John Roughan: America is at risk of surrendering economic leadership

U.S. President Barack Obama, left, watches Chinese President Xi Jinping, right, speak the opening ceremony of the G20 Summit in Hangzhou. Photo / AP

There's a headline I wish would appear in newspapers across America. It would say something like, "TPP allies back big deal with China".

The story below would start, "US trade partners, meeting on the fringes of the Asean summit in Laos this week, are looking to China to spearhead a alternative agreement if the Trans-Pacific Partnership is rejected by Congress".

The TPP members at the summit did not say that, or even meet as a group as far as I know, but the idea is not totally fanciful. A thing called the Regional Comprehensive Economic Partnership has been under discussion for some years among the 10 Asean members and China, India, Japan, South Korea, Australia and New Zealand. It is real enough in diplomatic circles to have an acronym, RCEP. It claims to be pursuing free trade.

If it comes to fruition, it will be the world's largest economic agreement, eclipsing the TPP in population thanks to the inclusion of China and India and, like TPP, cover 40 per cent of world trade.

With the eternal optimism of these things, the 16 countries had set themselves a goal for agreement before the end of this year but this week they agreed only to "intensify negotiations". Pity, but typical of East Asian diffidence. I don't seriously imagine for a moment the RCEP will match the progress of the TPP but it would do no harm to let American politicians and voters think it possible.

Even Donald Trump probably knows by now that this dreadful thing called the TPP excludes China, and that US geopolitical strategists were drawn to it for that reason. Hillary Clinton certainly knows so, because she was one of the said strategists when the newly elected Barrack Obama was reconciled to it. Candidate Obama had been opposed to the TPP, which was making little progress at that point, but once in office, President Obama held a "review" and changed his mind.

We could be confident Clinton would do the same were it not for Bernie Sanders. The old socialist has made the TPP his main target since conceding the presidential nomination to Clinton. In his address to the Democratic National Convention he made it his next goal to see the TPP is not passed by the post-election "lame-duck" Congress.

Ultimately it may not matter if the TPP is not ratified by the US. The deal signed in Auckland in January has set a new benchmark for the principles and rules of global commerce.

Sanders wouldn't care if the US appeared to be surrendering leadership of international economic rule-making to China but Trump possibly would. Listening to him, it is hard to tell whether he sees China or trade deals as the greater ogre. And certainly congressional representatives would care if their voters realised the US was ceding something important to the country that will become the world's largest economy sometime this century.

Ultimately it may not matter if the TPP is not ratified by the US. The deal signed in Auckland in January has set a new benchmark for the principles and rules of global commerce. It stands for what can be agreed between governments that believe the path to prosperity for people everywhere is built on common recognition of property rights, investors' rights, fair competitive markets for goods, services and finance and national standards for employment, environmental protection, health and safety that do not discriminate between foreign and domestic industries.

The TPP does all of that and, if its opponents would only admit it, the deal was better than they expected. One of the ironies of the opposition to it is that while Trump and Sanders and their supporters are calling it a bad deal for Americans, those marching on New Zealand streets think it is a sell-out to the US. Trump and Sanders are closer to the truth. The US conceded a lot more than most of us were led to expect.

But it is not a bad deal for America. It keeps the US at the head of the table where the treaties for trans-national business and investment will be made. And they will be made. Globalisation is not going to stop. A world talking and trading on the internet needs to bring more law and order, and taxation, to the production chains that now commonly cross national boundaries and exploit fearful places that still cling to subsidies and protection.

"Free trade" stands for much more than open borders now. It is shorthand for an international code of commercial law that cannot be imposed on any country but can make them all more attractive to investment in competitive activities and the employment those can create.

Asean plans three more rounds of RCEP talks with its "dialogue partners" this year: in China, the Philippines and Indonesia. Six of the 16 countries are also in the TPP and another, South Korea, would like to be. Asean is notoriously indecisive and India, China and Japan are probably worse. But America should be on alert.