22 September 2018
The Trans-Pacific Partnership brings together 12 Pacific Rim countries that account for 40 percent of global GDP. It could become the largest trade alliance in the world. Photo: HKEJ
The Trans-Pacific Partnership brings together 12 Pacific Rim countries that account for 40 percent of global GDP. It could become the largest trade alliance in the world. Photo: HKEJ

TPP: Why Singapore wins and Hong Kong loses

Two years ago, I wrote two articles in which I pointed out that the Trans-Pacific Partnership (TPP) is in fact intended to be a containment measure by the US against China.

As a result, it is bound to have profound implications for the economies of Hong Kong and the mainland.

My premise did not draw much attention at the time.

It was not until the agreement was signed in Atlanta on Monday that people suddenly awakened to the challenges posed by the new strategic trade alliance.

There is growing concern about its potential threat to China and Hong Kong.

As the US government puts it, the rules of the road are up for grabs in Asia Pacific, the world’s fastest-growing market.

And if the US doesn’t take proactive measures to write those rules, someone else will. That would be China, it says.

If that happens, American jobs and leadership in Asia will come under threat.

Against that backdrop, the US tried to establish a new trade regime outside the World Trade Organization (WTO) by spearheading the creation of TPP.

By all indications, it’s meant to reinforce Washington’s predominance in international trade, give American companies the upper hand and, above all, curb China’s political and economic rise.

It could also be seen as an “an eye for an eye” response to China’s aggressive moves in recent years to rewrite international norms, stretch its influence and push the US further from Asia.

The China-led Asia Infrastructure Investment Bank, launched this year, deliberately excluded the US.

China became a WTO member in 2001 after 15 years of prolonged and tough negotiations.

Under WTO, Chinese exports to the West enjoy low tariffs and are exempt from certain quotas.

On the other hand, China is required to further open up its domestic market to foreign competition.

But after 14 years, the US government and American businessmen are unhappy about the pace of Beijing’s efforts to break down trade barriers.

Although the TPP cannot — and is not — intended to replace the WTO, the alliance is a force to reckon with.

It comprises 12 founding members which account for 40 percent of the world’s gross domestic product.

South Korea, Indonesia, Colombia and other countries are eagerly seeking to join it, which would make it the largest multilateral trade alliance in the world.

Despite the fact that the US is deliberately excluding China from the TPP and Beijing’s response to the fledging global trade powerhouse remains lukewarm, many in Washington believe that sooner or later, Beijing will come knocking on the door.

In the 1990s, it was almost willing to go to any lengths to become a WTO member.

Others say the TPP is overrated and has few benefits to offer to China which already has free trade agreements (FTAs) with dozens of countries.

These include ASEAN member states, South Korea, Australia and Switzerland. Twenty more FTAs are in the pipeline. 

Having said that, I believe the true winners are countries that have concluded FTAs with China and become founding members of the TPP such as Singapore and South Korea.

The reason is that they have it both ways and they can take advantage of the rivalry between the US and China.

Unfortunately, Hong Kong is not on that list and we have concluded very few FTAs.

We are risking being marginalized in the global trade system.

And with three of our four economic pillars — professional services, financial services and tourism — in deep trouble, the prospects for our economy are anything but promising.

This article appeared in the Hong Kong Economic Journal on Oct. 6.

Translation by Alan Lee

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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