Trump nixes the TPP

President Trump was busy on his first “working day” in office. The Washington Post describes, albeit in loaded terms, the most important actions he took today.

In my opinion, the single most important action was Trump’s executive order formally withdrawing the U.S. from the Trans-Pacific Partnership (TPP) trade deal. This move will have both economic and strategic consequences, and the strategic consequences may have economic ramifications down the road.

I don’t know enough to predict whether, on balance, withdrawing from the TPP will be beneficial, harmful, or a wash for America. The deal would have brought about things we’ve been trying to achieve for years, such as granting U.S. cattle ranchers better access to Japan. But as with any such agreement, it would have produced losers as well as winners. If the terms of the deal are as one-sided against the U.S. as Trump claims, then it may be economically beneficial, at least in the short term, to pull out.

The potential strategic consequences are what concern me. Sen. John McCain expressed the concern. He said that the withdrawal “will send a troubling signal of American disengagement in the Asia-Pacific region at a time we can least afford it.”

We can ill-afford such disengagement now because China stands ready to fill the vacuum — economic and geopolitical — that Trump’s move potentially creates. I agree with Richard Haass, president of the Council of Foreign Relations, who says that pulling out of TPP “does create strategic opportunities” for China.

Beijing is pursuing its own regional trade agreement with 15 other Asian countries, including Japan. The White House, under its previous occupant and his economists, claimed that a deal between just China and Japan could jeopardize $5 billion in U.S. exports and millions of American jobs.

I don’t know about that, but it’s easy to believe that U.S. companies could lose market share if China locks up trade deals with our major Asian trading partners. It is also easy to believe that that the U.S. might lose political influence in the region in the absence of a trade deal (or deals) with key regional players. China would be more than happy to fill that void, as well.

As suggested in the previous paragraph, however, bilateral deals with key nations represent an alternative to a multilateral deal such as TPP. The problem is that China can be expected to move aggressively to beat us to the punch. As John Veroneau, deputy U.S. trade representative under President George W. Bush, says, “if the U.S. decides to pause, we should assume that some of our trading partners will move ahead.”

Mara Liasson was thus very much on point at today’s White House press briefing when she asked spokesman Sean Spicer whether President Trump sees a national security component to trade deals and whether he is concerned that China will write the rules for Asia Pacific trade. In his response, Spicer referred briefly to the virtues of bilateral trade agreements. (See the exchange that begins at around the 37 minute mark on the video below). By the way, Spicer was excellent today; the entire press briefing is worth watching.

Let’s hope the administration gets to work promptly on those bilateral agreements.

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