Tag: TPP

Distance Makes Trump’s Heart Grow Fonder for the TPP?

Picking up on Simon Lester’s reaction on Friday to President Trump’s near 180-degree rhetorical pivot on the Trans-Pacific Partnership, I agree with the implication that one would be ill advised to set his watch to the man’s words. However, there are plenty of good reasons for Trump to change his mind and seek to rejoin the TPP, so maybe—just maybe—the president is beginning to see the bigger picture.

Before the 2016 election, I wrote a piece in Forbes explaining why any president would want the tools of the TPP at his or her disposal and predicted that the next president (despite both major party candidates disavowing it) would ultimately support it:

The TPP is a blueprint for securing U.S. geoeconomic and geopolitical interests now and into the future by updating the rules and institutions of international trade that facilitated 70 years of global economic expansion, poverty reduction, and relative peace. As an agreement that includes countries on four continents, the TPP is well-suited to fill the void created by the breakdown of the multilateral negotiating “round” approach to global trade liberalization. The TPP is open the new members and the fact that it has achieved critical mass (40% of global GDP represented) means that the cost of remaining outside the deal will rise with every new accession, so most eligible countries will choose to join.

As investment has begun to shift from TPP outsiders to TPP members in anticipation of implementation, non-members have been implementing various domestic reforms to improve their prospects for eventually joining. And with China’s most important trade partners joining TPP, Beijing with have no better alternatives than to embrace the TPP, as well—and accept the new rules that will rein in some of the abusive trade practices of which China is so frequently accused.

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TPP Withdrawal Likely to Haunt Trump’s Asia Trip

President Trump’s arrival in Japan on November 5th will mark the start of a nine-day visit to Asia where trade and other economic issues, along with security concerns regarding North Korea, stand to figure prominently. Those hoping for the unveiling of any new bold trade initiatives, however, will almost surely find themselves disappointed. More probable is that the trip will serve as a bitter reminder of Trump’s ill-advised move only days after taking office to withdraw from the Trans-Pacific Partnership (TPP)—a decision whose reverberations are likely to be felt during many of his stops. The following is a closer look at some of the issues the president will likely encounter:

Japan: Had Trump used his political capital as a newly-elected president to push the TPP through a Republican-held Congress, his visit to Tokyo could have been an occasion to celebrate the agreement’s ratification in both countries (Japan has already done so). Instead, his trade discussions with Prime Minister Abe are likely to mirror those held between Vice President Pence and Deputy Prime Minister Aso last month, where Pence is said to have expressed “strong interest” in a U.S.-Japan bilateral trade deal while senior Japanese officials grumbled over U.S. withdrawal from the TPP. Given this disparity in views, it was no surprise when the two sides settled for a list of deliverables whose highlights included an agreement to lift U.S. restrictions on the import of Japanese persimmons and for Japan to allow imports of Idaho potatoes.

Like Pence, Trump may once again push for Japan to start negotiations on a bilateral free trade agreement. If so, it is doubtful he will receive the commitment he’s looking for, with Japan likely to prefer focusing on other aspects of a busy trade agenda which includes the finalizing of agreements with the TPP’s eleven remaining members and the European Union. Rather, any trade deliverables reached are likely to focus on more minor issues such as Japan’s decision in August to raise tariffs on imports of frozen beef from the United States and other countries from 38.5% to 50% as part of a “safeguard” mechanism to protect domestic farmers.

South Korea: Under a TPP passage scenario, Trump’s stop in Seoul could have been an opportunity to discuss South Korea’s accession to the agreement. Indeed, the country had previously made clear its interest in becoming the thirteenth TPP member, and the addition of the world’s eleventh-largest economy certainly would have increased the TPP’s benefits to its members. Instead, trade discussions between U.S. and South Korean officials are sure to center around a renegotiation of the U.S.-South Korea Free Trade Agreement (KORUS) demanded by President Trump which remains in its early stages. Indeed, just this week the renegotiation’s stakes were raised when South Korea’s trade minister is reported to have requested authority to terminate KORUS if he determines that the renegotiation’s result harm national interests.

