Elephants in the Room

Trump Will Be Haunted by the Ghost of TPP

Throwing out a global trade deal has enormous ramifications in Asia.

U.S. President Donald Trump holds a joint press conference with Japanese Prime Minister Shinzo Abe in Washington, D.C. on Feb. 10. (Chip Somodevilla/Getty Images)
U.S. President Donald Trump holds a joint press conference with Japanese Prime Minister Shinzo Abe in Washington, D.C. on Feb. 10. (Chip Somodevilla/Getty Images)

The most dangerous policy missteps are not those which costs are immediately apparent. They are those which damage is only revealed slowly over time. Thus it was with President Donald Trump’s withdrawal from the Trans-Pacific Partnership (TPP). The president reveled in pulling the United States out of the deal in his first days in office. But the price will be paid this month, as he tours the Asian region.

Though Trump had been exceedingly clear on the campaign trail that he despised TPP, there was still some surprise that he rejected it completely. Bill Clinton and Barack Obama had previously run against trade agreements, only to take office and find changes that made the deals palatable. To not do so seemed to signal that there was nothing redeeming anywhere in TPP.

This reflects the disparate ways TPP was seen among President Trump’s supporters and in Asia. Trump made the agreement a totem for globalization and the ills plaguing swathes of the middle class. This was quite different from a careful analysis of each chapter, critiquing commercial deficiencies, which might have made more sense to Asian counterparts.

While the demolition of the TPP offered the president a rare instance in which he could take decisive action to fulfill a campaign promise, independent of congressional action, it poses some serious challenges he is facing on his tour of the region. Here are four:

Challenge 1: If not commercial relations, then what?

There are multiple dimensions to U.S. engagement in Asia, but one can consider the three categories of commercial engagement, diplomatic engagement, and security engagement. When the Obama administration wanted to emphasize its increased emphasis on the region (the “pivot” or “rebalance”), it increased its diplomatic visits and made some shifts in military deployments, but the crux of the new policy ended up being TPP.

Where will Trump put his emphasis? It is unlikely to be on diplomatic attendance, given the paucity of confirmed diplomats, though the decision to stay for the East Asian Summit is a laudable step. It is impressive to have three U.S. carriers operating simultaneously in the region, but that is transient. Longer-term actions would require both time and money. That leaves commercial relations, the focus of the remaining challenges.

Challenge 2: If not TPP chapters, what?

While the TPP marked an extension of prevailing practice in trade agreements into some important new areas (such as electronic commerce), it very much followed in the tradition of preceding trade agreements. If the Trump administration is to reject this entire tradition, there is a burden to propose something new and acceptable. It is for this reason that the world has been watching the NAFTA renegotiation talks so closely. The early signs of what the United States might do differently — sunset clauses, restrictive rules of origin, and the termination of dispute settlement provisions — have not been encouraging.

Challenge 3: Everyone else sees the downside of bilaterals.

President Trump has been quite explicit about his preference for bilateral trade deals over multilateral ones. This is not a preference shared by most other countries, for several reasons. First, much of modern trade negotiation is about rules, rather than country-to-country tariff barriers. If one is setting rules about which products are safe or pass health standards, the broader the geographic coverage of those rules, the better. This was a major reason countries were excited about TPP (very broad coverage, with potential for new world standards). Pairwise rules are much less valuable.

Nor do bilateral deals look good from a more conventional standpoint. Countries such as Japan have been very wary of pursuing bilateral deals, despite expressed U.S. interest. After all, the TPP itself was a serious test for Japanese domestic politics; it promised agricultural opening in sectors often deemed sacred. Now Trump promises to pocket those TPP concessions and demand more, while retracting U.S. offers. That package has little appeal.

Challenge 4: How to restore U.S. credibility?

The credibility problem is two-fold. The TPP discussions commenced in the fall of 2008, but were accepted by the Obama administration at the end of 2009. For the following six years, the participating countries were told to worry about their own domestic politics while the United States would take care of its own issues. The end result was that the TPP partner countries exposed themselves politically and ended up with little to show for it, as U.S. politics ended up derailing the effort in the end. So there could be a general wariness about relying upon U.S. promises in the trade arena.

Further, trade deals must be passed through Congress. If Asian countries were not already aware of this, the TPP experience (which the Obama administration signed, but never got it past the Hill) would make it clear. To date, there is little in Trump’s record, either on trade or other issues, to suggest his administration has mastered the art of moving difficult legislation.

There is no doubt that the leaders of the region will attempt to establish or reinforce warm personal relationships with President Trump on his visit. As he tries to move beyond pleasantries, however, he may find himself haunted by the ghost of the TPP.

Phil Levy is Senior Fellow on the Global Economy, The Chicago Council on Global Affairs, and teaches strategy at Northwestern University’s Kellogg Schoool of Management.

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