What Would US TPP Withdrawal Mean? [ IR , Economy ]

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WASHINGTON — President Trump formally abandoned the Trans-Pacific Partnership on Monday, pulling away from Asia and scrapping his predecessor’s most significant trade deal on his first full weekday in office, administration officials said.
Mr. Trump sharply criticized the partnership agreement during last year’s campaign, calling it a bad deal for American workers. Although the deal had not been approved by Congress, the decision to withdraw the American signature at the start of Mr. Trump’s administration is a signal that he plans to follow through on promises to take a more aggressive stance against foreign competitors.
In other action on a busy opening day, Mr. Trump ordered a hiring freeze in the federal workforce, exempting the military. And he reinstituted limits on nongovernmental organizations that operate overseas and receive American taxpayer money from performing abortions. Republican presidents typically impose those restrictions soon after taking office, and Democratic presidents typically lift them when they take over.
The president’s withdrawal from the Asian-Pacific trade pact amounted to a drastic reversal of decades of economic policy in which presidents of both parties have lowered trade barriers and expanded ties around the world. Although candidates have often criticized trade deals on the campaign trail, those who made it to the White House, including former President Barack Obama, ended up extending their reach.
“We’ve been talking about this for a long time,” Mr. Trump said as he signed a document formalizing his decision. The withdrawal from the trade pact, he added, is a “great thing for the American worker.”
Aides signaled that Mr. Trump may also move quickly on renegotiating the North American Free Trade Agreement. He is scheduling meetings with the leaders of Canada and Mexico, the two main partners in that pact, first negotiated by the elder President George Bush and pushed through Congress by President Bill Clinton. Nafta has been a major driver of American trade for nearly two decades, but it has long been divisive, with critics blaming it for lost jobs and lower wages.
Mr. Trump outlined his views in his Inaugural Address on Friday, when he promised an “America First” approach to the world. “We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs,” he said. “Protection will lead to great prosperity and strength.”
He said that his policy would be to “buy American and hire American.”
The Obama administration arduously negotiated the Pacific trade pact over eight years. Under legislation passed by Congress, the accord could not be amended once completed, nor could it be joined without congressional approval. Mr. Obama never submitted the partnership for approval, understanding that a defeat in Congress would be worse than leaving the deal in hibernation.
In discarding the Trans-Pacific Partnership, or T.P.P., Mr. Trump tacked away from his Republican allies in Congress who have long supported such trade agreements. Speaker Paul D. Ryan worked closely with Mr. Obama to pass legislation granting the president so-called fast-track authority to negotiate the trade agreement over the objections of many Democrats. But amid opposition, Congress never approved the deal itself.
The agreement brought together the United States and 11 other nations along the Pacific Rim, including Canada, Mexico, Japan, Vietnam, Malaysia and Australia, creating a free-trade zone for about 40 percent of the world’s economy. It was intended to lower tariffs while setting rules for resolving trade disputes, setting patents and protecting intellectual property.
Mr. Obama and his Republican allies argued that the pact would open growing foreign markets to American businesses. But Democrats, ultimately including Hillary Clinton, even though she had helped push negotiations forward as secretary of state, said it would benefit wealthy corporations at the expense of workers and the environment.
Mr. Trump sided with them, and he beat Mrs. Clinton in crucial Midwestern industrial states like Michigan and Wisconsin that had traditionally gone Democratic but have been hurt by changes in manufacturing over recent decades.
The president’s action on the deal came the same day he met with business leaders in the morning and was set to speak with union leaders in the afternoon. He will also meet with congressional leaders of both parties and hold a separate meeting with Mr. Ryan.

the diplomat
On Monday night, incoming U.S. President Donald Trump made headlines around the world when he included U.S. withdrawal from the Trans-Pacific Partnership (TPP) as one of the executive actions he would take upon taking office on January 20 in a transition update to the American people.

