Wednesday, 25 January 2017

Withdrawing the US from TPP was a senseless act of wanton destruction

 

The TPP was good for all participants – or would have been. The Cato Institute’s Daniel Ikenson argues in this guest post that America would have been one winner out of many, not the loser Trump has now made it.


Yesterday, demonstrating his preference for action over reason, President Trump signed an executive order to officially withdraw the United States from the Trans-Pacific Partnership agreement. On the one hand, it’s refreshing to witness the rare act of a politician fulfilling a campaign pledge. On the other hand … there is nothing else good about it. Trump detonated a bomb; six years of negotiations went boom; now what?

To a president who seems intent on turning the country inward, raising the barricades, demanding self-sufficiency and eschewing the outside world, the TPP was an obvious target. But what’s especially disconcerting is that the president didn’t need to go this far to keep TPP out of play. The agreement couldn’t possibly take effect without congressional passage of implementing legislation, and his signature affixed. He could have just kept TPP on the back-burner in the event that its utility, relevance, or imperative to U.S. economic and geostrategic objectives became evident as his term progressed. Because it will.

My colleagues and I at the Cato Institute did a thorough, chapter-by-chapter assessment of the TPP and concluded that, on net, implementation would advance American economic freedoms. But there is also a geostrategic rationale for the TPP that compels beyond the text of the agreement. I presented that case in a few different articles, but here’s an excerpt from the most recent op-ed, in The Hill

The TPP is a comprehensive trade and investment agreement that reduces tariffs and other trade barriers among 12 Pacific-Rim nations. Implementation would help generate greater wealth and higher living standards by more closely integrating economies that account for 40 percent of global GDP.

As an agreement among countries on four continents, the TPP is uniquely qualified to fill the void created by the once successful, but now dysfunctional, multilateral negotiating “round” approach to global trade liberalisation.

But perhaps more significantly, the TPP offers a unique opportunity to refresh the U.S.-created rules and institutions of international trade and adapt them to the nature and conditions of the 21st century global economy. It is a blueprint for securing U.S. geo-economic and geopolitical interests now and into the future.

Without the TPP, as the economic centre of gravity continues its shift across the Pacific toward Asia, those successful trade rules and institutions could become superseded by lesser, opaque, discriminatory rules, which subvert the existing order, advance parochial objectives, and disadvantage U.S. commercial interests.

The geostrategic rationale for TPP—which has yet to dawn on the president-elect—is much less about achieving overt economic and security objectives than it is about preserving and strengthening U.S. soft power.

Unlike most other trade agreements, the TPP permits new members to join. The fact that TPP had achieved critical mass allows its terms to be offered on a take-it-or-leave-it basis.

Just as larger bodies floating in space have significant gravitational pull on smaller, surrounding objects, the TPP—by virtue of its heft—would pull other countries on other continents into its orbit because the costs of remaining on the outside will increase with each new accession.

The evidence of this effect is considerable. As investment in production platforms and supply chains has begun to shift from TPP outsiders to TPP members, current non-members such as South Korea, the Philippines, Indonesia, Thailand, and Taiwan have been considering and implementing various domestic reforms to improve their prospects for eventually joining.

With TPP rules and benefits applying to China’s most important trade partners, Beijing would have no better alternatives than to embrace the TPP itself, which would be good for all TPP parties.

In addition, what better way to dissuade China from bellicosity over its territorial disputes with Vietnam, Japan, and the Philippines than to demonstrate a prosperous alternative to 1930’s-style resource-driven expansionism in Asia?

Rather than deploy a naval fleet, offer China’s neighbours—and China itself—a clearly plausible path to economic growth and security.

But without TPP, China is the large mass drawing smaller countries into its gravitational pull. With the China-led Regional Comprehensive Economic Partnership negotiations waiting in the wings for TPP’s failure, countries in the region will be drawn more deeply into China’s orbit.

That shift doesn’t mean trade between the United States and those countries will suddenly dry up, but it does mean that existing China-focused investment and supply chain relationships will be reinforced, new ones will emerge and become established, and the costs of reorienting those relationships in the event of some future TPP implementation will increase with each passing year.

U.S. commercial and diplomatic interests in the region would be further impaired by Washington’s failure to follow through on its promises. Reformers in foreign governments that incurred political costs to push the TPP in their countries with expectations of U.S. participation wouldn’t soon forget that the United States proved to be an unreliable partner.

Hopes for the TPP jump-starting a new wave of global trade liberalisation would be dashed and, with U.S. credibility diminished around the world, America’s policy objectives would become more difficult to meet.

In one stroke of a pen and all the bluster that has accompanied it, the new president has thrown all this away, and opened up instead these more dangerous prospects.

That signature represents nothing less than a senseless act of wanton destruction.


Dan Ikenson is director of Cato’s Herbert A. Stiefel Center for Trade Policy Studies, where he coordinates and conducts research on all manner of international trade and investment policy.
This post first appeared at the Cato at Liberty blog.

.

1 comment:

  1. Presume that the cost of supporting unemployed workers is factored in here?

    ReplyDelete

1. Commenters are welcome and invited.
2. All comments are moderated. Off-topic grandstanding, spam, and gibberish will be ignored. Tu quoque will be moderated.
3. Read the post before you comment. Challenge facts, but don't simply ignore them.
4. Use a name. If it's important enough to say, it's important enough to put a name to.
5. Above all: Act with honour. Say what you mean, and mean what you say.