In a recent video message, US president-elect Donald Trump pledged to withdraw from the Trans Pacific Partnership (TPP, 跨太平洋夥伴關係) – a US-led multilateral trade agreement between 12 Pacific Rim countries – on his first day in office. The pact asserts US economic leadership in Asia, and functions as an important component of the Obama administration’s strategic rebalance in the region. An American withdrawal not only creates a power void in Asia, but may also lead to an entire dissolution of the pact. This has both economic and geopolitical consequences that may shake up the region’s balance of power.
The weakening of the TPP will undoubtedly benefit rival trade agreements such as the Regional Comprehensive Economic Partnership (RCEP, 東南亞區域全面經濟夥伴協定), an initiative backed primarily by China. China then may seize the opportunity to fill the vacuum left by the US and spearhead economic integration within the region. For Hong Kong, this is both an opportunity and a threat.
The fact that China is not a member of the TPP, excludes her from the benefits of rising free trade with members of the pact. With neighbouring countries such as Vietnam rapidly catching up, the Chinese manufacturing sector is facing declining trade activities. This, in turn, limits the growth of Hong Kong’s export trade, which consists primarily of re-exports to and from the mainland. As the key gateway to China, Hong Kong’s current economic and geopolitical significance hinges on how well the Chinese economy performs. The potential unravelling of the TPP may reverse this process, shift trade back to China and offer lucrative opportunities for both China and Hong Kong.
However, one must question as to whether Hong Kong fully benefits from such a future. As the premiere regional hub for commerce and finance, Hong Kong thrives from the free movement of goods and services. Under the TPP deal, Hong Kong factories are encouraged to relocate from the mainland to TPP countries as regulatory barriers loosen, which could potentially consolidate the city’s regional influence. As more businesses from Hong Kong invest beyond the Greater China region, Hong Kong’s economic ties can be more diversified. Nonetheless, now that the TPP is on the brink of collapse, China’s economy is expected to regain momentum. In the long term, this may further exacerbate Hong Kong’s dependence on the mainland, and the city will play an increasingly passive role in regional politics.
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