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Future historians may look back on the executive order signed by President Trump withdrawing the United States from the Trans-Pacific Partnership (TPP), a fledgling free-trade agreement that brought together a dozen Pacific nations, including Australia, Japan, Malaysia, Mexico, Peru, and Vietnam as an event of epochal importance. The move was indeed widely expected. The TPP has long been in serious political trouble. Throughout the Presidential campaign, Donald Trump inveighed against the agreement as contrary to the interests of American workers.
It is also true that the immediate economic impact of the TPP’s demise will be minor. Noted American Economists estimated that, by 2030, the agreement would have raised American GDP by just half a percentage point. Some other estimates were even smaller. The pro-TPP institution, Peterson Institute for International Economics explains that it is tempting, then, to view President Trump’s move as a merely symbolic action. In pulling the United States out of the TPP, President Trump has effectively disowned the United States-led model of globalization and free trade that both of the country’s major parties have subscribed to for decades. The move also created more uncertainty about the world’s most important bilateral relationship: the one between the United States and China.
Since the end of the Second World War, the United States has promoted global economic integration on the basis of multilateral free-trade agreements. The United States embrace of free trade was squarely based on self-interest. With much of Europe and Asia in ruins following the war, the United States economy was indisputably the world’s strongest, and its firms were keen on expanding their markets abroad. In return for United States financial help in postwar reconstruction, nations such as Germany and Japan agreed to embrace an open trading system. In Geneva in 1947, twenty-three countries, led by the United States, reached a deal, the General Agreement on Tariffs and Trade (GATT) and later in WTO, to reduce tariff barriers and other impediments to commerce. These multinational agreements greatly stimulated global trade. Since then, the total value of global exports has risen sevenfold.
However, especially after the completion of the North American Free Trade Agreement (NAFTA) in 1994, many Americans came to view free trade as a job killer and an impediment to wage growth, concerns that, in some cases, were rooted in reality. According to a 2015 study by economists at the University of California, between 1999 and 2011, cheap Chinese imports eliminated about five hundred and sixty thousand United States’ manufacturing jobs, and perhaps as many as 2.2 million jobs in total.
Donald Trump’s Presidential campaign was fuelled by this popular backlash. In addition to withdrawing from the TPP, the new Administration has said it wants to renegotiate NAFTA, and it has threatened to impose tariffs of as much as thirty-five per cent on Mexican goods if it doesn’t get its way. Such punitive measures could violate the laws of the WTO, which might well rule against the United States. If that happened, President Trump’s options would range from ignoring the body to “pulling out of the WTO altogether. That would bring the architecture of global trade policy for the past 70 years crashing to the ground,” the Financial Times noted, in an editorial on Tuesday 24 January.
The TPP decision will have other consequences. John Cassidy, a staff writer at The New Yorker adamantly argued that rather than relying on multilateral trade agreements, President Trump has said that he will negotiate one-on-one deals with individual countries, beginning, possibly, with the post-Brexit United Kingdom. However, just because the United States has turned its back on multilateralism doesn’t mean other countries will follow suit. Shortly after President Trump signed his executive order on TPP, Australia, New Zealand, and Singapore, three allies of the United States, said that they might go ahead with the TPP without America.
There is something ironic here. On numerous occasions starting in his electoral campaign, President Trump has vowed to check China’s growing economic and strategic power, which, in his zero-sum view of the world, represents a grave threat to the United States. But he has now scuttled a trade agreement that the Bush and Obama Administrations both saw as a vehicle to bolster American influence in the Pacific region and to counterweight China’s economic influence.
The crucial question here is this. How President Trump will deal with China? On trade issues, he evidently intends to go one-on-one and demand big concessions. John Cassidy argued that Chinese will likely to insist that any United States’ complaints be dealt with through the WTO. According to him, if President Trump responds by threatening to impose hefty tariffs on goods produced in China, he could well cause a crash in the global financial markets. And that would be just the beginning. President Trump also indicated that it might challenge China militarily in the South China Sea, where China has asserted sovereignty over some small islands that are located in international waters. In response, a China urged him to respect the facts, speak and act cautiously to avoid harming the peace and stability of the South China Sea.
It is perhaps too early to read very much into this verbal jousting. But as Stephen Collinson of CNN argued, given the fact that President Trump’s disregard for multilateral agreements and organizations, which also seems to extend to NATO and the European Union, with his appetite for challenging countries, institutions, and people on an individual basis, it is hard not to be concerned about where things are heading, and not just with China.
In 1990, after the Berlin Wall came down, one of President Trump’s Republican predecessors, George H. W. Bush (Bush the father), talked about establishing a “New World Order,” in which all the world’s nations could “prosper and live in harmony.” That turned out to be largely wishful thinking. But, as Jean-Pierre Lehmann wrote on “Foreign Affairs” in early January that for more than twenty-five years, the United States continued to pursue the postwar vision of an open global trading system, which developing countries such as China and India could choose to participate in, as they eventually did. President Trump’s “America First” vision is very different. According to Jean-Pierre Lehmann, it is parochial, overtly nationalist, and focused on obtaining immediate benefits for his alienated supporters. If he isn’t careful, it could turn out to be a recipe for a New World Disorder.