“On trade, I’m going to issue a notification of intent to withdraw from the Trans-Pacific Partnership, a potential disaster for our country,” Trump said in a short video message elaborating on some of his policy proposals.
Trump’s comments did not come as a surprise to those familiar with his views on the TPP, a 12-member free trade agreement whose members comprise around 40 percent of global GDP. As I indicated in an in-depth look at what Trump’s Asia policy would look like, his opposition to the pact had been fierce throughout the election, which always made it difficult to believe that he would reverse his position (See: “What Will Donald Trump’s Asia Policy Look Like?”). That view is a product not only of his decades-long skepticism of free trade, but also the domestic climate in the United States where some – particularly members of the white, working class without a college education – are anxious about their relative economic position in an increasingly diverse society.

Should Trump withdraw the United States from TPP, it would be a disaster for the United States both economically and strategically. Economically, as I’ve written before, Washington would lose out on not just the potential gains from any free trade agreement (FTA), but on a valuable opportunity to write the rules of 21st century trade, including in areas where it would break new ground like state-owned enterprises and the digital economy. TPP, unlike regular bilateral FTAs, has “open architecture,” which means Washington would have been able to attract new members over time and generate a race to the top in terms of trade pacts regionally and even globally.
Strategically, TPP’s failure will reinforce doubts about American credibility in the region amid a rising China, as several Asian leaders including Singapore’s Lee Hsien Loong have warned. It will also undermine Washington’s efforts to strengthen the capabilities of its Asian allies and partners, who desire both diversification in their foreign relations as well as reforms domestically that TPP would have induced. It will also make U.S. Asia policy seem unbalanced, since TPP was the major plank in the economic realm of the Obama administration’s so-called rebalance, even though there were less significant initiatives as well that did not get as much attention.
What happens to TPP after U.S. withdrawal, however, is less clear. Several TPP signatories, including Malaysia and Vietnam, have been signaling that the agreement is essentially dead without the United States, whose inclusion was the very reason why the agreement – which initially began as a pact between just four countries, Brunei, Chile, New Zealand and Singapore – got the heft that it later did. Yesterday, Japan’s Prime Minister Shinzo Abe, who recently became the first foreign leader to meet with Trump, joined this chorus of voices, saying that the TPP “has no meaning” without the United States. As for the United States itself, some have been quick to suggest that the United States would essentially be excluding itself from Asia’s ongoing economic integration and passing the torch of free trade to China.
While the consequences of U.S. TPP withdrawal are dire, it is important not to exaggerate them as some are already doing (See: “Beware the Myth of Warring US-China Trade Pacts”). While China’s economic influence is growing, Asian countries desire diversification, and the United States’ large market is still attractive. TPP also offers the other eleven signatories benefits that other agreements like the Regional Comprehensive Economic Partnership (RCEP) they may end up wanting to preserve in spite of Washington’s withdrawal from it. And though Trump has rhetorically suggested a hard line on TPP itself, we still do not know what his administration will do in terms of economic policy.
It may thus still be too early to declare TPP’s death so soon. As I have indicated previously, there are ways for the countries within TPP to pursue the agreement without the United States should they choose to do so, and even opportunities for Washington to perhaps reenter the pact at some point in the future, whether after some reconsideration or revision during a Trump administration or even under a different administration (See: “How the TPP Can Survive Trump”).
Furthermore, even if TPP does end up dying, there are ways to salvage some of the major benefits of the agreement through other means, including bilateral FTAs. Concluding these will not be easy, especially given the protectionist vibe Trump has given off so far as well as the scarring TPP experience. And in any case, a series of high-standard bilateral deals will not look as impressive as a U.S.-led, single multilateral effort with “open architecture” like the TPP. But for countries like Japan, Malaysia and Vietnam who do not have a bilateral FTA with the United States, unlike other TPP members that do, this might be an option.
This might also be a path that the Trump administration could eventually pursue. Though some missed this, Trump followed his statement on TPP withdrawal in his video message by stressing:  “Instead, we will negotiate fair bilateral trade deals that bring jobs and industry back onto American shores.” If he is actually serious about this and can get U.S. trade policy as well as U.S. economic policy more broadly back on track, that would at least help mitigate some of the damage that a TPP withdrawal would cause.
Meanwhile, as I predicted ahead of the Asia-Pacific Economic Cooperation (APEC) summit in Peru, with the pessimism on TPP from the U.S. side, leaders signaled that regional economic integration would move forward with agreements like RCEP, and Chinese President Xi Jinping predictably waxed eloquent on the importance of openness, fueling commentary that Beijing is seeking to fill the U.S. void. Some of this is again rather alarmist – RCEP, which is hardly even comparable to the TPP, has been moving predictably slowly as well, and the reality of regional economic integration is much more complex than just a zero-sum competition between China and the United States. Nonetheless, perceptions matter, and sometimes they can create their own reality. U.S. withdrawal from TPP is not exempt from this, and should it happen, it will go down as nothing short of a major blow for American credibility and influence in Asia.

