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American Shipper

Trump delivers stark message on trade

The new president immediately put the world on notice that his administration will combat unfair trade practices, which many interpret as a return to protectionism.

   For those hoping that Donald Trump would pivot from his nationalistic campaign rhetoric on trade and foreign policy once he took office as president, Friday’s inaugural address was a stark reminder that the past is prologue.  And trade is expected to be a major focus of his first week in office.
   After being sworn in as the nation’s 45th president, Trump doubled down on protectionism and signaled a new era of isolationism when it comes to global affairs. On Sunday, he said he would soon begin work to renegotiate the North American Free Trade Agreement (NAFTA) – a promise he repeatedly made during the campaign.
   Trump signed an executive order Monday morning withdrawing from the Trans-Pacific Partnership. White House sources told NBC News that the administration intends to move ahead with separate trade deals with each of the 11 individual nations that were part of the regional pact, which aimed to improve market access among countries controlling 40 percent of global GDP and set high standards for protection of intellectual property rights, the environment, labor rights and Internet use. The President is expected to sign another symbolic executive order later this week signaling his intention to renegotiate NAFTA, which he called the worst trade deal ever. Changing NAFTA will require action by Congress and cooperation from Mexico and Canada.
   Trump told business leaders, among them the heads of Whirlpool and Dell, who met at the White House Monday morning that he wants to bring back more manufacturing from overseas by reducing taxes and regulations, but warned companies that relocate factories to low-cost countries will face a “significant” tax on imports, a threat he has consistently made during and after the campaign, according to a publicly released video from the press pool.
   “If you go to another country and you decide that you’re going to close and get rid of 2,000 people, we are going to be imposing a very major border tax on the product when it comes in,” he said. “We think we can cut regulations by 75 percent, maybe more. Have in a certain way better protections, but when you want to expand your plant, you’re going to have your approvals really fast,” the president added.
   This afternoon, Trump is scheduled to meet with union leaders, where the topic of trade is expected to be discussed.
   “For many decades, we’ve enriched foreign industry at the expense of American industry, and subsidized the armies of other countries while allowing for the very sad depletion of our military. We’ve defended other nations’ borders while refusing to defend our own, and spent trillions of dollars overseas while America’s infrastructure has fallen into disrepair and decay,” the President said in his inauguration address to the nation.
   “We’ve made other countries rich while the wealth, strength, and confidence of our country has disappeared over the horizon. One by one, the factories shuttered and left our shores, with not even a thought about the millions upon millions of American workers left behind. The wealth of our middle class has been ripped from their homes and then redistributed across the entire world.
   “We, assembled here today, are issuing a new decree to be heard in every city, in every foreign capital, and in every hall of power. From this day forward, a new vision will govern our land. From this moment on, it’s going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.
   “We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength. America will start winning again, winning like never before.
   “We will bring back our jobs. We will bring back our borders. We will bring back our wealth. And we will bring back our dreams.
   “We will build new roads, and highways, and bridges, and airports, and tunnels, and railways all across our wonderful nation.
   “We will get our people off of welfare and back to work – rebuilding our country with American hands and American labor.
   “We will follow two simple rules: Buy American and Hire American.
   “We will seek friendship and goodwill with the nations of the world – but we do so with the understanding that it is the right of all nations to put their own interests first.”
   Trump declared in November that he would immediately exit the TPP agreement, which was never ratified and implemented, and has said he wants to narrowcast trade policy, relying on bilateral rather than regional or multilateral accords, to suit American interests.
   Sen. John McCain, R-Ariz., called the decision to pull out of TPP a “serious mistake that will have lasting consequences for America’s economy and our strategic position in the Asia-Pacific region.
   “This decision will forfeit the opportunity to promote American exports, reduce trade barriers, open new markets, and protect American invention and innovation. It will create an opening for China to rewrite the economic rules of the road at the expense of American workers. And it will send a troubling signal of American disengagement in the Asia-Pacific region at a time we can least afford it.
   “Abandoning TPP is the wrong decision. Moving forward, it is imperative that America advances a positive trade agenda in the Asia-Pacific that will keep American workers and companies competitive in one of the most economically vibrant and fastest-growing regions in the world,” McCain said in a written statement.
   The agriculture sector depends on exports and looked to the TPP to open doors to new markets. The American Soybean Association (ASA) on Monday expressed dismay that TPP is dead.
   “Trade is something soybean farmers take very seriously. We export more than half the soy we grow here in the United States, and still more in the form of meat and other products that are produced with our meal and oil,” ASA President Ron Moore said in a statement. “The TPP held great promise for us, and has been a key priority for several years now. We’re very disappointed to see the withdrawal today.”
   Trump’s message could destabilize the global order built through U.S. leadership that has brought relative peace and prosperity over the past 70 years around the world, Richard Haas, the president of the Council on Foreign Relations, said on CNN’s “GPS” program Sunday.
   Haas, a former State Department advisor to Colin Powell during the George W. Bush administration and expert on Near East and South Asian affairs in the National Security Council from 1989 to 1993, said two things could happen if Trump pursues a policy of American nationalism: smaller nations will begin to appease other countries such as China and some nations will begin to rethink whether they should develop nuclear weapons because they can’t rely on the United States anymore to ensure their security.
   During a short public ceremony at the White House Sunday, Trump said he will soon meet with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto to discuss rewriting NAFTA.
   At his Senate confirmation hearing last week, Commerce Secretary-designee Wilbur Ross testified that one of the top international priorities of the new administration is to redo NAFTA.
   The administration does not have its trade team in place yet, with the Senate yet to confirm Ross, or Robert Lighthizer, the nominee for U.S. Trade Representative. The Trump team is also in the early stages of standing up a new organization in the White House, the National Trade Council, which is expected to help coordinate the setting of trade policy among various agencies.
   Trump is also scheduled to meet with United Kingdom Prime Minister Theresa May on Friday, where the talks will focus on establishing a new U.S.-U.K. trade relationship as Britain prepares to exit the European Union and reorient trade relations around the world.
   A large segment of the business community is holding out hope that the Trump administration intends to ramp up enforcement of trade violations under existing trade deals, but that it won’t take broader action to restrict imports in an effort to protect domestic businesses because such moves will have unintended consequences such as inviting retaliation on U.S. exports. For insight into how pro-trade business interests are trying to adjust to the uncertainty created by the incoming administration, read the new Adam Smith Project feature story, “Looking for a bright side.”

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