This is a reprint of our September 28, 2016, post outlining Donald Trump's trade policy paper, written by Wilbur Ross and Peter Navarro. Wilbur Ross has just been named by Trump to be Commerce Secretary. Ross has not been backing away from this document. Since his name surfaced, Ross has said the US has been following "dumb" trade policies. He dismissed efforts to pass the TPP in the US as"a figment of people's imagination." . . . Navarro and Ross believe that the United States is already engaged in an economic war that it has lost because the US has failed to engage properly. The Trump economic plan places blame for economic damage squarely at the feet of poorly negotiated trade deals and the failure to enforce them. The “bad deals” include NAFTA, China’s entry into the World Trade Organization, and the US-Korea free trade agreement (KORUS).
This post is a comprehensive overview of the different provisions in the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP) trade agreements to allow a side-by-side comparison of the two deals. Of course, since the RCEP negotiations are not yet finished and officials are meeting next week for the 16th round, the situation in Asia may still change.
The Trans-Pacific Partnership (TPP) ball is back in the court in Asia. The 11 members of the agreement (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam) get to decide what happens next with the most advanced trade agreement in the region. Donald Trump has chosen to take the Americans out of the trade ballgame. His video announcement confirmed his intentions to withdraw the United States from the Trans-Pacific Partnership (TPP) agreement when he takes office in January.
The study will say that FTAAP is an excellent idea that APEC should pursue. The original plan—certainly by the Americans—was to say that the study was nice, but since both pathways were currently in progress and moving ahead nicely, there was no need to push forward with FTAAP at this point. After all, TPP was finished but in the domestic ratification stage and RCEP remains under negotiation. Why jump to the next phase while the building blocks are still being built? Now the situation has changed. Trump will not even be present, yet his shadow will loom large because his election has called into question the viability of the TPP pathway to FTAAP. If the TPP is not going to happen, then RCEP becomes the default path to FTAAP.
Companies hoping to remain competitive—and particularly those working in export markets—will have to work much harder now. Absent trade preferences, firms are at a disadvantage relative to competitors in places like Asia or Europe. The outsourcing that Trump has complained about is likely to accelerate. Firms that want to take advantage of benefits conferred through deals like the Regional Comprehensive Economic Partnership (RCEP) in Asia will need to be located in Asia to provide goods and services to these faster growing, significant markets.
The wider world certainly grasps the consequences of this election. People of all sorts have been glued to their televisions in amazement. For American voters, knocking over the system and electing Donald Trump as President may have felt very good. But the economic and trade consequences will be significant and the fallout felt far beyond Washington DC.