The Trump administration today pulled out of the 12-nation TPP talks. (123rf / art1980)
Keeping a promise from his 2016 campaign, US president Donald Trump formally pulled the United States out of the Trans-Pacific Partnership today, a 12-nation trade and investment agreement in the works for nearly a decade.
Though the move will win plaudits from both the populist right and the anti-trade left (including Vermont senator Bernie Sanders, the former Democratic presidential candidate) Trump’s move is the first major unforced foreign policy error of the Trump administration. TPP opposition brings together an ascendant protectionist coalition that includes many of Trump’s populist supporters, but also many rust-belt and leftist Democrats and many organized labor officials.
In junking the US role in the TPP, a death knell for the trade accord, Trump has now cleared the way for the People’s Republic of China to set the baseline for trade rules across the Asia-Pacific region, negating hopes from the previous Obama administration to ‘pivot’ the country’s strategic and economic orientation toward the fast-growing region and backtracking on a decades-long bipartisan consensus that the United States takes an open and, indeed, leading approach to the ideal of free trade.
Though the general terms of global trade will continue to be governed by the World Trade Organization, regional trade deals allow for countries to deepen trade ties in ways that go beyond the standard WTO rules and to develop strategic alliances.
Trump railed against the TPP from the earliest months of his presidential campaign, arguing that it gave China an unfair advantage:
The TPP is horrible deal. It’s a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone.
But China was never a signatory to the TPP and, indeed, was never party to the 12-country talks that also included stalwart US allies like Australia, New Zealand, Canada and Japan. The US national interest in negotiating and signing an agreement like the TPP would have been to create a trade paradigm in the region that seeks to help US interests in contrast to Chinese interests and, of course, to draw both traditional allies and new allies closer to the United States economically and strategically.
If anything, the TPP provided a framework to protect the United States from Chinese competition. To the extent that American manufacturing jobs have suffered as a result of international trade, and from trade with China, in particular, it has come from the decision in 2000 by a Republican Congress and Democratic president Bill Clinton to grant permanent normal trade relations to China (which had previously been subject to an annual congressional vote) and in 2001 to admit China to the WTO, lessening the ability of the United States to deploy protective tariffs against China.
Paul Ryan, speaker of the House of Representatives, faces a unique primary challenge on August 9. (Facebook)
Don’t look now, but House speaker Paul Ryan may have just one week to salvage his career.
OK, that might be hyperbole, but the longtime Wisconsin representative is facing perhaps the stiffest challenge of his nearly two-decade career in elective office.
For the better part of a decade, Ryan has been the face of movement conservatism in the United States. From the beginning of the Obama administration, Ryan quickly filled a role as something of the dean of conservative policymaking on Capitol Hill, earning for himself a reputation as a radical intellectual of the American right, who would routinely propose budgets that would so drastically reshape taxes and spending in the United States, even his predecessor as House speaker, Newt Gingrich — no shrinking violet on the American right — dismissed some of his ideas as ‘right-wing social engineering.’
Nevertheless, Ryan’s ascent in American politics is stunning. He served as Mitt Romney’s running mate in 2012; had the Romney-Ryan ticket won that election, Ryan would have played an important role in formulating economic policy for the Romney administration. Reluctantly — very reluctantly — Ryan agreed to run for House speaker last year after John Boehner stepped down and the frontrunner, House majority leader Kevin McCarthy, suddenly dropped out.
In many ways, Ryan’s has been a fairy-tale rise in American politics and, even today, he is a plausible future president in 2020 or beyond.
That may be changing, however, in the age of Trump.
By all appearances, Ryan was already facing an uncomfortably tough primary challenge from local businessman Paul Nehlen. But that challenge became a bit tougher on Sunday evening, when Republican presidential nominee nudged supporters toward Nehlen via Twitter:
Thanks to @pnehlen for your kind words, very much appreciated.
On Monday, Trump refused to endorse Ryan in his primary, openly mocking the House speaker with the same kind of equivocating language that Ryan used in May when he refused to endorse Trump for the presidency:
Trump praised the House speaker’s underdog opponent, Paul Nehlen, for running “a very good campaign.” Trump said that Ryan has sought his endorsement, but that as of now he is only “giving it very serious consideration.”
“I like Paul, but these are horrible times for our country,” Trump said. “We need very strong leadership. We need very, very strong leadership. And I’m just not quite there yet. I’m not quite there yet.” Trump’s refusal to back Ryan represents an extraordinary breach of political decorum and signals that the Republican Party remains divided two weeks after a national convention in Cleveland staged to showcase party unity. Continue reading Trump boosts Nehlen in August 9 primary vs Paul Ryan→
Hillary Clinton strode to victory in New York, a state that twice elected her to the US senate in the 2000s. (Facebook)
The New York primaries are over, and it’s clear that they will be yuuuuuge victories for Republican frontrunner and businessman Donald Trump and former US secretary of state Hillary Clinton.
Of course, New York is central to both politicians’ careers. Trump built his real estate empire in New York City, and he launched his campaign from his now-iconic Trump Tower last summer. Clinton transitioned from activist first lady to public official when she won a seat in the US senate from New York in November 2000, a position she held through her presidential campaign in 2008.
Neither Clinton nor (especially) Trump will become their party’s presumptive nominee, but their victories most certainly give their opponents little comfort. Primaries next week in Maryland, Connecticut, Rhode Island and Pennsylvania do not seem likely to change the narrative.