It is worth pointing out that had Trump secured TPP ratification, South Korea’s accession could have served as a de facto renegotiation, thus eliminating what has become a noted sore point in bilateral ties. 

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Clayton Yeutter, RIP

After a long battle with cancer, Ambassador Clayton Yeutter passed away on Saturday at the age of 86 at his home in Potomac, Maryland. With his passing, the world parts not only with a brilliant, effective, accomplished leader, but an extraordinarily generous, decent man whose enduring kindness and humble demeanor made politics and policymaking in Washington more tolerable for all involved.

Clayton Yeutter had a long an illustrious career spent in both the private and public sectors, as well as in academia, but he is probably best known for his service during the Ronald Reagan and George H.W. Bush administrations.

As Reagan’s U.S. Trade Representative from 1985 to 1989, Ambassador Yeutter presided over implementation of the very first U.S. bilateral free trade agreement (with Israel) and he launched and oversaw negotiation of the U.S.-Canada Free Trade Agreement, which evolved into the North American Free Trade Agreement, to include Mexico, in 1994.

As USTR, Ambassador Yeutter also launched and advanced the “Uruguay Round” of multilateral trade negotiations in 1986, under the auspices of the General Agreement on Tariffs and Trade, which resulted in broader and deeper reductions in global barriers to trade than had previously been achieved, and it established the World Trade Organization in 1995.

During the first two years of the George H.W. Bush administration (1989-91), Yeutter served as Secretary of Agriculture, where he was instrumental in steering U.S. agricultural policy back to a more market orientation, from which it had deviated in the mid-1980s. The 1990 farm bill (The Food, Agriculture, Conservation, and Trade Act of 1990) included reductions in agricultural subsidies that were negotiated during the Uruguay Round.

Yeutter held other high-profile positions, including an eight-year stint as President and CEO of the Chicago Mercantile Exchange—a period during which the volume of trade in agricultural, currency, and interest rate futures more than tripled. He served as Republican National Committee Chairman for two years, following the death of Lee Atwater.

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Ford’s Curious Approach to Trade Policy and Customer Relations

Mark Fields, president and CEO of Ford Motor Company, celebrated President Trump’s Jan. 23, 2017, executive order withdrawing the United States from the Trans-Pacific Partnership (TPP).  In a statement the following day, Fields said, “And I would just call out yesterday, the president’s decision to withdraw from the TPP.  We’ve been very vocal, both as an industry and as a company, and we’ve repeatedly said that the mother of all trade barriers is currency manipulation, and TPP failed in meaningfully dealing with that, and we appreciate the president’s courage to walk away from a bad trade deal.”

Field’s comments are consistent with Ford’s longstanding position, so were not surprising.  What is harder to understand is that the company appears to be ignoring the economic interests of farmers and ranchers, a significant portion of its customer base for F-150 and heavier trucks.

The F-150 is the best-selling vehicle in the United States and has enjoyed that status for many years.  Some 820,000 were sold last year in this country, with another 145,000 sold in Canada.

The 2012 Census of Agriculture reported slightly more than 2.1 million farms in the United States.  Many of them are quite small, part-time operations.  However, there are more than 500,000 commercially significant farms with sales in excess of $50,000 per year.  A high percentage of farmers drive pickup trucks.

Due to relatively low commodity prices, recent years haven’t been great for farmers.  Net farm income has fallen almost by half since 2013, dropping from $123.7 billion to a forecast level of $66.9 billion in 2016.  Many farmers are putting off buying new machinery and equipment, as well as new pickups.  The farm economy really could benefit from a boost in demand for agricultural products.

Farmers expressed dismay at the president’s decision to withdraw from TPP.  An American Farm Bureau Federation study had predicted that improved access to 250 million customers in Japan, Vietnam, Malaysia, New Zealand, and Brunei would raise U.S. net farm income by $4.4 billion per year, as well as adding more than 40,000 jobs to the American economy.  (No estimate was made as to how many of those jobs would have been related to building more pickup trucks.)

