Trump’s Exit From Asian Trade Pact Damaged America, Boosted China

Removing the United States from the Asia-Pacific trade pact designed to promote U.S. economic and strategic interests over China’s will go down as one of the worst decisions by an American president in the past 50 years, according to trade and foreign policy analysts. Now that China has applied to join the Comprehensive Progressive Trans-Pacific Partnership, Donald Trump’s decision looks even worse than it did in 2017.

Background: President George W. Bush proposed a trade agreement with like-minded Asia-Pacific countries in 2008. “While quick to embrace TPP [Trans-Pacific Partnership] and successful in concluding an agreement among the parties, President Barack Obama fatally delayed pushing for trade promotion authority from Congress in 2014,” writes Matthew P. Goodman, senior vice president for economics at the Center for Strategic and International Studies. “And in one of his first, catastrophic acts as president, Donald Trump withdrew the United States from the unratified TPP—not understanding that it was one of the most powerful tools he had to compete with his nemesis, China.”

The Latest Developments: On September 16, 2021, China submitted an application to join what is now called the Comprehensive Progressive Trans-Pacific Partnership (CPTTP). The group of countries in the trade pact currently includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. China’s notification was sent to New Zealand’s trade minister, the designated CPTPP member for such matters, notes Wendy Cutler, a vice president at the Asia Society Policy Institute.

New Zealand’s trade minister is well aware of the stakes. “It was February 2017 and President Trump’s first address to a joint session of Congress,” according to Tim Groser, who served as New Zealand’s trade minister (2008–15) and ambassador to the U.S. (2016–18). “As the president announced the U.S. withdrawal from the Trans-Pacific Partnership, I was thinking about a conversation I’d had with a particularly astute Asian ambassador. He’d suggested to me that if a book on the decline of American influence in Asia and the Indo-Pacific were ever written—and he hoped it never would be—its first chapter would be an account of the withdrawal of the U.S. from TPP.”

Will China Be Accepted into the Trade Pact?: China has prepared for gaining admittance to the CPTPP, even though the criteria and its poor relations with some of its members make the country’s entry less than certain. “Despite concerns over its inward-looking ‘dual circulation’ strategy, China has spent the past few months tearing down trade and investment barriers to make it easier to negotiate its entry to the 11-member trans-Pacific trade pact,” write Henry Gao, an associate professor of law at Singapore Management University and the author of a National Foundation for American Policy analysis on a proposed U.S. strategy to address China trade issues at the World Trade Organization (WTO), and Weihuan Zhou, director of research at the Herbert Smith Freehills CIBEL Centre at the law and justice faculty at UNSW Sydney.

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“At the international level, such a move is a continuation of China’s strategy of being more active in international rule-making, following the conclusion of the Regional Comprehensive Economic Partnership Agreement (RCEP) with its Asian neighbors last year, and the Comprehensive Agreement on Investment with Europe last December,” according to Gao and Zhou. “This is in marked contrast to the approach taken by the Biden Administration, which, despite its rhetoric that ‘America is back,’ has not been able to conclude or even initiate any major international trade agreement in its first eight months in office. Moreover, domestic political considerations are likely to keep the U.S. from returning to the CPTPP anytime soon. This creates a perfect window of opportunity for China to maneuver its way into a trade pact that was, ironically, created by the U.S. in order to contain China.”

The Impact on the United States: China’s latest actions and the U.S. government’s poor policy choices concern American companies. “First, China would have to overcome formidable obstacles to join the CPTPP. It would have to win over current CPTPP governments that have ongoing differences with China or that question its readiness to join,” said John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, in an interview. “It would need to undertake deep reforms to its system of state capitalism and regulation to meet the pact’s terms and convince the other parties that it had done so. However, if Beijing managed to clear these hurdles, Chinese firms would win substantial advantages over their U.S. competitors in terms of access to markets across the Asia-Pacific.”

Murphy notes, “The United States would face a significant setback in its efforts to shape the international economic landscape to support our values and interests. These dynamics show the risk that Washington’s inaction on trade could deal a severe blow to U.S. competitiveness and to the long-term prospects for American workers and companies.”

Joining the Asia-Pacific trade pact is a priority for China’s leadership. “China’s application to join the CPTPP is not a spontaneous decision but has been long in the making,” according to Gao and Zhou. “Since 2013, China has been carefully studying the CPTPP, including its predecessor the Trans-Pacific Partnership (TPP). Last November, President Xi formally confirmed China’s intention to join the pact. In the long run, China’s accession could further cement the Asia Pacific’s role as the world’s leading economic bloc, with CPTPP and RCEP [Regional Comprehensive Economic Partnership Agreement] playing complementing roles to further boost growth in the region.”

The Trump administration’s trade policy was a story of inflicting great harm and achieving few successes. The administration levied tariffs on $350 billion worth of imports from China. The Congressional Budget Office estimated the Trump tariffs cost the average U.S. household more than $1,200 a year. The Biden administration has maintained the tariffs.

Trump’s trade policies, particularly tariffs on steel and aluminum, cost many manufacturing workers their jobs. The tariffs also resulted in companies listed on the U.S. stock market losing an estimated $1.7 trillion in market value, according to research by Mary Amiti, an economist at the Federal Reserve Bank of New York, and Columbia University economists Sang Hoon Kong and David Weinstein.

The Trump administration’s trade policies harmed consumers and companies and failed to achieve their stated objectives with China or America’s other trading partners. Donald Trump’s decision to pull the United States out of the Trans-Pacific Partnership created an opening for China and will continue to put U.S. workers and companies at a competitive disadvantage.

The Tycoon Herald