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President Donald Trump, who takes pride in being unpredictable, surprised some of the economic bigwigs in Davos in January by declaring that he might reconsider his withdrawal from the Trans-Pacific Partnership (TPP) if he could get a better deal from the other TPP signatories. But it is not clear what he would want from a new deal or whether the other countries would accept significant changes to the TPP-clone accord, renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which they plan to sign in Chile on March 8.
CPTPP members have said they would welcome US reengagement. But what they have in mind is US accession to the new accord and not a substantial rewrite of its provisions. Accession negotiations could begin once the CPTPP takes effect, probably mid-2019.
Those talks would be complicated. The CPTPP largely incorporates the previous TPP, but it has suspended about 20 specific and controversial obligations originally included at US insistence. These changes were designed to facilitate ratification of the new pact in national legislatures. Reinstating some or all of them would require approval by all CPTPP members, who would be reluctant to recommit without a quid pro quo.
US officials would also likely want other changes in the TPP to validate President Trump's claim that the old deal was substandard. But if they proposed major changes on dispute settlement, auto rules of origin, government procurement, and sunset terms—comparable to those put forward by Washington in the renegotiations over the North American Free Trade Agreement (NAFTA)—the US offer would be D.O.A: dead on arrival.
What could the Trump administration achieve by reengaging with the revised pact? It depends on whether US officials give priority to making the TPP "bigger and better" or whether they try to use the talks to rebalance US merchandise trade with the Pacific Basin countries. Trump originally rejected the TPP because he promised in the election campaign to do so—and because of his misguided fixation on reversing the US trade deficit with the TPP countries, which together totaled $173 billion in 2016. If that remains his primary goal, there will be no US rapprochement with the TPP countries.
But Trump could achieve three notable gains if he takes a more pragmatic approach to negotiations with the CPTPP countries.
Larger Economic Payoff for the US Economy
If Trump's goal is to provide larger benefits to the US economy than the original pact, the CPTPP could soon pass the test, because it is likely to expand its membership to include players with more economic clout. Any country willing to meet CPTPP obligations is eligible to join once the deal takes effect. Not just countries are eligible but also "separate customs territories" such as Hong Kong or Taiwan. The entry queue is already forming with South Korea, Colombia, Taiwan, and even the United Kingdom discussing prospective membership in the pact. The economic payoff to CPTPP members will grow as more countries join the club.
New Trade Deals with Taiwan and possibly the United Kingdom
If Trump's goal is to cut new trade deals with Taiwan and the United Kingdom, where his predecessors in the White House did not tread, CPTPP would be an attractive option. US officials will be hard pressed to conclude a bilateral deal with Taiwan because of objections by China. But that problem could be better managed if the United States joined a regional pact to which Taiwan, Hong Kong, and others were a party. And why start from scratch on a post-Brexit US-UK deal, as Trump has suggested, when joining the CPTPP could achieve the result more efficiently?
More Comprehensive Rules
If Trump's goal is to augment the trade pact with more comprehensive rules on ecommerce, currency, cybersecurity, and other issues, the CPTPP would be a more productive channel for advancing US interests than bilateral or World Trade Organization negotiations that have dim prospects for success. Unlike the unconventional US proposals for NAFTA reform that would make everyone worse off, the CPTPP countries might consider adding new CPTPP obligations in these areas during US accession negotiations along with the unfreezing of specific TPP provisions suspended under the CPTPP accord.
Expanding the CPTPP rulebook in these areas would make the deal bigger and better than the one signed in 2016. And it would establish new precedents for future trade accords, substantially based on existing US standards and practice, that sharply differ from those contained in Chinese-led initiatives in the region. In sum, the Trump administration should reconsider its trade deal with its Pacific Basin partners and turn the CPTPP into the new "gold standard" of international trade agreements.
