Sun Sentinel Palm Beach Edition
With TPP out, what’s next for US trade?
WASHINGTON — It was quick and easy for President Trump to fulfill his campaign promise to withdraw from the Trans-Pacific Partnership.
With a stroke of his pen, he buried the massive Pacific free-trade agreement that the Obama administration had negotiated, even though the 12-nation accord had been moribund for the past year after losing political support. It had little chance of being ratified by Congress.
The real questions are: What will Trump replace it with? And when and how will he remake America’s economic relations with the rest of the world?
Nobody knows what Trump will do on trade as he has spoken only in generalities, threatening high tariffs and other tough measures against countries and American companies that move operations abroad.
Trump’s goal is to reverse the trade deficit and bring back jobs to U.S. shores. To many, he has sounded alarmingly protectionist, although it isn’t clear how much of that is merely negotiating rhetoric to bring partners to the table.
Trump’s trade policies will likely become clearer with his approach to reshaping the North American Free Trade Agreement with Canada and Mexico, which has been in force since 1993 and accounts for about $1 trillion of U.S. merchandise trade.
The president said Monday that he would begin renegotiating NAFTA at “the appropriate time,” but White House spokesman Sean Spicer said that Trump had already spoken to Mexican President Enrique Pena Nieto and with Canadian Prime Minister Justin Trudeau about his desire to reopen NAFTA.
Trump’s appointments suggest that the administration is serious about taking a sharply different, more aggressive tack on trade than recent past administrations, particularly involving China, the United States’ top trading partner.
Yet Trump’s Cabinet officials also include international business people and investors who have generally backed free trade. Trump’s secretary of State nominee, Rex Tillerson, said that he did not oppose the Trans-Pacific Partnership.
“That is one X factor,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Is he going to be able to simply implement what he’s stated or will he be getting a push-back from his Cabinet as well as the congressional leadership?”
One strategy that Trump confirmed Monday was that he would pursue bilateral trade talks instead of multiparty deals like the TransPacific Partnership.
An advantage of bilateral trade negotiations is that the U.S. can focus on a single country and not have to make concessions to satisfy a third party, although multilateral deals can offer commercial and geopolitical benefits that apply to many countries.
The Trans-Pacific Partnership, which stood to be the world’s largest regional trade accord, accounting for 40 percent of the global economic output, was the linchpin of Obama administration’s strategy to bind that region around an American-designed system of trade and commerce, essentially providing a counterweight to China’s increasing influence.
Although the Pacific deal was concluded more than a year ago, it never took effect and Trump’s action Monday made clear it would not be revived, as some congressional Republicans had sought. The U.S. already has a free-trade deal with six of the Trans-Pacific Partnership countries, but the pact would have added Japan, Vietnam and Malaysia. It would have uniformly lowered or eliminated tariffs on many goods, and created common standards and rules of practice on a wide range of trade and investment activities.
The Pacific agreement was widely rejected by congressional Democrats, unions and consumer groups as favoring corporations and not providing better protections for patents, workers and environment.
While there are signs of more aggressive trade actions on the part of Trump, Thea Lee, deputy chief of staff at the AFL-CIO, said it wasn’t clear how Trump’s approach would manifest itself in actual trade policies.
“The incoming administration has a narrower vision of America first,” she said. “It could be negotiated and be worse for working people.”
Alan Deardorff, professor of public policy and economics at University of Michigan, worried that Trump’s “intent to renegotiate NAFTA could be very harmful if it restores the tariffs and other barriers to trade between the U.S. and Mexico that existed prior to NAFTA. That would destroy, but not replace, the complicated North American supply chains that have grown under NAFTA and sustain much of U.S. manufacturing.”
Canada and Mexico are the United States’ top two export destinations. American shipment of goods to Mexico totaled $212 billion last year, up from just $4.5 billion in 1993 when NAFTA was signed. Yet imports from Mexico have surged even more, particularly cars and car parts and electronics, to a total of about $271 billion in the first 11 months last year from almost $40 billion in 1993. The result was a U.S. trade deficit of $58.8 billion through November last year, contrasted to a small surplus of $1.7 billion in 1993.
Trade with Canada is more balanced, with the U.S. running a shortfall of about $9 billion last January to November.
America’s biggest trade deficit in goods is with China, about $319 billion through November last year. Trump and his nominees to oversee trade have had the harshest words for China, pledging to upend the way the U.S. deals with China’s trade and commercial relations. The U.S. has 20 freetrade agreements, but none with China.