China’s influence grows in ashes of the Trans-Pacific Trade Pact

LIMA, Peru >> A toxic political war over money, jobs and globalization killed the vast and complex trade deal that was supposed to be a signature legacy of President Barack Obama. But the deal, between the United States and 11 Asian and Pacific nations, was never just about trade.

The agreement, the Trans-Pacific Partnership, was conceived as a vital move in the increasingly tense chess match between China and the United States for economic and military influence in the fastest-growing and most strategically uncertain part of the world. The deal, which excluded China, was intended to give those 11 nations more leverage in that strained match by providing them with a viable economic alternative. And its defeat is an unalloyed triumph for China, the country that President-elect Donald Trump castigated repeatedly over trade.

As Obama meets this weekend with the leaders who laboriously negotiated the pact, he will find those nations already getting pulled deeper into China’s economic riptide.

Australia said on Wednesday that it wanted to push ahead with a Chinese-led trade pact that would cover Asian nations from Japan to India but exclude the United States. Peru has opened talks with Beijing to join the agreement as well. Even U.S. business leaders are positioning themselves for the potential opportunities in Asia.

“Two-thirds of what we do there ends up in another country,” said John G. Rice, General Electric’s vice chairman for international operations. “So if they’re going to lower tariffs and trade barriers within that region, we’ll find ways to do more there.”

For the United States, such trade ties have geopolitical undertones.

Much of Asia has for decades quietly accepted U.S. security guarantees while also running large trade surpluses with the United States, turning them into prosperous manufacturing powerhouses. But China is now the largest trading partner for most of the region, while at the same time making territorial claims against many of its neighbors.

The neighbors fear they could soon face a stark choice among money, pride and place: Accede to China’s security demands, or lose access to China’s vast market.

“The long-term question is whether America pulls back from Asia and makes it easier for China to force countries in the region to make a choice between China and the United States,” said Richard Bush, a senior fellow at the Brookings Institution.

When it comes to Asia, the shift in U.S. policy is likely to be among the most pronounced in the new administration.

Born in Hawaii, in the middle of the Pacific Ocean, and raised partly in Indonesia, Obama has, since his earliest days as president, pushed Asia as his nation’s best opportunity for growth. Other than efforts to end two wars begun by his predecessor, Obama’s principal foreign policy goal was to shift the nation’s attention and military resources away from an aging Europe and an unproductive rivalry with Russia and toward the fast-growing Asia-Pacific region.

It is a goal he partly shared with President George W. Bush, whose administration began the negotiations for the Trans-Pacific Partnership. Bush, too, saw the pact as a bulwark against China’s rising strategic ambitions.

Obama has spent much of the past 10 days putting a brave face on the crushing blow that Trump’s surprising electoral victory represented to his legacy.

Hours after the results became clear, he told the country and his own weeping staff that “we’re all actually on one team.” On Monday, he suggested Republicans would find replacing his health care law difficult. And in visits on Tuesday and Thursday to Greece and Germany, he told panicked Europeans that Trump would preserve the NATO alliance.

But the meetings this weekend, at the Asia-Pacific trade summit, will very likely have a more funereal feel.

More than on any other issue, Obama and Trump have diametrically opposing views on Asian trade. And Trump has won. Even White House aides have admitted to their boss’s bitter defeat.

“We’re cleareyed about the current situation, but we believe what we believe about the value of trade and the importance of the Asia-Pacific region to the United States,” said Benjamin J. Rhodes, a deputy national security adviser.

The allegiances are starting to shift after Trump’s election.

Just three days before Obama’s arrival here, Peru’s foreign minister, Eduardo Ferreyros, said the country still hoped the Pacific pact would someday become a reality. But given the changing dynamics, his government also opened talks this autumn with Beijing to join the rival, Chinese-led trade pact, the Regional Comprehensive Economic Partnership.

“Since Trump is not so interested in requiring economic integration and trade liberalization, why not have other countries follow this free-trade proposal?” asked Song Guoyou, a longtime trade specialist who is the deputy director of the Center for American Studies at Fudan University in Shanghai.

Since the election, Australia’s government has also called for rapid progress in concluding that rival trade pact. Even Japan, despite facing territorial demands from China and close, but peaceful, confrontations between the two countries’ military jets and coast guard vessels, is paying more attention to China’s vision for global trade.

Australia and Japan have been bargaining for years with China on the deal. But they wanted it as a complement to the Trans-Pacific Partnership, to balance their economic relationship with the United States instead of replacing it with ties to China.

“If TPP doesn’t move forward, there’s no doubt that the focus will shift” to the China-led deal, Prime Minister Shinzo Abe of Japan told his country’s parliament on Tuesday. Abe met with Trump on Thursday.

Since 2011, trade negotiators from China, Japan, Australia, India and 12 other Asian nations have been meeting several times a year to stitch together the Regional Comprehensive Economic Partnership. And with Trump’s victory, those efforts are almost certain to accelerate. The next round of talks is to be held in Indonesia in early December.

Trade officials across Asia met to negotiate details in Cebu, the Philippines, the week before Trump won the election. Almost no one noticed outside of Cebu. The next meeting, in December, could attract far more attention, including some at this weekend’s Asia-Pacific Economic Cooperation summit meeting in Lima.

“Everyone is waiting to see what will happen at the APEC summit — there will be a lot of discussions on the sidelines on how to deal with Trump,” said Kishore Mahbubani, the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, said of this weekend’s meeting. “The biggest winner if you walk away from TPP is China. There’s no doubt about that.”