Last week, 11 Pacific Rim nations came to an agreement on implementing a new trade deal, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The group is comprised of nations from both the eastern and western sides of the Pacific Ocean, including Canada, Japan, Singapore and Australia.
If the name of the deal rings a bell, it is because this was formerly the group who was going to create the Trans-Pacific Partnership. In fact, of the 12 nations involved in drafting the TPP, 11 of those countries are completing negotiations for the new Pacific trade deal. As you likely already guessed, the one nation who will not be included is the United States.
According to a report for the Council on Foreign Relations by James McBride, while the U.S. has been a leader on creating a global trade network for decades, President Donald Trump has taken a different path. In January, one of his first acts in office was removing the U.S. from the Trans-Pacific Partnership. He stated he thought he would be more capable of negotiating bilateral agreements instead of engaging in a multi-lateral deal like the partnership.
Although he has started a round of renegotiations for NAFTA, Trump has not done much else with regards to those bilateral deals he was so certain he could deliver.
In fairness to the president, many of the presidential candidates in 2016 spoke about their desire to withdraw the U.S. from the agreement. If we had elected a different president, we would possibly face the same challenges. Either way, America will watch 11 other nations offer us a collective, “bye, Felicia,” and move forward with the trade deal.
There are two reasons this reflects poorly on America.
First, we would have benefitted economically from several provisions in the deal. According to an article by Rajeshni Naidu-Ghelani for BBC, a crucial part of the agreement was the removal or reduction in tariffs which confront U.S. exporters.
For instance, U.S. vehicle exports into Vietnam would have likely increased once the 70 percent tariff was removed. U.S. farmers also would have seen their export numbers grow, as tariffs on products such as soybeans and poultry would have been reduced or eliminated. American consumers would likely have benefitted as well, as it would have become cheaper to purchase vehicles from Japanese companies, such as Toyota and Honda.
The second reason why America now looks foolish deals with the political aspect of the original agreement. According to a CNN article by Daniel Shane, the expected benefits of the deal were not entirely economic. A key country left out of the talks was China. This was because the agreement was also supposed to serve as a check on Chinese hegemony in the Pacific region.
Several other Asian countries, especially Japan, were eager to counter the growing Chinese economic influence. China has not made a reputation as a scrupulous trading partner, as their investments often come with strings attached, such as requirements for other countries to use Chinese materials and workers.
Ironically, despite the fact Trump talked such a big game on countering China on the trade front, he handed them a huge victory by pulling out of the Trans-Pacific Partnership in January. It is no wonder why Xi Jinping put on such a fabulous parade for our president last week.
For now though, it looks as if China will not be able to pull as many Pacific Rim countries under their influence as they may have hoped, as the other countries in this deal will work to hammer out the final details over the next few months.
I have no idea what Trump will decide to do about this amended deal, and I will offer no predictions as to what his actions will be. All I know, at least for the moment, is America will sit by as global trade policy moves forward without us at the table.
President Trump was right; I think I am getting tired of all this winning.