Trans-Pacific trade allies move on without the U.S.
HONG KONG — President Donald Trump shook up the world economic order this year by pulling the United States out of a major international trade pact and raising fundamental questions about its global role.
Now, the world is moving on without the U.S.
A group of 11 countries announced Saturday they had committed to resurrecting a sweeping multinational trade agreement, the Trans-Pacific Partnership, without the United States. A new deal, which would have to be signed and ratified by each country, would include major U.S. allies such as Japan, Canada and Mexico. Collectively, they account for about a sixth of global trade.
The agreement will “serve as a foundation for building a broader freetrade area” across Asia, Taro Kono, Japan’s foreign minister, said in a statement.
Pointedly, the potential members of what is now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership came to an early agreement on the broad outline of a deal while many of their leaders were meeting with Trump in Vietnam — itself a potential member of the new trading group.
Some details of a new deal, including when rules would be phased in, still need to be determined, and prospective member states such as Canada raised last-minute concerns. But a new deal could be announced as soon as early next year.
Other countries are slowly but surely making progress on their own sweeping trade deals, without any participation from the United States. China is negotiating a potential deal with 16 Asia-Pacific countries, including Japan, India and South Korea. The European Union and Japan hope to strike separate trade pacts with a group of South American countries, Brazil and Argentina among them.
From tough talk on China (“they took our jobs”) to casting doubt on the decades-old North American Free Trade Agreement (“the worst trade deal ever made”), Trump has threatened to lob a grenade at an increasingly integrated global economic system.
His administration has questioned years of efforts to lower global trade barriers, arguing they hurt U.S. workers and led to big trade deficits. It also means dealing with nations one-on-one, rejecting the regional and global pacts his predecessors pursued.
But other factors are pushing the rest of the world to fill the void left by the United States. China’s rise as a regional and economic power is driving other nations either to join with it or to join together to counter it. Fast development in places such as Southeast Asia means potential new markets for all kinds of products. The absence of the United States means potential opportunities for others.
“At some point, the administration may begin to see that this was a strategic mistake and that dropping out of trade is not in the interest of American workers,” said Rufus Yerxa, president of the National Foreign Trade Council, a lobbying group that represents companies such as Walmart, Ford and Microsoft.
“We’ve got to compete and be a winner in global markets — and the danger is, the strategy is divisive,” he added.
More worrying for some is the possibility the Trump administration is ceding its position as global leader to China, a rising economic and political influence in the region.
“The U.S. has lost its leadership role,” said Jayant Menon, an economist at the Asian Development Bank. “And China is quickly replacing it.”
Under the new TransPacific trade deal, members would enjoy tariff-free trade with one another. That would allow companies in the member countries to have faster and better access to other markets than their U.S. rivals.
But there are still challenges ahead of the group, and not all the prospective member states meeting in Danang, Vietnam, were in complete accord over the finer details of a new deal.
“We are pleased that progress is being made towards a possible agreement, but there is still some work to be done,” FrançoisPhilippe Champagne, Canada’s minister of international trade, said in a statement. He added that Canada would sign a deal only once its interests had been addressed.
Even without the United States, the deal would be the largest trade agreement in history. It is intended to increase protections for intellectual property in some countries, while opening more markets to free trade in agricultural products and digital services around the region. It also has provisions on improving working conditions, although there is debate about the likely results.
In a statement posted online, the Australian government said the agreement in principle demonstrated the 11 countries’ “commitment to open markets, to combat protectionism and to advance regional economic integration.”
The 11 countries working toward the new agreement are Japan, Australia, Canada, Mexico, Singapore, Malaysia, Vietnam, Chile, Peru, New Zealand and Brunei.
Trump has expressed support for the nation’s regional allies even as he rejects or criticizes trade deals with them. He reiterated U.S. support for cooperation on security during his stops in Japan and South Korea.
In China, he went out of his way to woo President Xi Jinping, going so far as to suggest the trade deficit with the United States was the fault of past U.S. administrations rather than of China itself.
“I don’t blame China,” Trump said in a tweet on Friday morning shortly before leaving for Vietnam.
“The U.S. has been the driving force, not just behind the global economic order, but also pursuing higher standards on free trade and securing provisions that go way above the World Trade Organization obligations,” said Stephen Olson, a former U.S. trade negotiator who worked on NAFTA. “If the U.S. abdicates that role, it puts us in uncharted territory,” he added.
In the absence of U.S. leadership, Japan has driven the new round of talks. Prime Minister Shinzo Abe has spoken of the countries working on an agreement as Ocean’s Eleven, after the movie.
Japan’s long-term hope is that the United States will eventually return to the fold.
“We will just go ahead and make it, and we will welcome the United States back if they decide to do so,” said Ichiro Fujisaki, a former Japanese ambassador to Washington. Completing a deal now, he said, “makes the possibility of the U.S. coming back more likely.”
The new agreement has been crafted with the hope the United States will one day participate. Some of the provisions — among them ones the United States lobbied for — could ultimately be suspended, including some on copyright protection.
Given the intensity with which Trump excoriated the original deal, it seems unlikely this administration will come back to the table.
“It will be difficult for the administration to backtrack,” said Wendy Cutler, a former U.S. trade negotiator who worked on the Trans-Pacific deal and is now managing director of the Washington office of the Asia Society Policy Institute.
But other countries such as Korea, the Philippines and Thailand are expected to join once the deal is ratified, said Cutler.
For members, the pact could offer a sense of security in a time when a number of politicians around the world are questioning the impact of trade and globalization.
Speaking last week, Prime Minister Malcolm Turnbull of Australia said the deal promised “greater transparency and a stronger rule of law, in a world which is dangerously short of both,” referring to the “siren songs of populists, advocating protectionism.”
“The TPP creates rules of the road to match the new economic world we are living in,” Turnbull said.
“At some point, the administration may begin to see that this was a strategic mistake and that dropping out of trade is not in the interest of American workers.”
– RUFUS YERXA, PRESIDENT OF THE NATIONAL FOREIGN TRADE COUNCIL