The transition and policies of President-elect Donald Trump has been – and is likely to be – marked by uncertainty, and the diplomatic relationship with China is no exception. Mr. Trump spoke with Taiwanese President Tsai Ying-wen over the telephone, the first between an American president or president-elect and a leader of Taiwan since diplomatic relations were cut in 1979, thereby risking a diplomatic rift even before he enters the White House, but later selected Iowa governor Terry Branstad to be his ambassador to China. Even though the governor has no direct experience in diplomacy, Mr. Branstad has a long personal relationship with Chinese President Xi Jinping, which could create better access in the future.
Yet what is less uncertain, it would appear, is the continued emergence of China as a global superpower. And in the next four or eight years of a Trump presidency in the United States, the geopolitical and economic effects of Chinese ascendancy will be felt most keenly in Asia. “Are we anticipating the end of an era, of American leadership”, Visiting Senior Research Fellow at the Lee Kuan School of Public Policy (LKYSPP) James Crabtree asked the speakers in attendance, “[And if so] are we then headed towards an era of no leadership, or is it plausible [for a] Pax Sinica, that we are instead headed towards an era in which China will begin to start shaping the agreements that govern trade and commerce in Asia and beyond?”
Mr. Crabtree was moderating a panel discussion, titled “Asia, Trade, and Globalisation in the Age of Trump”, organised by the LKYSPP. The four speakers – Visiting Senior Fellow at the National University of Singapore Business School Alex Capri, former United States ambassador to Singapore Frank Lavin, Li Ka Shing Professor of Economics at the LKYSPP Danny Quah, and Associate Professor at the LKYSPP Razeen Sally – while expressing scepticism over the productive potential of a Trump presidency and highlighting the anti-globalisation backlash, had disagreements over the TPP and the RCEP, and the shaping of a new world order.
The TPP versus the RCEP
A new wave of anti-globalisation movement and protectionism has gained traction, leading to the death of the Trans-Pacific Partnership or the TPP, a trade agreement which would have included 12 of the Pacific Rim countries, and representing roughly 40 per cent of global GDP and 30 per cent of world trade. The outgoing administration of President Barack Obama suspended its efforts to win congressional approval for the TPP on November 11, days after Mr. Trump won the election. In its place, in Asia, China has begun to fill this vacuum left by the United States. China is taking the lead on infrastructure initiatives, and on trade – Prof. Sally noted – it is the Regional Comprehensive Economic Partnership, or RCEP, “involving ASEAN plus six countries [also ASEAN’s free trade partners], with China very much in the leading seat”.
This is significant, because trade agreements are no longer about trade. “They are about geopolitical powers carving out circles of influence, [and] they are about strong hegemonic nation-states projecting core values on human rights, democracy, corruption, protectionism, and a whole range of other issues”, Prof. Quah said.
In this vein, and in the opinion of Prof. Quah, RCEP arguably provides a trade agreement that is closer to what trade is supposed to be. Vis-à-vis the TPP – which only four ASEAN countries signed up to, which China and India were not part of, and which tilted the playing field in favour of American business and against that of emerging countries – RCEP includes China and India, together with ASEAN, “the three largest workforce populations in the world”. RCEP, furthermore, as a “light-touch” trade agreement, will also make special provisions for countries which cannot yet meet the high labour standards as desired.
“This is, and dare I use the word, a liberal approach to a trading order, one that does not exclude people or countries on the basis of whether they can afford to pay the high costs associated with the kinds of labour standards that we are used to in the developed countries”, Prof. Quah added. Moreover, “RCEP can be viewed as part of a bundle, that includes an AIIB [the Asian Infrastructure Investment Bank, an eponymous financial institution which supports the building of infrastructure in the region], and a ‘One Belt, One Road’ narrative [a development strategy premised upon greater connectivity and cooperation]”.
On the other hand, Mr. Capri described the TPP as a deep free-trade agreement, “with special provisions for small- and medium-sized enterprises, governing rules for state-owned enterprises, and very good intellectual property, environmental, and labour rights or standards”. Disagreeing with Prof. Quah, Prof. Sally characterised the TPP as a “trade-plus” agreement, in contrast to the RCEP as a “trade-light” agreement. “Like many trade agreements, [the TPP] is about geopolitics and other issues. But the TPP, more than any other trade agreement in history, is about trade. It has much more ambitious market access, [and] its rules go deeper to actually free up trade around the region, for developed as well as developing economies.”
“RCEP follows the pattern of intra-ASEAN free trade agreements. It does something on the tariffs, rather like the ASEAN free trade area, but it will do hardly anything on the trade and investment barriers, the non-tariff and regulatory barriers. They are too politically sensitive … The net effect of something like RCEP might not be very much, [with] a smaller effect on global value chains than the TPP”, he added.
Pax Sinica: A new world order?
Free trade is but one pillar of globalisation, though free trade agreements provide good indication of the global balance of power. After almost three decades of American unipolarity and leadership, following the collapse of the Berlin Wall in 1989, “there has been a shift in appetite for international leadership”. The former United States ambassador to Singapore made the point about the costs of global leadership and the United States lowering the bar, and Mr. Lavin later remarked that China also has a growing appetite for globalisation. Such developments will no doubt shape the new world order.
Should there be an American disengagement, from Asia and around the world, it could presage very bad news for geopolitics and economics. The anti-globalisation backlash has thus far been limited to Western Europe and the United States, but could have broader ramifications in the year to come. The notion of a Pax Sinica – with American disengagement, resulting in a world order which is less rules-based, and more power-based – does not appeal to Prof. Sally. His doubts of the efficacy of Chinese leadership, against a background of managed capitalism and managed trade, is premised upon three concerns: first, that China has no tradition of international or even regional leadership, at least since explorer Zheng He’s ships were burned in the Ming dynasty in the 15th century; second, that it is now feeling its way in an opportunistic sense; and third, pessimism over China’s internal dynamics, especially with its political system.
Could a different world order, nonetheless, emerge in the age of Trump? Not just a Pax Americana or a Pax Sinica? “A different world order will emerge”, Prof. Quah said at the end of the panel discussion. “The demand for world order remains high, supply pulls back, someone else will supply an alternative form of world order. And it is absolutely critical that we – people who are concerned about this – be there to help shape the conversation on that. We do not want a dysfunctional world order”. In this configuration, the professor added, countries can take advantage of existing channels of communication and transportation, for instance, in search of alternative sources of demand.
And within a geopolitical climate likely to be marked by ambiguity for years to come, countries in Asia would be compelled to do just that. They may not be able to change broader forces, yet they can change how they respond to these forces.