Trump’s ‘art of the deal’ costs US exporters and consumers

COMMENT

Not content with its trade war against China, United States President Donald Trump’s administration has also opened bilateral trade negotiations with Japan. Yet whatever Trump hopes to achieve with Japan will be far less than what he threw away when he abandoned the Trans-Pacific Partnership (TPP) in early 2017.

During the 2016 US presidential campaign, Trump promised Americans that he would negotiate so many great deals on their behalf that they would get “tired of winning”.

Now that he has imposed heavy costs on US farmers, consumers and the overall economy through tariffs on Chinese imports, Americans are probably growing quite tired indeed.

Trump’s withdrawal from the TPP is a good example of his trade-policy recklessness. Signed in 2016 by the US and 11 other Pacific Rim countries, the treaty would have governed about 40% of all trade covered by World Trade Organisation rules. It included not just tariff reductions, but also provisions to liberalise retail, communications, entertainment, and financial services. It would have strengthened labour and environmental standards, established a new dispute-resolution mechanism, and created a framework for managing e-commerce, cyber security, intellectual property rights, data mobility and more.

When the US withdrew from the TPP, many assumed the agreement was dead. But the remaining signatories, led by Japanese Prime Minister Abe Shinzo, quickly agreed on a replacement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which retains about 200 of the TPP’s 220-odd provisions. The 20 that were left out were those for which the US pushed, and can be reinstated should the country wish to join the pact at a later date.

Now that the CPTPP has entered into force, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam enjoy preferential access to each other’s markets. As tariffs are phased out, US suppliers in those markets are finding themselves at a growing disadvantage. The Japanese tariff on American beef imports has remained at 38.5%, but the levy on beef from fellow CPTPP countries has fallen to 27.5% and eventually will reach just 9%. As a result, American beef and wheat entering Japan (or any other CPTPP country) now face a higher tariff than beef and wheat from Australia, Canada, or New Zealand.

So much for Trump’s “art of the deal”. He has left US exporters at a severe disadvantage in Pacific Rim and European markets. Worse, China is now pushing for a mega free trade agreement among 16 countries under the Regional Comprehensive Economic Partnership, negotiations for which are ongoing.

It is worth remembering that the TPP would have excluded China and locked in a US-led trade bloc in Asia for the long term. No deal that the Trump administration makes with Japan can possibly make up for what the US would have had under the TPP. At best, the US will salvage the TPP terms concerning Japan alone, rather than all 11 original signatories. Abe cannot possibly grant the US better terms than those given to Japan’s CPTPP partners.

With each Trumpian “negotiation”, the US issues its demands, offers little in return, and threatens “punishment” through tariffs if it doesn’t get its way. By acting like an insecure bully, Trump has left the US increasingly isolated in the global economy. American producers and consumers are already paying the price. The only question is how much more “winning” are they willing to bear. — © Project Syndicate

Anne Krueger is senior research professor of international economics at the School of Advanced International Studies, Johns Hopkins University

Anne Krueger
Anne Krueger
Anne Osborn Krueger is an American economist. She was the World Bank Chief Economist from 1982 to 1986, and the first deputy managing director of the International Monetary Fund from 2001 to 2006.
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