US further alienates itself on trade, nations look elsewhere for partners

Many in Washington, D.C. and around the world thought that Donald Trump’s hardline, protectionist rants during the presidential campaign would give way to more moderate stances when he discovered a more complex global economy from the vantage point of the Oval Office. 

Alas, no such evolution has occurred. Indeed, in both pronouncement and deeds, President Trump has largely echoed Trump the candidate on trade policy. 

{mosads}One of his first acts as president — as promised during the campaign — was to withdraw the U.S. from the recently negotiated Trans-Pacific Partnership (TPP) agreement. Later, in his address to a joint session of Congress, the president taunted free trade-leaning Republican congressional leaders by citing Abraham Lincoln who had warned that “abandonment” of protectionism would “create want and ruin in the country.”

Further, the administration’s recently published document “The President’s 2017 Trade Policy Agenda” was straight out of the Trump “America First” playbook. It listed “defending U.S. national sovereignty over trade policy” as the number one priority.

The document took dead aim at the World Trade Organization (WTO) and the alleged attempts of some members to game the system in order to compete unfairly with U.S. businesses and workers by stating, “For too long, Americans have lost business to other countries, in part because our businesses and workers are not being given fair opportunity to compete abroad…the status quo is unsustainable.”

The statement also bluntly warned that the administration would “use all possible sources of leverage” to force other countries to open their markets. In this and other pronouncements, administration leaders — particularly Secretary of Commerce Wilbur Ross — have made it clear that they will exact maximum concessions by invoking U.S. market power in one-on-one bilateral negotiations.

Most recently, Germany, one of America’s most important allies, got a bitter taste of the new trade policy imperatives. In a March 17 joint press conference with Chancellor Angela Merkel, President Trump bridled at being labeled an “isolationist,” but he lashed out at the current trading system, saying, “I am a free trader, but I am also a fair trader.

“And free trade has led to a lot of bad things happening. Just look at the trade deficits…and the accumulated debt…The United States has been treated very unfairly by many countries over the years.  And that’s going to stop,” he said. 

One day later, U.S. Treasury Secretary Steve Mnuchin “blew up” the G20 meeting of finance ministers by leveling the same accusations against the trading system and refusing, in an unprecedented stance by the United States, to agree to a resolution condemning “protectionism in all forms.” The U.S., thus, has reached an “impasse” on global trade policy with 19 of the largest global competitors in world markets. 

So how is the trading world reacting to the United States’ about-face on trade? It varies, but, by and large, nations are looking to a future without U.S. leadership on advancing market liberalization. Chancellor Merkel pivoted from her awkward encounter with Trump to meeting with Japanese Prime Minister Shinzo Abe where she vowed to push forward quickly with a Japan-European Union free trade agreement (FTA). 

Europe has already completed a trade agreement with Canada and plans to move forward with negotiations with other “discarded” TPP nations, like Australia, New Zealand, Malaysia, and Vietnam.

As for Asia, the 11 rump TPP members met in Chile recently to consider plans to keep the TPP rules in place — either through a TPP-like agreement without the U.S. or through bilateral agreements. Interestingly, should they actually put together a rump TPP — or even if key TPP members sign new FTAs — the U.S. would directly suffer.

It would be excluded from the concession negotiated in the TPP. For instance, a Japan-Australia FTA will give a huge advantage to Australian beef and lamb farmers in the Japanese markets, pushing out American farmers. 

China, though not a member of the TPP, was also a conspicuous participant in the Chile meeting. Though the hypocrisy is blatant, given its own discriminatory protectionism, China has moved to fill the vacuum left by the U.S. and proclaimed itself the champion of globalization and the WTO. 

At the Chile gathering, China took the opportunity to push for the regional alternative to the TPP — the Regional Comprehensive Economic Partnership (RCEP) agreement — that includes many of the nations of Asia but excludes the United States. From a trade liberalization perspective, RCEP is shallow and even backward-looking, but it’s the only game in town for Asia.

Meanwhile, the Trump administration will spend its first months on trade policy attempting to bludgeon Mexico and Canada into “updating” the North American Free Trade Agreement,  all the while ignoring the fact that the U.S. had already achieved a 21st-century, state-of-the-art North American agreement in the TPP. This is folly all around.

Claude Barfield is a resident scholar at the American Enterprise Institute.

The views expressed by contributors are their own and not the views of The Hill.