Interview: Australian economist sees RCEP as platform to demonstrate world's confidence in free trade system

The demise of Trans-Pacific Partnership (TPP) is expected to provide new incentives to the negotiations of Regional Comprehensive Economic Partnership (RCEP), which will become a platform to demonstrate the world's confidence in the current economic and trade system, leading Australian economist Peter Drysdale said in a recent interview with Xinhua.

With the election of Donald Trump as president of the United States, the future of TPP, a 12-nation free trade pact with the U.S. as its backbone, has been in doubt, as Trump promised to withdraw the U.S. from the TPP during his election campaign.

Trump showed no change of mind in terms of TPP after his election victory, reiterating last week that he will "ditch" TPP on day one of his presidency, which starts in January 2017.

"TPP is dead in its original incarnation," said Drysdale, Head of the East Asian Bureau of Economic Research and East Asia Forum, Australian National University. "I don't think there is any coming-back of TPP in its current form. Some, including politicians here, think there would be some kind of restitution, but I think that's a very long shot."

"The world has changed fundamentally because of the election of Trump," Drysdale said.

"It's a fundamental change on this (trade policy) because the uncertainty about Trump's commitment to the global trade regime, including the WTO, including respecting the agreements under the WTO with China and other countries, the rest of the world, especially those in Asia, has to think very seriously about how to protect against that, how to strategize in a way that keeps those uncertainties under control."

He pointed out that's why what the leaders of APEC did in Peru is very important. They put forward an alternative vision for global economy.

"That alternative vision is the one that emphasizes the momentum of trade liberalization in Asia and the Pacific through the vision of Free Trade Area of Asia and the Pacific (FTAAP), but also asserts the supremacy of openness in trade, openness in investment as our interests in global economic regime," said Drysdale.

Drysdale said that Asia-Pacific, including Australia, carries the responsibility of keeping the momentum in trade liberalization and reform alive, because otherwise there is no elsewhere in the world that will carry out that burden forward.

He suggested to structure a collective initiative, which includes China, Australia, Japan, South Korea, Indonesia, as motivators of a regional trade liberalization and reform initiative. There are opportunities to do that from several platforms, he said, the most important one under negotiation now is the RCEP.

"In order to do what's necessary, the RCEP process has to be lifted to another level. It has to engage the intention of the leaders in a big way and make them see how that's a natural and important step towards the broader Free Trade Area of Asia and the Pacific (FTAAP) idea and protecting the global regime from a retreat from globalization that's symbolized in the election of Trump to U.S. presidency and also symbolized in a different way by what's happening in Europe around Brexit."

Drysdale expected Australia to continue to support the global trade system as the idea of open market and free trade has been recognized by both mainstream politicians and the general public.

"In Australia, the two mainstream parties are still resolutely outward looking and global in their orientation," he said.

He gave two main reasons. One is because the institution and policy system in Australia does ensure those who are disadvantage in the normal cause of opening and change of the economy are protected institutionally.

"Wages are protected against corrosion in a way that they have been corroded in the United States. Social and institutional policy system is congenial to running an open trade policy."

The other reason is that Australia is situated in the Asian region. Australia is very much a part of the Asian dynamism.

"The growth of Asia, the growth of China has in the last 40 years been central to Australia's own prosperity. The policy community here and the people broadly understand that. Asia is so important to our economic prosperity. Both those things make us very positive about openness." Endit