This is significant for Asia. Many economies in the region are members of the TPP – Japan, Singapore, Malaysia, Brunei, Australia, New Zealand and Vietnam – while others have expressed a desire to join.
Most literature unequivocally attributed significant economic gains to the region from the TPP – above all for Vietnam – and its implementation would precipitate politically difficult, yet economically beneficial, reforms.
The TPP was a beacon of hope amid an environment of subdued trade activity and weak global growth.
Fortunately, not all hope is lost. After all, talks for the Regional Comprehensive Economic Partnership (RCEP) are ongoing and the 15th negotiation concluded last month.
The RCEP groups Asean’s 10 members with China, India, Japan, South Korea, Australia and New Zealand – countries with which Asean already has free-trade agreements (FTAs).
As the first pan-Asia free trade deal, it boasts impressive statistics, such as covering roughly half of the world’s population and nearly 30 per cent of its gross domestic product.
Alas, the scope of the RCEP is more limited than the TPP.
True, the RCEP covers the usual components of a free-trade deal, such as trade in goods and services, investment and protection of intellectual-property rights.
However, there are already warning signs that the final treaty will be watered down, because of India’s fears that its already large trade deficit with China will balloon further and Japan’s reluctance to open its agricultural sector.
The final agreement will likely be replete with country-specific exemptions and many tariff lines may remain intact.
Despite the drawbacks, the RCEP should help boost trade across Asia and spur investment in new supply chains.
The deal will be particularly advantageous for Asean as it will reduce the incongruity across pre-existing FTAs and strengthen the appeal of the region as a production base.
By connecting the world’s three largest consumer markets – China, India and Asean – the RCEP also offers a new “south-south” template for growth that can partly offset subdued imports and investment in the West.
We believe that Trump’s victory is ushering in increased protectionism in the US economy.
The medium-term implications of the new administration will depend on which of president-elect Trump’s policy pledges he can implement.
However, his seven-point plan on trade suggests that Asian economies could be affected in a significant way.
At the very least, we are likely to see a withdrawal from the TPP and the US is unlikely to launch other trade initiatives over the next four years, which will provide additional impetus for accelerating the RCEP negotiations.
In short, the RCEP’s passage should incentivise investment in supply chains and provide some support for trade activity and GDPs across Asia.
The benefits discussed here suggest that the impact on growth is not insignificant.
Sure, the impact is not as rosy as the benefits from the TPP, but given the low-growth environment we are faced with, we’ll take what we can get.

Joseph Incalcaterra, economist at HSBC