It’s sad to watch the United States threaten trade partners, withdraw or threaten to withdraw from multinational trade agreements, pressing instead for bilateral (country-by-country) trade treaties instead. NAFTA. Trans-Pacific Partnership (TPP), Trans-Atlantic Trade and Investment Partnership, etc. President Trump’s focus, mounted with strong rhetoric and insulting tweets, is towards replacing these multinational trade accords with individual, one-off bilateral treaties. This effort smacks of what the pre-overly-connected world looked like in the first half of the 20th century. If only the rest of the world looked at trade this way, perhaps Trump’s efforts might make sense. We live in the 21st century where multinational trade is just a daily and immutable fact of life. Thus, Trump’s bully-tactics seem increasingly to fall on deaf ears in most of the world. Today in Viet Nam, the remaining signers of the TPP decided to move forward without us.
Another example, as the United States presses for increased sanctions against Iran – which even the Trump administration admits is compliant with the nuclear accord – it threatened European companies, backed by their governments, who did not go along. European leaders have simply rejected that American demand. I am by no means supporting a very predatory Iran. I am trying to make a very simple point: instead of bowing to America pressure as Trump expected – with a couple of exceptions from countries, willing to accept bilateral agreements, who see no alternative – most of the world is implementing a “work-around” system of multinational trade agreements that simply exclude the United States.
The economic advantages, including niceties like mutual copyright protection and enforcement as well as limitations on requiring surrendering of technology as a condition for trade (two provisions that are at the top of US trade priorities), are parts of those elements of some of the largest multiparty agreements… to which the United States is not or will not be a party. China is particularly active is securing trade advantages, as the United States pulls back on foreign aid, across Africa, Asia and Latin America, China is pedal-to-the-metal, zooming in right behind the vacuum that American departure has created. It rapidly mounted a pan-Pacific trade alliance to replace America’s sabotage of the TPP… a new alliance that pointedly is designed to exclude according any of the treaty’s advantages to the U.S.
And while the United Kingdom is reeling from its ill-conceived departure from the European Union, rushing to be one of the few nations willing to negotiate a simple bilateral treaty with the U.S., the under the economic leadership of Germany’s Chancellor, Angela Merkel, the European Union is busy designing a new work-around around the United States as it reaches out to most of the rest of the world (as the above chart illustrates).
Even as the President vacillates over NATO, abrogates trade agreements, reduces the American commitment to the United Nations, ramping up his tweet-driven, on-again, off-again waffling over the US willingness to keep funding its military in Asia, plus his administration’s rejection of the Paris climate accord (joining only one nation – Syria – in this status), Europe no longer considers the United States to be a reliable treaty partner under the best of conditions. Merkel has openly warned fellow Europeans that they must redesign their political and economic alliances without depending on the United States. Under EU law, bilateral trade deals between individual member nations and any other one country are not legal. Europe has no intention of changing that policy to placate Donald Trump.
The President’s questioning and potentially reneging on NAFTA also places our trade relationships with our direct neighbors, Mexico and Canada, in jeopardy. The treaty does need to be updated, but the basics are fundamentally good for all the partners. Behind the scenes, a gleeful China is happy to remind those two nations that it is more than willing to make up for economic losses due should the US pull out of NAFTA. Ah, yes, Asia.
Trump’s trip to Asia is about containing North Korea and beginning his effort to begin that litany of bilateral trade agreements he so cherishes. Many individual Asian nations, perhaps to balance the rising power of China, are more willing than lands far away – Europe, South America and Africa – to use bilateral agreements with the United States to bolster their political power. But other Asian nations, from the Philippines to Myanmar, see the deck stacked in favor of cozying up to China, considered to be a stable, growing and reliable world power. They see the United States’ power waning.
Beginning with the crusade by former senior presidential advisor, Steve Bannon, against what he labeled predatory, US-job-killing trade policies of cheap-labor China, the Trump administration has mounted an ambivalent posture with the People’s Republic: craving their support to contain Kim Jong-un, on the one hand, while lambasting China’s restrictions on US companies while “dumping” underpriced manufactures into the United States, on the other. Americans have become addicted to cheaper Chinese goods, although PRC labor is not so cheap these days. Automated manufacturing, the huge “real American labor issue,” is more than competitive against Chinese workers. But the “trade imbalance” mantra is at the core of this administration’s economic policies toward the PRC. And meanwhile, Trump is pressing hard to begin those country-by-country trade agreements in Asia.
“The strategy he will unveil in Da Nang [Vietnam] on Friday [11/10] hinges on developing stronger bilateral trade and investment ties with like-minded regional allies such as India and Japan. Behind it, much like his predecessor’s ‘pivot to Asia,’ lies a desire to find a hard-nosed way to respond to a rising China. Many of Mr Trump’s top advisers view Beijing as a predatory economic rival that has, for too long, gamed an international system ill-equipped to cope with its brand of state-subsidised mercantilism.
“‘We have trade deficits with China that are through the roof,’ Mr Trump told reporters last week, ‘they’re so big and so bad that it’s embarrassing saying what the number is.’ The number the US president was too embarrassed to say is $274bn — the size of the trade deficit with China in goods for the first nine months of 2017.” Financial Times, November 5th.
But the frequent policy reversals and tweet-driven diplomacy that characterize US foreign policy in the Trump administration have created an atmosphere of general mistrust of any actual or potential agreement with the Trump administration. As China’s star rises rapidly, as America pulls itself back, many regional powers are loathe to give up trade advantages inherent in multinational trade agreements in favor of bilateral agreements with the US: “Japan continues to resist US approaches to begin bilateral talks. Other TPP members with whom Washington is eager to strike bilateral pacts, such as Vietnam, seem equally unenthusiastic.
“‘It is not the right time to start new ambitious trade negotiations [with the US], Lee Hsien Loong, prime minister of TPP member Singapore, said during a recent visit to Washington. ‘I think [the Trump administration] believe that, bilaterally, you are bigger than any other partner that comes along and so you get a better deal. As a result of which I think not that many partners will be keen to deal with you bilaterally.’” Financial Times.
Are US companies concerned? Probably, but they are so drooling over the GOP-promised domestic corporate tax cuts that they are simply turning a blind eye to what will eventually be a very difficult American position in the global trade arena. There is no way they want to rock the boat, which has sent the stock market soaring in anticipation of lower taxes, by questioning this Trump-led march towards economic isolation.
Just think what would happen when all those trade agreement are fully negotiated and signed, those long-term “work-around” commitments that specifically exclude the United States, when some future American administration decides that the United States wants back in. After the world has designed and implemented a world that no longer depends on – or needs – the United States…
I’m Peter Dekom, and I see a vast flock of chickens flying about looking for a place to roost.
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