Withdrawing from TPP Was a Senseless Act of Wanton Destruction

Earlier today, demonstrating his preference for action over reason, President Trump signed an executive order to officially withdraw the United States from the Trans-Pacific Partnership agreement. On the one hand, it’s refreshing to witness the rare act of a politician fulfilling a campaign pledge. On the other hand, there is nothing else good about it. Trump detonated a bomb; six years of negotiations went boom; now what?

To a president who seems intent on turning the country inward, raising the barricades, demanding self-sufficiency, and eschewing the outside world, the TPP was an obvious target. But what’s especially disconcerting is that the president didn’t need to go this far to keep TPP out of play. The agreement couldn’t possibly take effect without congressional passage of implementing legislation, and his signature affixed. He could have just kept TPP on the back-burner in the event that its utility, relevance, or imperative to U.S. economic and geostrategic objectives became evident, as his term progressed. Because it will.

My colleagues and I did a thorough, chapter-by-chapter assessment of the TPP and concluded that, on net, implementation would advance our economic freedoms. But there is also a geostrategic rationale for the TPP that compels beyond the text of the agreement. I presented that case in a few different articles, but here’s an excerpt from the most recent oped, in The Hill

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Reality Will Curb Trump’s Protectionist Fantasies

I said there was no way Trump would last through the early primaries.  I belittled the prospect of Trump even attending the convention, much less accepting the Republican nomination.  And I was cavalier in my certainty that Trump would be making a concession speech early Tuesday night.  In other words, by Washington’s standards, I have established credibility on the subject. 

So you should feel reassured that I am less bearish about the direction of President Trump’s trade policy than I probably should be given candidate Trump’s bellicose campaign rhetoric.

The trade policies Trump outlined in broad strokes on the campaign trail would – to put it mildly – devastate the economy.  For example, Trump has said he would:

  • impose duties on 35 percent on imports from Mexico and 45 percent on imports from China;
  • impose special taxes on U.S. companies that incorporate foreign components or labor into their production or assembly operations;
  • tear up the North American Free Trade Agreement – or at least renegotiate what he calls “the worst trade deal ever negotiated,” and abandon the Trans-Pacific Partnership, which he calls a “rape of our country”; 
  • declare China a currency manipulator and impose countervailing duties to mitigate the export price advantages that practice allegedly bestows;
  • use tax policy, protectionism, and the threat of more protectionism to compel China, Mexico, and all of the other countries with whom the United States runs bilateral trade deficits to buy more from U.S. producers and sell less to U.S. consumers in order to achieve a state of balanced trade;
  • tax manufacturing companies that lay off workers.

The list of angry, knee-jerk, foolish ideas goes on and on. If you take candidate Trump at his word, U.S. trade policy is going to be an unmitigated disaster.

100 Days of Trump Trade Policy

Donald Trump is well known for his vociferous complaints about foreign trade.  Trump has also gained notoriety for offering very vague policy proposals, and trade is no exception.  This has left observers knowing that Trump wants to do something big on trade but without much sense of what, specifically, that will be.  Now that Trump is president-elect of the United States, that uncertainty is bound to vanish as Trump’s plans and intentions necessarily become more concrete.

For the moment, however, we are left to speculate based on Trump’s vague and bellicose announcements.  The most reliable indicator of Trump’s plans is probably Trump’s “100-day action plan to Make America Great Again” he produced in the closing weeks of his campaign.  That plan has reportedly been fleshed out a bit by his transition team.  The plan includes numerous executive actions and a list of legislative proposals. 

In one section, Trump lists “Seven actions to protect American workers,” four of which directly involve trade.  Let’s go through them one by one.

Renegotiate of Withdraw from NAFTA

It’s no secret Donald Trump really doesn’t like NAFTA.  He has said that NAFTA “destroyed our country.”  It’s safe to assume Trump means to act on this.  According to Politico, the longer version of Trump’s 100-day plan specifies that Trump will start renegotiating NAFTA on day one and withdraw from NAFTA “by day 200” if he hasn’t gotten what he wants yet.

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