congress in October, the economic reforms still to be fully applied, an ever increasing debt and a kiddy Trump administration we could hardly see any huge step by China. Probably, the 2017 will be a year of study, of strategy drawing, with important measures to be taken probably in 2018.