Skip to main content

Is the TPP a Way for the US to Isolate China?

The global financial system as we now know it is a distinctively American confection, fashioned out of the detritus of the World War II, in New Hampshire. Charged with rebuilding a world addled with debt and disarray, The US assembled 730 delegates from 44 nations at the Mount Washington Hotel for the  Bretton Woods Conference, the event that birthed the International Monetary Fund and the World Bank Group.

But now many, maybe principally China, worry that the US is incrementally retreating from the international system it once constructed. Historically the guarantor of this world order, a beneficent financial and military hegemon, the US now seems to prefer to accept a diminished role. In place of grand global systems, the US is substituting a multitude of more limited, preferential trade deals. Instead of sweeping, comprehensive organizations, it gravitates towards regional pacts, investment deals and ad hoc arrangement with similarly interested nations.

Why should China be worried? One maybe cynical interpretation of the US’s strategic shift is that it is intended to isolate a rising China, newly minted as a member of the WTO. Take the Trans-Pacific Partnership (TPP) as an example. Many see the TPP as a economic inflection point, significantly liberalizing trade routes among sixteen major commercial nations. Even more specifically, it aims to redraw a traditionally cloistered quarter of the Asian markets, including Singapore, Malaysia, Japan and Vietnam. China is conspicuously absent from the party.

Related Stories

China also has other pressing concerns regarding American stewardship of the world financial order. Of course, it would disproportionately suffer from a US default, and so vigilantly follows the current debt-ceiling debacle play out anxiously.

Additionally, China is worried about a gradually devalued American dollar, given that its diminishment also devalues its $1.3 trillion of US Securities. Chinese officials have bitterly complained for years that the US borrows more while inflating away the debt it accrues, effectively paying it down by dint of monetary policy.

The exclusion of China from the TPP, in particular, seems like a strategic isolation precisely because so many see the free-trade deal as historically momentous.  Julia Hughes, president of the US Association of Importers of Textiles and Apparel opined, “One of the goals of the TPP is to have it be a true 21st-century agreement and part of what that means is the ability of manufacturers in one TPP party to sell to all others with no new regulatory barriers, technical barriers [or tariffs].Part of the point of TPP is to create a new supply chain among the countries.”

While Obama administration’s desire to recede from the international spotlight militarily has never been concealed–in fact, is has been ostentatiously advertised–it has been more reticent about its disengagement from the kind of sweeping global financial arrangements it once produced and then advocated. The US ceremoniously rebuilt the world and now would like to flee it, gradually, one regional arrangement at a time. China can’t move so easily, tethered to a financial ecosystem fracturing into parts around it, unable to move into any one of them. It is becoming a global superpower just as the age of the global superpower comes to an end.