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Asia watching fate of Nafta amid Trump review, Malaysia says

Malaysia Trade Minister Datuk Seri Mustapa Mohamed says in Hanoi Asia is 'anxious to hear' from new US Trade Representative Robert Lighthizer. — Reuters pic
Malaysia Trade Minister Datuk Seri Mustapa Mohamed says in Hanoi Asia is 'anxious to hear' from new US Trade Representative Robert Lighthizer. — Reuters pic

HANOI, May 20 — Asian governments are watching with some anxiety the fate of the North American Free Trade Agreement as the Trump administration kicks off a review of the pact.

“All of us are keen to know whether America is committed to have an open, liberal trading environment,” Malaysian Trade Minister Datuk Seri Mustapa Mohamed said in an interview yesterday on the sidelines of the Asia-Pacific Economic Cooperation ministerial meeting in Hanoi, Vietnam.

Mustapa said ministers were “anxious to hear” from new US Trade Representative, Robert Lighthizer. “In this first meeting the first thing is to get some clarity on protectionism — this America First and how it’s going to affect us in this part of the world,” he said.

The US government served notice to Congress on Thursday of the administration’s intention to renegotiate Nafta. During the election campaign, President Donald Trump called the deal with Mexico and Canada a “disaster” that cost millions of U.S. jobs and hollowed out the manufacturing sector. A few weeks ago, he was weighing whether to pull out of the deal entirely.

Trump has also said he plans to renegotiate some bilateral trade deals with Asian nations including South Korea. And in one of his first acts as president he pulled the US out of a 12-nation Pacific trade pact known as the Trans-Pacific Partnership.

TPP future

The deal, which would have covered 40 percent of the global economy, was seen as a hallmark of US engagement with Asia under the prior administration and a buffer against China’s rising economic and military clout.

There will be a sideline meeting in Hanoi of the remaining 11 nations in the TPP accord, with countries like Japan and Australia pushing to proceed without the US.

Mustapa said Malaysia was less keen to continue, but added he would like some clarity on the US position on the pact. The US is Malaysia’s third-largest trading partner and there is no direct trade deal between the countries.

“TPP countries are still keen on TPP, of course the level of keenness differs between countries,” he said. “Some countries are still very gung-ho.”

“One of the reasons we decided to be part of the TPP was the potential access to the American market and if that does not happen one of the major motivations to be part of the TPP will be removed.”

Progress on the TPP without the US would require significant revision of terms that at least six states, which together account for 85 per cent of the combined gross domestic product of all original signatories, ratify it. The US made up about 60 per cent.

RCEP sticking points

Mustapa added if the remaining countries went ahead the pact should be renegotiated. "In the event it’s TPP minus one in our view it cannot be the one that was agreed in Auckland in February 2016."

He said ministers were also focused on a separate 16-nation Asia trade pact that includes China and India but does not involve the US.

Some Regional Comprehensive Economic Partnership nations are pushing for an initial deal to be reached this year.

“The leaders decided that on this issue we ministers should work harder to make sure we achieve a substantial conclusion by the end of 2017,” Mustapa said. Still, there are sticking points including differing levels of ambition on the deal, the range of countries involved — from developed to developing — and tricky topics like free migration.

“Towards the end we get into more difficult matters,” Mustapa said. “That is true of TPP and true of RCEP as well, so in a way it’s not totally unexpected.”

Malaysia’s trade performance has improved in the first few months of the year after a “tough” 2016, Mustapa added. Exports rose 24.1 per cent in March, outpacing the 20 per cent median estimate of economists polled by Bloomberg News. Exports to the US increased 16.5 per cent on the year. “This year there will be a recovery in trade with the US.” — Bloomberg

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