CNN

(CNN)President Donald Trump on Monday will start to unravel the behemoth trade deal he inherited from his predecessor, as he signed an executive action to withdraw from the negotiating process of the Trans-Pacific Partnership.
That executive action sends signals to Democrats and leaders in foreign capitals around the world that Trump’s rhetoric on trade during the campaign is turning into action. Trump vowed during the campaign to withdraw the US from the Pacific trade deal, commonly known as TPP, which he argued was harmful to American workers and manufacturing.
    The TPP was negotiated under former President Barack Obama, but never ratified by Congress, so withdrawing from it will not have an immediate, real effect on US economic policies, although it does signal a new and very different US outlook on trade under Trump.
    The other executive actions signed Monday included reinstating the Mexico City abortion rules and instituting a five-year lobbying ban for anyone who works in administration.
    Trump’s action comes as the President is looking to change the conversation after a rocky first weekend at the White House, during which, he and his officials feuded with the press and his presidency was greeted with massive protests in the nation’s capital and in large cities across the US.
    The executive action will be just one part of the Trump administration’s efforts to focus attention on its plans to radically reshape US trade policies, making good on a central premise of Trump’s campaign and its economic nationalist underbelly.
    Trump on Monday will also meet with union leaders and blue-collar workers several hours after signing the executive action, as well as separate meetings with business leaders.
    As the Republican nominee, Trump railed against free trade agreements he argued were lopsided against the US and vowed to implement more protectionist trade policies as president, rallying voters to the polls with his “America First” slogan.
    Trump has also threatened to impose trade tariffs as a way to revive American manufacturing and compel US companies not to take their manufacturing operations abroad.
    Obama’s administration worked with the 11 countries that became signatories for more than two years to formulate the massive free trade deal that was set to reshape commerce throughout the Pacific Rim, triggering movement among multinational companies in the region at the same time. Trump’s election swiftly dealt a death knell — one formalized on Monday — to the deal, sending shockwaves in Asian capitals that had pinned their economic hopes on the deal.
    Trump’s decision to withdraw the US from TPP is also a first step in the administration’s efforts to amass a governing coalition to push the new President’s agenda, one that includes the blue-collar workers who defected from Democrats and flocked to Trump’s candidacy in November.
    The move could also put many Democrats — particularly those who opposed the trade deal — in a tricky position as they look to hold on to union support, a key constituency in their political coalition.
    Obama struggled to sell many Democrats on the trade deal, in particular because of concerns about how the trade deal would impact American manufacturers and the US workers in that industry.
    Even Hillary Clinton, the Democratic presidential nominee who pushed the TPP deal as secretary of state, backed off her support for the deal during the campaign amid pressure from the left.
    Democrats with heavy union worker constituencies will either need to get on board with Trump’s protectionist trade policies or risk losing reelection.
    Republican leaders, many of whom supported the TPP trade deal and free trade more broadly, will also be pressed to react Monday — reactions that could show daylight between top Republicans on Capitol Hill and the White House on a top policy issue.
    Trump has said that he also plans to renegotiate the North American Free Trade Agreement, a free trade deal joining the US, Mexico and Canada.


Source: xaam.in

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