What Trump Lost by Pulling Out of the Trans-Pacific Partnership

Many of the imbalances the president has since complained about were addressed in the Asia trade deal he decided to scrap.

In this Jan. 23, 2017, file photo, President Trump signs an executive order to withdraw the U.S. from the 12-nation Trans-Pacific Partnership.
AP Photo/Evan Vucci
June 26, 2018, 8 p.m.

Almost from the moment he entered the White House, President Trump has been complaining about Canada’s trade practices and demanding a modernization of the two-decade-old North American Free Trade Agreement. That long-simmering anger boiled over in nasty tweets recently after the allied summit in Quebec and has introduced unusual tensions in relations with the United States’s northern neighbor.

But a good deal of that tension could have been eased, and many of the president’s goals realized, if not for his action on his first full day in office to pull out of the Trans-Pacific Partnership, an ambitious free trade agreement between the United States and 11 Asian-Pacific countries that make up 40 percent of the world’s gross domestic product. Trump blasted it as “a bad, bad deal.” That deal, though, would have eliminated the Canadian dairy tariff that he so hates, would have opened Japanese markets to U.S. beef, and would have updated NAFTA.

“We would have been the biggest beneficiary,” said William Reinsch, the former longtime president of the National Foreign Trade Council in Washington. “Realistically, if we have a dairy negotiation with Canada, probably the best we’ll do is what they already gave up in TPP.” He added, “The Canadians made dairy concessions in TPP to the other 10 countries and to us. We are out, so we don’t benefit from those concessions. The Canadians made them anyway to the other 10, so we’re at a disadvantage.”

The same is true, he said, of Trump’s complaints that Japan erects barriers to U.S. beef and pork imports. “The U.S. would have been big winners on both of those in TPP,” said Reinsch, who is now an expert on trade at the Center for Strategic and International Studies.

Gary Hufbauer, a veteran of the U.S. Trade Representative’s office and the Treasury Department, said American negotiators had great success in the TPP talks on cracking the Canadian dairy market. Trump’s decision to withdraw from TPP was “a definite step back” for American dairy farmers, he said. “Now, our competitors will get more access and we won’t. In terms of Trump’s named objectives—or at least some of them—they were there. The bird was in the hand. And now, thanks to renouncing TPP, the best you can say is it is in the bush.”

Hufbauer, now at the Peterson Institute for International Economics, added that the U.S. success at the negotiating table went farther in the parts of TPP that updated NAFTA. “Things the U.S. wanted, including some patent protection and exclusivity—that was all in there,” he said. “Abandoning TPP meant going backwards on those concessions the U.S. won.”

Similarly, he said, there were concessions by Vietnam on textiles and apparel. “Now, those have gone ‘poof.’”

Economists who have studied TPP lament both these specific setbacks on gaining more U.S. access to Pacific markets and the larger step-back from Asia. When he was pushing Congress to ratify TPP in 2016, President Obama frequently talked about the “elimination of more than 18,000 taxes that other countries put on products made in America,” always casting tariffs as taxes. And he said that “the United States, not countries like China,” should be writing the economic rules for the region.

Two years later, analysts see China moving into the vacuum left by the United States on trade leadership. “It was a huge opportunity, both political and economic,” Reinsch said. “To me, the biggest loss is that we passed up an opportunity to reinforce our presence in the region. The Southeast Asian nations are afraid we are going to leave. The Chinese are throwing their weight around. And we just said, ‘Go ahead and throw your weight around some more.’ And the other countries are hurrying to play up to the Chinese and adjust their relationships.”

Reinsch said the main TPP gains for the United States were in access for agricultural goods in Japan. Those, he said, “are not only gone, but gone for good because afterwards, the Japanese negotiated the same kind of agreement with Europe. … So our guys are not only shut out, but they have been replaced.”

Inside the White House, this point was being made earlier this year by Treasury Secretary Steven Mnuchin and Gary Cohn, then the president’s chief economic adviser, leading Trump to openly speculate about the United States returning to the TPP fold under new terms. But that window quickly closed. And with Cohn now departed, Mnuchin’s is a lonely voice inside the administration.

Officials both at USTR and in the White House declined to comment or acknowledge any second thoughts about the withdrawal, which was a campaign promise. Nor do they acknowledge any damage to the U.S. standing in the region.

Others, though, see a significant setback. Michael Green, who was the senior National Security Council official on Asia under President George W. Bush, said the damage is twofold. “We have less leverage with China,” he said, making Obama’s point about writing the rules. “The second thing it did was it suggested to our closest friends and allies that we are strategically incompetent.” Countries like Japan and Vietnam “were making all kinds of concessions, and we were making virtually none and we were reaping strategic benefit,” he said. To those allies, he said, Trump’s withdrawal “looks like strategic malpractice and raises questions about whether America gets the world we are in.”

Reinsch still retained hope that Trump could return to the negotiating table, but even then, he said, “it would be coming back on their terms, which are slightly less than what we got before.” He said he thinks the president would be intrigued by any Japanese movement on automobiles. “He’ll be back,” predicted Reinsch. “We’ll go around this carousel again.”

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