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The bad politics of withdrawing from the TPP

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    President Trump in one of his first acts as president has used his executive powers to formally withdraw the United States from the Trans Pacific Partnership Agreement. Trump says he will instead negotiate bilateral trade agreements with each of the eleven countries: Australia, Brunei, Canada, Chili, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. I will make a few comments on his actions that we should think about in the months and years ahead.

    Note first, that China is not a part of the TPP. China was one of Trump's favorite whipping posts in castigating the TPP during the campaign and made for good populist rhetoric. It still does...mention China at it gets a rise out of his avid supporters. However, we also do not have a bilateral trade agreement with China that we can threaten to withdraw from. All trade between our two countries is governed under the larger WTO terms. Withdrawing from the WTO has enormous implications and would be really stupid. So he has reverted to what is called border adjustment taxes.

    Imposing border adjustment taxes on specific countries like China would violate many of the WTO regulations. If Trump imposes those taxes on selected or all Chinese imports, look for the USA to be defending their actions in the courts. Worse than that, however, would be retaliatory actions against the US exports. Trump might be able to bully a US company like Carrier or Ford, but the Chinese will play tough.

    Secondly, the United States already has bilateral trade agreements (and one trilateral agreement, NAFTA) in place with each of these countries. As I said in my blog article supporting the TPP, many of these agreements were negotiated in the 1990s (including NAFTA) and are in need of updating. The USA stopped negotiating updated terms for their bilateral trade agreement with Vietnam when negotiations with the TPP started. If Trump plans to negotiate separate updated bilateral agreements with each of the eleven TPP countries, it will be very taxing on his staff. These negotiations can take years, and to work with these eleven countries simultaneously to have separate different terms for each will be draining on those people doing the negotiating, especially so if Trump has dictated non-negotiable terms to his staff. These countries may not succumb to Trump's customary bullying. Look for major impasses in the negotiations.

    So let me predict right now that after all the bluster and after years of negotiating, Trump will not get much better deals with each of the countries than what he has just cancelled out of with the withdrawal from the TPP. Yes some of the obsolete terms of those old agreements will be updated much like they were in the TPP, but to get a better deal for the America worker at the expense of the foreign worker is a pipe dream.

    In the meantime, China will probably step in and perhaps join the TPP on their terms. If the USA wants to join the TPP later after the Trump presidency has run its course, we will be in a much weaker position.

    I really don't know what the hell he's planning for NAFTA after all his bluster about that agreement. Maybe it'll only be token improvements along the lines of the TPP...and then lots of bragging about nothing.

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    Talk is cheap. He is going to be quite a figure. Threaten to halt imports while all of your billionaire friends have already moved manufacturing operations to China or other 3rd world nations. Will there be tariff exceptions for products with a Trump label ? Wait until they realize all of the machinery to make the Walmart grade crap is already in China. Time to negotiate that sub sub minimum wage to make made in the USA anywhere near cost effective.
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    This is what happens when someone who doesn't understand trade policy is put into office. The people who are going to be most hurt by our withdrawing from the TPP are farmers and other small business owners who won't be able to utilize this agreement and sell their goods fairly.

    The biggest winner in this debacle is China. They will now move in and strong arm the countries in this deal to the detriment of American companies.