As America Withdraws from Asia, China Looks to Trade on “the New Silk Road.”

While President Trump continues to insist that the United States is “winning at everything,” the reality is that the US appears to be failing at international trade and retreating from the geopolitical game that is trade policy. On January 23rd, 2017, three days after his inauguration, President Trump, by Executive order, withdrew the United States from the Trans-Pacific Partnership. While the United States perpetuates its inward, isolationist attitude economically and diplomatically, China is beginning to look outward to carve itself a greater role in the Asia-Pacific and beyond.

Goodbye, TPP.

Perhaps in his zealous crusade to stop American workers from “getting killed by trade pacts,” the President has overlooked the potential economic and diplomatic benefits of a free trade agreement such the Trans-Pacific Partnership.

Despite the fierce protests from factions within both parties in support of protectionism, economics and history have together proven that free-trade agreements can unlock numerous benefits for signatory countries. For the United States, past free-trade agreements such as the North American Free Trade Agreement (NAFTA) added around 30 million jobs to the US economy in critical sectors such as transportation, energy, and agriculture, all while lowering prices for domestic consumers.

More specifically, the Trans-Pacific Partnership was a multilateral free-trade agreement between eleven nations (twelve before the withdrawal of the US) that border the Pacific Ocean; it was the largest trade deal in history, evinced by the fact that the combined global GDP of all the signatories hovered around $28 trillion dollars. The aim of the TPP, as with most trade pacts, was to reduce protectionist measures, such as tariffs and import quotas, to promote not only greater volumes of trade between the US and its Asia-Pacific signatories, but also to encourage closer economic relationships between members countries. The TPP would also have allowed signatories to further collaborate on economic and environmental policy related to trade. President Obama championed the TPP as part of his “pivot-to-Asia” strategy in the closing days of his administration.

Diplomatically, the United States’ involvement in the Trans-Pacific Partnership would have cemented greater economic ties with many Pacific Rim countries, further undermining China’s frequent attempts to increase its economic sphere of influence. Given that the TPP would have fostered closer ties with Asian-Pacific countries that surround China, those closer economic ties could have translated into security partnerships with the intent of curbing Chinese expansionism. Instead, as we will soon explore, China is stepping into America’s shoes as the hegemon through regional and international trade policy.

Hello, “New Silk Road.”

In a challenge to the Trans-Pacific Partnership, China has quietly begun to increase its economic and diplomatic clout in the region via two approaches, the Regional Comprehensive Economic Partnership (RCEP) and the One Belt, One Road Initiative (OBOR). However, the while the RCEP is regional in its scope, the OBOR initiative is global, and is indicative of the outward shift in Chinese foreign policy.

In 2013, China commenced planning for the OBOR initiative, which has since been dubbed “the New Silk Road.” The OBOR plan is not a free-trade agreement, but rather a trade initiative that entails offering extensive investment and development aid to neighboring and nearby countries in Central Asia and the Asia-Pacific. The initiative is ambitious in size and scale; China recently pledged $46 billion in investment and financing for the OBOR plan. China plans to use the money to develop physical structures vital to the establishment of trade routes, such as highways, roads, ports, railways, and pipelines. China’s President, Xi Jinping, hopes that infrastructure investment will create a trans-continental platform to facilitate greater volumes of trade between China, Central Asia, and Eurasia over both land and sea. China itself acknowledges that free-trade agreements throughout the region and across other continents are the end goal of the OBOR initiative.

According to journalists covering the recent “Belt and Road Forum for International Cooperation” in Beijing, leaders and representatives that attended the conference signed a pledge which stated a “shared commitment to building an open economy, ensuring free and inclusive trade [and] opposing all forms of protectionism.”

China also understands that closer economic cooperation through trade initiatives and free-trade agreements can potentially translate to future security partnerships should the need arise. China is also constructing new floating military airfields in the South China Sea and the opening of its first military base in Djibouti, Africa. It is not a coincidence that China is beginning to increase its economic and military clout at the same time.

What Now?

The most troubling aspect of Trump’s withdrawal from the TPP is that it signals America’s retreat from the Asia-Pacific region. The Asia-Pacific is home to the world’s fastest growing economies and is home to some of the world’s youngest democracies. The United States has plenty of opportunities to build friendlier, sustainable relationships with countries that share her values. Furthermore, it is irresponsible and short-sited to disengage from the region economically at this critical juncture.

China is still aggressively maneuvering for hegemony, North Korea is continuing its nuclear belligerence, and radical Islamic groups are encroaching upon Indonesia and the Philippines. An economic disengagement from the Asia-Pacific could signal that the United Staes now holds a diminished commitment to the prosperity and security of the area; which may force many of those countries to join China’s growing sphere of influence.

About Peter Chan

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Peter Chan currently resides in Tallahassee, Florida, where he is a junior at Florida State University studying Economics and Political Science (Go ‘Noles!) Peter is deeply committed to the Liberty movement, illustrated by his involvement with College Libertarians, Students for Liberty, and the American Enterprise Institute. When he’s not railing against big government, Peter can be found relaxing with a cup of tea and a book or plotting world domination on Civilization V. Follow him on Twitter: @ChineseCon