With the November elections over and a new administration set to take the helm of the U.S. government, the Trans-Pacific Partnership (TPP) and in general foreign trade are up in the air. During the campaign, the now President-elect pledged to upend the U.S. trade policy, even as Republican leaders in Congress closed the door on the Obama administration’s hopes for last-minute ratification of an expansive Pacific Rim trade accord before the president leaves office.
The TPP has had its supporters and detractors from the beginning. TPP is a 12-nation trade deal that would wrap together 40% of the global economy under one set of trade rules. The partnership included the United States, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile, and Peru. But opponents of the TPP have contended that jobs would move from the U.S. to developing countries, and jeopardize intellectual property and patent protections.
The TPP’s collapse denies President Obama the economic cornerstone of his administration’s attempt to rebalance the nation’s foreign policy attention toward Asia as a hedge to China’s growing economic and military clout. The accord was viewed as a test of U.S. leadership in the region.
Beyond TPP, the bigger question is whether its collapse is the beginning of new position by the U.S. in the global economy under the upcoming administration. During the campaign, the President-elect tapped into voters’ economic anxiety, blaming free-trade deals for harming American manufacturing workers. He vowed to end long-standing accords, including the North American Free Trade Agreement (NAFTA) signed in 1994, and impose double-digits tariffs on major U.S. trading partners China and Mexico. Moreover, the President-elect has said he would label China a currency manipulator, which according to some experts could be the first step in igniting a trade war. Even a modest increase in duties on Chinese and Mexican imports could have significant consequences. According to a report issued by Barclays, instituting 15% and 7% tariffs on China and Mexico, respectively, would shave about half a percentage point from growth next year.
Many economists also say that nixing the TPP gives China, who was not part of the deal, an opportunity to supplant the U.S. as a key market. In fact, Beijing advocates the rival Regional Comprehensive Economic Partnership (RCEP) trade pact, which includes Australia, New Zealand, China, Japan and 12 other Asian countries — but not the U.S. While RCEP is essentially an extension of free trade under existing parameters, TPP included a raft of regulations that some felt stood to bolster U.S. competitiveness. Proponents of the TPP claimed it would enhance labor rights, install minimum wages, put state-owned enterprises and foreign and domestic private companies on an even keel, allow the free transfer of information and safeguard intellectual property rights.
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Sources: Washington Post, Times Magazine