Decision to walk away from TPP means more than just duties
Four years before the first inauguration of President Barack Obama, four countries started meeting under the auspices of creating a Pacific Rim multilateral trade agreement.
The four countries, Singapore, New Zealand, Brunei, and Chile, were nowhere near powerhouses of global trade. Singapore, of course, has become a hugely important commercial maritime hub, while New Zealand and Chile provide volumes of exported goods to far away trading partners that far exceed what their population would suggest.
But in the context of 2005, with China exports booming to North America and Europe, these four countries were relative blips on the radar.
Three years later, in 2008, four other nations (the United States, Canada, Peru, and Vietnam) joined the talks, and the Trans-Pacific Strategic Economic Partnership Agreement had blossomed into the Trans-Pacific Partnership. Over the next four years, four more countries joined the negotiations.
Eleven years of talks culminated in February 2016, when all 12 TPP members signed the agreement. But not all countries ratified the agreement, most notably the United States. During the 2016 election season, the TPP became a punching bag, a totem to American jobs lost to other countries and a depleted manufacturing sector here.
While some held out hope that the TPP might be revived, those plans were summarily dashed the minute President Donald Trump took office Friday, when the new White House website revealed a pretty clear view of TPP and trade deals in general.
“This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers,” the website noted. “President Trump is committed to renegotiating NAFTA (the North American Free Trade Agreement). If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States’ intent to withdraw from NAFTA.”
Trump, in one sense, rode a wave of dissatisfaction with the current plight of America’s erstwhile manufacturing class into the White House, so his uncompromising stance on trade deals should come as no shock.
While the merits of the TPP could be debated for the length of his whole term, (and it should be noted that many of Trump’s Democratic opponents were no less clear on their disdain for the TPP), we won’t delve into that issue right here.
What we will say, however, is that Trump is diving into murky and choppy waters in his attempts to redraw the stakes of U.S. trade agreements. Let’s reiterate: it took nearly 12 years to get the TPP signed.
It was a sweeping agreement that would sunset tariffs on nearly all goods and services between the 12 members in stages. The agreement impacted trade in goods, rules of origin, trade remedies, technical barriers to trade, trade in services, intellectual property, government procurement and competition policy, among other things.
These negotiations are hard work, and one can’t help but feel the time invested by the 12 TPP members was eventually wasted by the ideology of a single party in one nation. Without the ratification of the United States and Japan, the TPP would never pass. So it was always vulnerable to the whims of a single government (and by default a single party or candidate).
The broader issue is the path forward. If the Trump administration’s plan is to negotiate bilateral agreements that only benefit the United States, he’s not going to be negotiating very long. The world is not ready to be the Washington Generals to Trump’s Harlem Globetrotters.
And more than that, what will the expectations be of countries that negotiated the TPP in good faith, devoting countless hours and precious resources to come to a broad, globalist compromise, in future negotiations. A groom only has to be left at the altar once to understand the pain of what it feels like to be jilted.
It’s hard to imagine any of the TPP nations in a rush to negotiate individually with Trump’s trade team given how quickly he submarined their hard work. It’s even harder to imagine that Trump’s tough rhetoric on trade will entice anyone (jilted TPP member or otherwise) to the negotiating table.
In other words, there are actual political stakes in these deals, but also a good faith component. Trade deals are ultimately acts of salesmanship followed by periods of compromise. A potential trading partner is not going to spend time negotiating a deal if there’s even a small chance that the party at the other end of the table will run home and take the ball with him. That’s just not how diplomacy works.
There have been several theories posited about the lasting impact of the United States pulling out of the TPP: less access for U.S. exports to TPP member nations; higher priced imported goods; jobs tied to trade lost; acceding more regional power to China.
But perhaps the biggest loss will be that our trading partners no longer have confidence in the United States to be a keystone in the global structure. That our word isn’t our bond when it comes to hard-fought trade deals.
As Singapore’s ambassador to the United States Ashok Kumar Mirpuri put it in a briefing with the trade press in mid-2016, the downfall of the TPP has changed the world’s view of the United States.
“The surprise is that so many of us built our economies on the economic model of the U.S. free market,” he said. “The surprise is that now people (in the United States) have started to reflect that this model isn’t effective. This is what you put out in the world – not just democracy but free trade.”
With the World Trade Organization struggling to cobble together global consensus, many pinned their hopes on the TPP (and the similarly sweeping Transatlantic Trade and Investment Partnership, or TTIP) to show that multilateral agreement is possible.
Protectionism is on the rise around the world. It’s up to everyone in the trade industry (shippers, logistics companies, compliance practitioners, regulators) to make clear trade benefits all economies.
Because, according to a lot of those in positions of power today, it only takes one to tango.
Decision to walk away from TPP means more than just duties