Trump Targets Trade Deals

By The Maritime Executive 2016-11-22 02:01:25

U.S. President-elect Donald Trump released a video on Monday laying out actions he would take on his first day in office on January 20, including withdrawing the United States from the Trans-Pacific Partnership (TPP).

Trump campaigned for the U.S. presidency on a promise to pull out of the 12-nation trade deal, calling it a job-killing disaster.

The Trans-Pacific Partnership would be meaningless without U.S. participation, Japan's Prime Minister Shinzo Abe said on Monday.

Abe, who attended a gathering of TPP leaders in Lima on Saturday, said there was no discussion at the meeting that other members should try to put the TPP into effect without the U.S.

"The TPP would be meaningless without the United States," Abe said.

Trump's NAFTA revamp may borrow from TPP

Trump's plan to renegotiate the North American Free Trade Agreement (NAFTA) has also made headlines this week. However, Trump’s plans to make it "a lot better" for U.S. workers would not be a one-way street for his administration, as Canada and Mexico prepare their own list of demands that could require difficult U.S. concessions.

The 22-year-old NAFTA and other trade deals became lightning rods for voter anger in the U.S. industrial heartland states that swept Trump to power this month. Trump called NAFTA the "worst trade deal ever" and pledged to leave NAFTA if it can't be improved to his liking. But he has said little about what improvements he wants, apart from halting the migration of U.S. factories and jobs to Mexico. He has threatened to levy a 35-percent tariff on Mexican-assembled autos and other goods.

Trade experts, academics and government officials say Canada and Mexico would also seek tough concessions and that NAFTA's zero-tariff rate would be extremely difficult to alter. And any renegotiation would likely take several years.

"There is no precedent in free trade negotiations for one side raising tariffs more than the other," said Chad Bown, a senior fellow at the Peterson Institute of International Economics in Washington.

Since NAFTA was enacted, total U.S. trade with Canada and Mexico has quadrupled to $1.3 trillion a year, but the U.S. combined goods trade deficit with Canada and Mexico has grown from $9.1 billion in 1993 to $76.2 billion in 2015.

NAFTA's effect on U.S. jobs is disputed. Critics such as the left-leaning Economic Policy Institute charge that it has led to the loss of some 850,000 U.S. manufacturing jobs, while proponents such as the U.S. Chamber of Commerce claim the trade growth has added a net five million jobs in the United States.

The non-partisan Congressional Research Service concluded that NAFTA has had only a small positive effect on U.S. growth, but has helped U.S. manufacturers become more competitive due to more efficient supply chains.

A renegotiated NAFTA could, ironically, end up borrowing key elements from the TPP to stiffen provisions on environment, labor and digital economy standards, trade experts said.

Mexico and Canada have already agreed in the TPP to "fully enforceable" labor and environmental improvements, meaning that punitive duties could be imposed on countries that don't comply - a major step-up from NAFTA.

TPP also included provisions governing e-commerce and cross-border data flows - sectors that barely existed as NAFTA was negotiated in the early 1990s - to better protect intellectual property and ensure a free and open internet. Officials in all three countries say NAFTA needs modernization in this area.

Trump economic advisers Peter Navarro and Wilbur Ross have suggested, however, that the TPP environmental, health and safety standards aren't strong enough.

In an economic white paper and various opinion pieces, Navarro, a University of California-Irvine business professor and Ross, a billionaire private equity investor who is being considered by Trump to lead the Commerce Department, said they want future U.S. trade deals to include "prompt triggers and automatic renegotiation if trade gains are not distributed fairly."

They also want "ironclad sanctions" against currency manipulation, and "zero tolerance" for intellectual property theft.

"In any negotiation or renegotiation, our guiding principle should be this: Enter into a free trade agreement only if it both increases total trade and reduces our trade deficit," they wrote.