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Did a fear of ‘losing out’ push Trump to alter his stance on the TPP trade deal?

by

Kyodo

One of the first actions U.S. President Donald Trump took after being sworn in on Jan. 20 last year was to “permanently withdraw” the United States from the Trans-Pacific Partnership, then a 12-nation free trade agreement that he blasted as costing American jobs.

During the 2016 campaign and the first year of his presidency, Trump instead advocated bilateral trade deals — rather than multilateral ones such as the TPP — as a way of pursuing what he said would be fair and reciprocal trade under his “America First” mantra.

But a major shift came last Thursday when Trump said in an interview on the sidelines of the World Economic Forum in Davos, Switzerland, that he would consider rejoining the TPP if the U.S. could strike a “substantially better” agreement.

In his address Friday to the annual gathering of government and business leaders in the Swiss resort, Trump reiterated that he was open to the prospect of negotiating a multilateral trade deal with TPP members “if it is in the interests of all.”

Experts in U.S.-Asia relations say a Jan. 23 agreement by Japan and the 10 remaining TPP signatories to promote a revised version of the deal without the United States — a so-called TPP 11 — appears to have propelled Trump to alter his approach to the agreement amid fears that Washington may “lose out” if others move ahead with trade deals.

“I believe that the ability of the 11 TPP countries to reach a final agreement has influenced the American calculus,” said Mireya Solis, a senior fellow at the Brookings Institution think tank in Washington.

“The notion in January 2017 was that if the U.S. was out, TPP was dead. The world turned out to be very different as the other countries were not deterred in bringing TPP to fruition,” Solis said, hailing efforts by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam to sustain the deal.

Citing Trump’s talks with members of Congress, state governors and business leaders, who warned of the U.S. being locked out of trade deals such as TPP 11 and a free-trade agreement between Japan and the European Union, James Schoff, a senior fellow at the Carnegie Endowment for International Peace think tank in Washington, said the latest development “is partly what prompted Trump’s comments.”

“I think some people told Mr. Trump that the U.S. is in danger of ‘losing out’ if others move ahead with trade deals,” Schoff said. “So he’s trying to avoid losing.”

A day after the 11 TPP members struck the deal, which included a plan to sign a new pact without the United States on March 8 in Chile, GOP Rep. Carlos Curbelo of Florida criticized the Republican president’s stance on the TPP.

“By not participating in such a critical free trade agreement, the president has missed a huge opportunity to ensure America’s interests are advanced,” Curbelo said in a statement. “I strongly encourage the administration to reconsider a shortsighted decision.”

The United States signed the TPP — negotiated under the administration of Trump’s predecessor, President Barack Obama, who vowed to write high-standard trade rules for Asia and beyond amid China’s growing global clout — together with 11 other countries in February 2016. But the pact never came into force after the U.S. withdrawal.

One of the key factors that has changed Trump’s views on the pact is that “China’s economic aggression has intensified globally,” David Malpass, U.S. undersecretary of the Treasury for international affairs, was quoted by the Wall Street Journal as saying Saturday.

But Trump’s statements in Davos suggest Washington will not return to the TPP under the original terms, despite Japan’s insistence that the deal not only has strategic significance for the region and the world but also works in favor of the U.S. economy and employment figures.

Tokyo has led TPP 11 negotiations — while also holding out hope that Washington would rejoin the initiative — throughout a time when the Trump administration has not advanced bilateral trade talks with Asian economies to the extent it wishes. Many nations would prefer multilateral arrangements in order to bolster regional economic integration.

“Mr. Trump says he would need a dramatically different deal. But this signal allows him to achieve two things — to tell his base he still will reset U.S. trade policy by redoing a ‘terrible’ TPP deal and to keep everyone in the region guessing if there will be a U.S. comeback,” Brookings’ Solis said.

“This improves U.S. positioning since it is clear the attempt to negotiate bilateral deals was going nowhere,” she added.

At Carnegie, Schoff suspects Trump would want “a very one-sided deal that would only give benefits to the U.S. side,” which Schoff said will satisfy his supporters but is “not realistic.”

Schoff also argued Trump’s apparent TPP overture may be an attempt to slow the process to bring the TPP 11 accord into force. But such a maneuver, he said, is unlikely to work “because Mr. Trump does not have much credibility on this issue.”

Japanese officials have welcomed Trump’s apparent shift on the TPP, but have said it will not alter Tokyo’s march toward signing the pact in March as it seeks early enforcement.

Japan, officials have said, has no plan to renegotiate the deal, either.

Amid this climate, Solis urged the TPP 11 members to sign and ratify the new pact swiftly.

“This is the best way to influence U.S. behavior and protect a rules-based versus a managed trade approach to trade,” she said.