Asia Watching Fate of Nafta Amid Trump Review, Malaysia Says

  • APEC ministers to meet U.S. Trade Representative Lighthizer
  • Malaysia trade minister Mustapa speaks in interview in Hanoi

U.S. Seeks to Shift Trade Tides With Nafta Overhaul

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 Mustapa Mohamed said in an interview on Friday on the sidelines of the Asia-Pacific Economic Cooperation ministerial meeting in Hanoi, Vietnam.

Mustapa said ministers were “anxious to hear” from new U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S.

Mustapa said Malaysia was less keen to continue, but added he would like some clarity on the U.S. position on the pact. The U.S. 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 U.S. would require significant revision of terms that at least six states, which together account for 85 percent of the combined gross domestic product of all original signatories, ratify it. The U.S. made up about 60 percent.

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 U.S.

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.”

Indonesia’s Trade Minister Enggartiasto Lukita told reporters the general mood for global trade was good and there was no sign of protectionist attitudes from the meeting so far. He added the RCEP would be discussed and ministers still "hope to get it by the end of this year."

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

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