What US Will Be Missing Without TPP
Trade Deal Was Crafted for International Supply Chains
President Donald Trump made it clear on the campaign trail and since taking the oath of office that he does not favor multilateral trade deals. His intention, he said, after withdrawing the United States from the Trans-Pacific Partnership, was to negotiate bilateral trade deals with the other TPP nations.
His rationale: that it’s easier to fix or exit bilateral trade agreements if something goes wrong.
That may be true, but it misses the chief virtue of multilateral trade deals, especially TPP: that they focus on how commerce is conducted today. Rarely is international trade a bilateral affair anymore but rather involves multinational value chains for sourcing, manufacturing, and assembling products.
“The biggest failure of Trumpism so far is the failure to recognize that the real flaw in the global economic order is that the rules are out of date and don’t meet the current challenges of a supply chain-based global economy,” said Matthew P. Goodman, at a recent presentation at the Center for Strategic and International Studies in Washington, D.C. Goodman holds the William E. Simon Chair in Political Economy at CSIS.
The current rules don’t address how international commerce is conducted today and don’t deal with the digital economy, Goodman noted. “That was the power of TPP,” he added, “and why Trump’s executive action on TPP was so harmful. Trump has been too quick to dismiss the benefits of the liberal economic order and globalization. His talk of protectionism is misguided and will make the anxieties felt by his voters worse.”
The TPP was also of strategic importance. “Economics in foreign policy is sometimes an afterthought,” said Goodman. “China certainly thinks of economics as a tool of foreign policy.”
TPP’s strategic importance had several aspects. One was that it was “an essential complement to US military strategy in Asia,” said Goodman.
Another strategic element involves the United States relationship with Japan. The Japanese, especially, saw a US-Japan partnership advancing TPP and that the trade deal would solidify US-Japanese economic and diplomatic relations. The US-Japan mutual defense treaty calls for the countries to eliminate economic conflict, so that the TPP could be seen as advancing that treat obligation.
The Japanese see the US abandonment of the agreement as a betrayal of that growing partnership, and granting a concession to China, which is not a member of TPP.
“Walking away from TPP raised serious questions about US credibility in Asia and elsewhere,” said Goodman. “It’s ironic that the US withdrew fro TPP just when the level of US-Japan cooperation reached its pinnacle.”
Reaching a US-Japan bilateral free trade agreement may now be necessary, but Goodman doesn’t see that as a replacement for TPP. “The negotiations will be hung up on old issues like automobiles and agriculture,” he said. “In TPP, we had already agreed on the new issues, like the digital economy and intellectual property. That’s what made TPP so powerful.”
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