A slimmed-down trade pact to be signed today will allow 11 Asia-Pacific nations to push forward with economic integration in the face of greater US protectionism, even if the new deal will offer less benefits than originally hoped.
Originally called the Trans-Pacific Partnership, it was left for dead after newly-elected US President Donald Trump pulled out to pursue his "America First" agenda before the pact could take effect.
"The world will not stop simply because of US disengagement," wrote Yoichi Funabashi, chairman of the Asia Pacific Initiative think tank said in a recent commentary published in the Washington Post.
But Japan sought to revive the deal, picking up support from Canada, Australia and Chile, host to the signing of the rebaptised Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The signing of the deal comes just as the Trump Administration plans to slap tariffs on imports of aluminium and steel entering the United States.
It was the United States which initially pushed for the pact, signed in February 2016 when Barack Obama was still in the White House. The TPP would have covered 40 percent of the global economy and nearly one-quarter of its trade. Without the United States, the new pact is worth less than half of that value – 15 to 18 percent of global gross domestic product (GDP). The 11 nations signing the CPTPP are also only expecting half of the boost they were under the TPP.
"One point of GDP instead of two initially expected," said Julien Marcilly, chief economist at the credit insurance firm Coface. "The impact is certainly less than expected, but the agreement deserves to exist and enter into force relatively quickly," he added.
Moreover, ratification should be quicker without Washington, he said, noting the free-trade agreement between the United States and Colombia took six years to enter into force after its signature in 2006.
Experts believe that notwithstanding the absence of the United States, the CPTPP is important.
"It is still a huge agreement," said one international trade specialist on condition of anonymity. "More so because liberalisation of global trade is blocked at the World Trade Organization and it has to take the form of successive regional agreements" like the CPTPP, said the expert.
A tiger without teeth?
However, Ludovic Subran, chief economist at credit insurance firm Euler Hermes, is sceptical the CPTPP will generate considerable economic benefits.
"Even if they are significant, most of all it is a beautiful political move for Japan," he told the AFP news agency. "It is a way for this country to establish a counterweight in the region."
Funabashi shares a similar view.
"The result is the emergence of a new regional order without the United States," he wrote. "Japan's aim is not to oppose or contain China but instead to fill the US void in economic and rule-making terms, in partnership with Asia-Pacific countries."
The TPP wasn't only intended to boost trade among its members but to also contain China's growing influence in the region. Without the United States the CPTPP also has less weight in this regard.
"A TTP without the US is like a tiger without teeth," said last year Huang Kwei-Bo, the foreign minister of Taiwan, which is not part of the new pact.
Funabashi also believes that US needs to play a role in Asia, both economically and politically.
"Deeper US engagement in Asia is indispensable to balance China," he wrote in the Washington Post last month. "TPP desperately needs the US market to have strategic significance."
And the US position has recently evolved. US Treasury Secretary Steven Mnuchin recently disclosed that he met several of his foreign counterparts for high-level talks on TPP and left the door open for a US return to the deal.
Subran at Euler Hermes noted that Trump wasn't completely against trade deals, but feels many are not to the advantage of the United States and wants to renegotiate them.
"He doesn't understand that negotiations take a lot of time before arriving at a consensus," he said.
But for Coface's Marcilly, the United States is the biggest loser by remaining outside the deal.
"The exports of US companies could be penalised," he said. "They will face competitors from the region which benefit from preferential conditions."