Wednesday, September 5, 2018

A Tale of Two Treaties

The United States and China are taking a very different approach to international trade. President Trump is intent on renegotiating or canceling American trade treaties such as NAFTA while the Chinese are creating a broad new trade alliance in Asia that excludes the United States.

One of President Trump’s first official acts was to withdraw the United States from the Trans-Pacific Partnership negotiated by the Obama Administration. Trump’s act, which fulfilled a campaign promise, shattered the trade agreement and allowed China to pick up the pieces.

In November 2017, less than a year after Trump’s order withdrawing from the TPP, a summit was held in Manila to negotiate an alternative, the Regional Comprehensive Economic Partnership or RCEP. Talks progressed quickly and the 16 nations are expected to sign an agreement at a November 2018 summit in Singapore. The White House announced this week that President Trump would skip the meeting as well as the Asia Pacific Economic Cooperation forum in Papua New Guinea.

The RCEP includes many of the same Asian nations that would have participated in the TPP. These include Australia, Brunei, Japan, Malaysia, New Zealand, and Vietnam. In addition, it adds a host of others such as Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, South Korea, and Thailand. The biggest addition to the TPP countries is China.

With the country in a growing trade war with the United States, participation in the RCEP gives China an opportunity to find new markets for exports that would have been sold to the US. President Trump’s tariffs on Chinese goods can be at least partially offset by the free trade agreement that encompasses a large swath of Asia and the Pacific.

President Trump is taking a different approach. The president recently threatened once again to withdraw from NAFTA if he cannot get a “fair deal” from Mexico and Canada. In a Sept. 1 tweet, Trump said that there was “no political necessity to keep Canada in the new NAFTA deal” and added, “Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off….”

Last week, the US and Mexico reached a preliminary agreement on a new trade deal, but negotiations with Canada appear to have stalled. Mr. Trump sent a letter to Congress on Friday announcing his intention to sign a deal with Mexico in the next 90 days. The timeline would allow an agreement to be signed before Andres Manuel Lopez Obrador, Mexico's new left-wing president takes office on Dec. 1.

The Trump Administration is also under pressure to show results before the midterm elections in November. Showing that the Trump approach to trade deals yields results would provide a boost to beleaguered Republican candidates and help to stem chances of a blue wave.

“With goodwill and flexibility on all sides, we can get there,” Canadian Foreign Affairs Minister Chrystia Freeland said. “For Canada, the focus is on getting a good deal and once we have a good deal for Canada, we'll be done.”

The end of President Trump’s tweet shows the fundamental difference between the Trump approach and the Chinese approach. The president, who last month tweeted that “tariffs are the greatest,” seems to see international trade as more of a threat to the US economy than an opportunity for growth. On the other hand, China sees the opportunity to expand international markets as a way to both bring wealth back home and grow Chinese influence around the world.

The irony is that Donald Trump does not see that his retreat from the world, his building of both literal and figurative walls between America and the rest of the world, does not make America great again. To the contrary, Trump’s trade policies not only hurt American companies and consumers, it also diminishes American influence around the world. That is apparent in the new Asian trade deal that will be written for China’s benefit instead of America’s.

Originally published on The Resurgent

No comments: