US Chances of Rejoining the TPP Fade

US Chances of Rejoining the TPP Fade
photo credit: Reuters/達志影像

What you need to know

The remaining 11 members of the Trans Pacific Partnership are renegotiating a deal that leaves the US out in the cold.

Tentative signs the U.S. may have been adopting a more sensible view on trade have been dashed by President Donald Trump’s recent decision to impose tariffs of 25 percent on steel imports and 10 percent on aluminium imports.

Hopes that Trump’s protectionist views were mellowing were kindled at Davos in January when he hinted that the U.S. might consider rejoining the Trans-Pacific Partnership (TPP) trade agreement. In February, U.S. Treasury Secretary Steve Mnuchin said the U.S. had held talks with TPP members about what it would take for the U.S. to rejoin the deal. This statement followed a letter to the President, signed by 25 Republican senators, urging the U.S. to rejoin the trade agreement.

Another positive sign that the U.S. may have been moving away from protectionist rhetoric was the annual Economic Report to the President, prepared by the Council of Economic Advisers. Released on Feb. 21, the report stated, “trade and economic growth are strongly and positively correlated”. Notwithstanding Trump’s skepticism about the World Trade Organization (WTO), the report also stated: "The United States gets better outcomes via formal WTO adjudication than negotiation, increasing the probability that the complaint will be resolved and decreasing the time it takes to remove the barrier in question."

Credit: REUTERS/Na-Son Nguyen/Pool
New Zealand's Prime Minister Jacinda Ardern (L) talks with Trade and Export Growth Minister David Parker at the Trans-Pacific Partnership (TPP) meeting held on the sidelines of the APEC summit in Danang, Vietnam.

Even on the North America Free Trade Agreement (NAFTA), which Trump described as “the worst trade deal ever made,” the Council of Economic Advisers said, “Studies suggest the existence of net positive gains from NAFTA for U.S. GDP and employment”. As Matthew Goodman from the CSIS observed, there was hope that views on trade in the White House were evolving in a positive direction.

Yet Trump’s decision to place levies on steel and aluminium imports has squashed such expectations. In contrast to the pro-trade comments in the report from his Council of Economic Advisers, after imposing the tariff on steel and aluminium imports Trump tweeted: "When a country (U.S.A) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win."

As one commentator later rightly observed: "There’s a lot to unpack in Trump’s tweet, but the overall message is pretty clear: The president doesn’t seem to have a full grasp of what’s going on here."

When Mnuchin said the U.S. had begun talks with other countries about rejoining the TPP, Australia’s Trade Minister Steve Ciobo cautiously welcomed the news. His caution was wise because, even before Trump’s imposition of tariffs on steel and aluminium, it would have been a hard slog for the U.S. to rejoin the TPP. After Trump’s announcement, the prospect is very unlikely under this administration.

As the largest market economy in the world, the U.S. was the driving force behind the original TPP agreement. But following Trump’s decision to withdraw from it, and efforts of the remaining members to continue as “TPP-11”, the U.S. is no longer in the driving seat in any negotiations. The remaining 11 members will have to agree to the U.S. rejoining.

The qualification in Trump’s comments at Davos was that the TPP would have to be renegotiated, and the U.S. achieve a “significantly better deal”. The irony is that the U.S. drove the original TPP negotiations, pushing for provisions only reluctantly agreed to by many other members who would say the original TPP was a “good deal” for the U.S.

Following the U.S. withdrawal from the TPP, the immediate reaction was that the agreement was dead. However, the 11 members remaining, led by Japan and with strong support by Australia, were able to keep most of the TPP agreement in place under a new name, the Progressive Comprehensive Trans-Pacific Partnership (PCTPP), and with a number of provisions suspended. The suspended provisions were mainly those driven by the U.S., including rules governing copyright, patents, and pharmaceuticals – issues very close to the heart of U.S. business, but controversial for many other TPP members. The PCTPP was described as the “Trans-Pacific Partnership with fewer bad bits”.

While the suspended provisions can be unsuspended if the PCTPP members agree by consensus, this would not be sufficient to entice the U.S. to rejoin. Trump said the original TPP, which included the suspended provisions in the PCTPP, was a “potential disaster,” clearly suggesting he wants to renegotiate the whole agreement.

After a decade of difficult negotiations, it is unlikely the PCTPP members would be willing to accommodate a better deal for the United States. The Chilean President, Michelle Bachelet, said the TPP cannot be redone to please the United States; and Japan’s chief negotiator on the TPP, Kazuyoshi Umemoto, said renegotiating the agreement would be difficult given that it took months of intensive talks to revise the pact after Trump pulled out.

But it is very unlikely that Trump has any idea of what a significantly better TPP outcome for the U.S. would look like. As we have seen on numerous occasions, Trump’s musings on policy issues are not the outcome of well-considered deliberations. The immediate issue facing the PCTPP members is not what it would take to entice the U.S. back into the TPP, but how to avoid a disastrous trade war.

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This article originally appeared in the Lowy Interpreter. The News Lens has been authorized to republish this article.

TNL Editor: Morley J Weston