Vacuum Power

China is poised to fill the void left by the U.S. withdrawal from the Trans-Pacific Partnership.

The Obama Administration was the target in recent years of stinging criticism for its abrupt withdrawal of U.S. troops from Iraq in 2011, and later for then-President Obama’s failure to fully engage the U.S. in the Syrian civil war after Syria crossed a “red line” the president had drawn against its use of chemical weapons.

Trans-Pacific PartnershipObama was accused by his opponents of creating a “vacuum” in the Middle East that facilitated the rapid rise of ISIS, permitting the terrorists to grab a wide swath of territory in Iraq and Syria.

But now it looks like the U.S. has created another kind of vacuum, one that Obama tried to prevent. This vacuum is economic, not military, and it spans the Pacific Rim.

During his second term in office, the 44th president unveiled a profound shift in the global strategic focus of the United States; Obama declared the top U.S. strategic priority to be the expansion of our role as a Pacific Rim power. He pushed our trade negotiators to complete a new free-trade agreement with a dozen Pacific Rim nations, the Trans-Pacific Partnership (TPP).

When the TPP deal finally was ready last year to be ratified by all of its participants, Obama hailed the agreement and urged Congress to approve it, hoping it would cement his legacy as a president who put America in a stronger position to compete in an increasingly integrated global economy.

In the final stages of the TPP negotiations, it seemed like a good bet that Congress would approve the deal. But then globalization suddenly became a dirty word in the United States.

Free-trade agreements—in particular the 23-year-old North American Free Trade Agreement (NAFTA)—became a central issue of the 2016 presidential campaign. Donald Trump led the charge, lambasting NAFTA as a job-killer in the U.S. Trump’s message struck a chord with a broad range of voters disgruntled with stagnant growth and thousands of lost manufacturing jobs yet to be replaced. The other candidates, including Hillary Clinton, fell in line with Trump’s stance against TPP. Sticking their political thumbs in the air, it didn’t take long for leaders on both sides of the aisle in Congress to declare the Trans-Pacific Partnership “dead on arrival.”

This week, President Trump put the final nail in TPP’s political coffin, formally withdrawing the United States from an agreement it had initiated and acted as a midwife to create. Trump invoked his new “America First” doctrine; the president declared that the U.S. had learned its lesson from NAFTA and would not dismantle trade barriers by entering into multi-national trade partnerships. Instead, Trump said, his top priority would be to protect American workers against competition from developing nations like Vietnam and Malaysia (both of whom had joined the TPP pact).

But if you look at the big picture, comparisons between NAFTA and TPP are flawed, and the big winner in the wake of the U.S. withdrawal from TPP will not be America. China is poised to fill the new vacuum in the Pacific Rim, sweeping up the big prize we left on the table: economic hegemony over a huge, strategically important region.

Unlike NAFTA, a straight-up trade deal designed to create a contiguous hemispheric corridor of commerce between Mexico, the U.S. and Canada, the primary purpose of TPP always was geopolitical; TPP was supposed to act as a bulwark against a rising and, under President Xi Jinping, increasingly aggressive China.

During his tenure as the PRC’s supreme leader, President Xi has made several bold moves to strengthen China’s position as the only nation that can compete with the U.S. for superpower status. The Chinese may blueprint their domestic economic plans in five-year intervals, but when they shape their geopolitical strategy they look over the horizon and think decades ahead. President Xi’s goal is much grander than simply catching up to the U.S. on the global stage—he wants China to surpass and eclipse America as the world’s leading superpower.

China caught us flatfooted in 2015, when the PRC deployed its mammoth cash reserves to launch a global competitor to the International Monetary Fund and the World Bank, global financial institutions the U.S. has dominated since we created them at an international conference attended by 43 nations in Bretton Woods, NH in 1944. [The Bretton Woods meeting was convened to lay the foundation for an international effort to rebuild shattered economies after World War II.]

Despite an urgent push—a less diplomatic description would call it pathetic pleading—by the U.S. to persuade its friends not to join the new China-led Asian Infrastructure Investment Bank (AIIB), the AIIB in April 2015 officially approved 57 nations as prospective founding members, including Great Britain, France, Germany, Spain, Australia, Israel, India and the Philippines. President Xi proudly stood in the center of the group photo at the announcement.

For more than a decade, China has voraciously been devouring strategic raw materials (including ores and rare minerals) from developing nations in Africa, securing access to these materials by making huge investments in Chinese-built infrastructure on the continent. In the process, the PRC has exponentially increased its political influence in Africa, a tightening grip that has some Africans complaining about “a return to colonialism.”

China’s most-ominous display of its rising power recently has been made in the disputed waters of the South China Sea, a vital international trade corridor traditionally kept open by the U.S. Navy. In the past two years, satellite imagery has revealed the construction by China of several new islands in the South China Sea. U.S. intelligence agencies have watched, with growing concern, as these new Chinese atolls suddenly sprouted runways for aircraft and, more recently, military installations. A showdown with the U.S. seems to be looming, with the Trump Administration threatening military action to halt the buildup of the islands.

The countries in the Far East and Southeast Asia who signed on for the TPP welcomed the deal because they wanted a strong U.S. presence to offset China’s growing power in their neighborhood. They were willing to adopt U.S.-style business practices (including protection of intellectual property rights, environmental protection and a role for labor unions) because they fear the alternative, the PRC’s heavy-handed tilting of the business playing field in China’s favor.

To put it simply, the TPP signatories in Asia don’t want to be sucked into China’s orbit. Unfortunately, just like in the vacuum of outer space, in economic affairs the largest bodies exert the greatest gravitational pull.

With the United States retreating into a fortress mentality, our friends in Asia are watching a new Jupiter rise above them. They may not be able to resists its magnetic grasp, which means Obama’s geopolitical vision of the U.S. as the dominant Pacific Rim power may have vanished along with our support for the free-trade deal we created.

[Editor’s Note: Business Facilities2017 LiveXchange event, which will take place April 23-25 at the Hyatt Centric Park City in Park City UT, will feature a panel discussion on Brexit/NAFTA: Beginning of the End of Free Trade?]