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Trump's pullout of TPP opens way for China

[November 22, 2016] By Ami Miyazaki and Tom Westbrook

TOKYO/SYDNEY (Reuters) - An Asia-Pacific trade deal stands almost no chance of working now that U.S. President-elect Donald Trump has pulled the plug on it, proponents of the pact said on Tuesday, opening the way for China to assume the leadership mantle on trade.

Japan and Australia expressed their commitment to the pact on Tuesday, hours after Trump vowed to withdraw from the 12-nation Trans-Pacific Partnership on his first day in office, calling the deal "a potential disaster for our country."

Trump's declaration appeared to snuff out any hopes for the deal, a signature trade initiative of President Barack Obama, five years in the making and meant to cover 40 percent of the world economy.

The TPP, which aims to cut trade barriers in some of Asia's fastest-growing economies and stretch from Canada to Vietnam, can't take effect without the United States. It requires the ratification of at least six countries accounting for 85 percent of the combined gross domestic product of the member nations.

Japanese Prime Minister Shinzo Abe said "the TPP would be meaningless without the United States," even as parliament continued debating ratification and his government vowed to lobby other members to approve it.

Yet even without U.S. ratification, the TPP won't just die, a senior Japanese official said.

"It just continues in a state of not being in effect," said Shinpei Sasaki of the Cabinet Office's TPP headquarters. "In the future if the United States takes the procedures and it passes Congress, that would satisfy the provisions and the TPP would go into effect."

AMENDING AGREEMENT

Other members of the 12-nation grouping could conceivably work around a U.S. withdrawal.

Australian Trade Minister Steven Ciobo told reporters in Canberra countries could push ahead with the TPP without the United States by amending the agreement and possibly adding new members.

"We could look at, for example, if China or Indonesia or another country wanted to join, saying, 'Yes, we open the door for them signing up to the agreement as well.'"

But Singapore's Prime Minister Lee Hsien Loong said reopening negotiations wouldn't be easy. "If you sign a fresh agreement, you have to go through it again. We haven't crossed that bridge yet. We'll cross it if and when we come to that."

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U.S. President-elect Donald Trump is shown at his election night rally in Manhattan, New York, U.S., November 9, 2016. REUTERS/Jonathan Ernst

CHINA'S RIVAL PACT

China has pushed its own version of an Asia-Pacific trade pact, called the Regional Comprehensive Economic Partnership (RCEP), which notably excludes the United States. It is a more traditional trade agreement, involving cutting tariffs rather than opening up economies and setting labor and environmental standards as TPP would.

The RCEP was a focus of attention at the Asia Pacific Economic Cooperation summit in Peru over the weekend.

Tan Jian, a senior member of China's delegation at the summit, said more countries are now seeking to join its 16-member bloc, including Peru and Chile, and current members want to reach a deal as soon as possible to counter rising protectionism.

China’s foreign ministry said on Tuesday Beijing has an “open attitude” toward any arrangements that promote free trade in the region as long they don’t become “fragmented and politicized”.

Foreign ministry spokesman Geng Shuang said the RCEP was an initiative led by the 10-member Association of Southeast Asian Nations (ASEAN), which China has been promoting. “We are willing to keep pushing the (RCEP) talks process with all sides to achieve positive progress at an early date,” he said.

Vietnam last week shelved its own ratification of TPP, after Obama abandoned efforts to push it through a lame-duck Congress, while Malaysia has shifted its attention to the RCEP.

(Reporting by Ami Miyazaki and Elaine Lies in Tokyo, Kiyoshi Takenaka in Buenos Aires, Tom Westbrook in Sydney, Marius Zaharia in Singapore and Elias Glenn in Beijing.; Writing by William Mallard. Editing by Bill Tarrant.)

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