One silver lining comes for Ohio governor John Kasich, who continues to wage a longshot campaign. He easily won second place last night, though Trump defeated him by a 60% to 25% margin. It will be good for at least some delegates, though, as Kasich took all of New York County, which corresponds to Manhattan.
When will Texas senator Ted Cruz drop out, considering that he’s now playing such a spoiler role to Kasich? (I jest…)
California dreaming
Leaping ahead for a moment, though, it seems now obvious that the real fight for the Republican nomination will take place in California, which will go a long way in setting the stage for a convention where Trump, despite his stunning New York victory, is unlikely to win the 1,237 delegates he needs to clear a first-ballot victory.
California will, therefore, play an outsized role as the final major primary on June 7, just as Iowa and New Hampshire play outsized roles as first-in-the-nation contests.
Donald Trump’s economic policies are rooted less in monetarism or neo-Keynesianism, but in the now-discredited economic 17th century theory of mercantilism. (Facebook)
For the most part, mainstream economic views in the United States (and most of the developed world, for that matter) can be traced to a long-established line of theory in the history of economic thought.
Adam Smith’s invisible hand. David Ricardo’s views on free trade and comparative advantage. Joseph Schumpeter’s concept of creative destruction. If you’re on the right, you look perhaps to 19th century marginalists or monetarists like Milton Friedman. If you’re on the left, perhaps you look more to John Maynard Keynes and other macroeconomic theories.
But Donald Trump’s view of economics and world trade seems to have its roots, intentionally or unintentionally, in a brand of economic theory that predates Smith and Ricardo — the mercantilist school, which essentially views world trade as a zero-sum exercise. The key to wealth is to maximize your exports, limit your imports and, for good measure, amass as much gold as possible. England’s loss was France’s gain.
Those kind of mercantilist theories are at the heart of Trump’s economic pitch to voters. It was on full display in his victory speech after Trump handily won the New Hampshire Republican presidential primary:
We’re going to beat China, Japan, beat Mexico at trade. We’re going to beat all of these countries that are taking so much of our money away from us on a daily basis. It’s not going to happen anymore.
The iconic June 8, 1972 photo that shows 9-year-old Kim Phuc after an aerial napalm attack on suspected Viet Cong forces. (AP Photo/Nick Ut)
There are a lot of reasons to be cynical about the Trans-Pacific Partnership.
Like most multilateral trade deals, it seems to bring with it all of the ‘warts and barnacles’ that always seem to accompany these kinds of trade deals:
Complex enforcement mechanisms (like ISDS) sometimes seem to threaten to override national sovereignty.
Agreements too often fail to address poor labor and environmental standards in the developing world and, when they do, enforcing more equal standards is difficult.
Ignoble compromises over intellectual property force higher prices for life-saving drugs throughout the developing world and benefit Hollywood at the expense of locally produced culture.
In a globalized world where the World Trade Organization reduced many tariffs to nearly zero over the last half-century, free trade deals too often fail to liberalize non-tariff barriers to trade, at least to the extent that proponents might prefer, especially in the most highly protected industries like agriculture and services.
Hillary Clinton, who often championed the TPP when she served as the Obama administration’s secretary of state, came out againstthe trade deal last week, citing the protections for pharmaceutical companies and the lack of mechanisms that deal with potential currency manipulation. Those are odd reasons, though, as many analysts have noted, and her opposition comes after sustained support for the trade deal when she was in office. If anything, the protections for drug companies are far lower than those companies sought (just five to eight years of protection instead of the 12 years that the United States originally wanted). Moreover, currency manipulation has never particularly been an issue of focus in multilateral trade deals, and it’s doubtful that the US government could have won any serious concessions on currency, even if it tried.
Generally speaking, even if you dislike the TPP’s ‘warts and barnacles,’ there’s still a strong theoretical basis for freer trade. But there’s an even more important reason to support the TPP.
Vietnam.
No country stands to gain more from the benefits of free trade and liberalization than Vietnam. As Tyler Cowen eloquently wrote in April for Marginal Revolution:
It has large numbers of state-owned enterprises, and its policies toward such enterprises could use more transparency and predictability, as indeed TPP would bring. Most generally, Vietnam is not today a free country. Bringing Vietnam into TPP would further ensure their attachment to a broadly liberal global trading order. TPP also would bring free(r) labor unions to Vietnam.
Other analysts agree, and there’s a growing consensus that Vietnam will be among the top winners if TPP becomes a reality. With tariffs on garments and footwear set to fall to zero under the TPP, Vietnamese exports will get a boost in the United States at the expense of China and even other free-trade partners like Mexico, because labor costs are still lower in Vietnam. That will help Vietnam maintain its advantage for low-cost manufacturing, even as multinational companies look to even lower labor costs in Laos and Cambodia. Moreover, despite challenges ahead, a widely cited analysis by the Petersen Foundation identified Vietnam as the country with the most to gain from the TPP:
Vietnam would face significant challenges in implementing an agreement that requires stringent disciplines in areas such as labor and government procurement. It also faces tough challenges in maintaining a macroeconomic environment that permits adjustment and encourages long-term investments. But overall, Vietnam’s participation in the agreement is well-founded.
TPP will, accordingly, increase the diversity of Vietnam’s trading partners and reduce its economic reliance on China. When the Obama administration talks about the benefits of TPP in strategic or even military terms, this is one of the most important points — TPP will lessen China’s hold on the southeast Asian economy, at least in the short term, both to the benefit of countries like Vietnam (as well as Malaysia and even more developed countries like Japan and Singapore).
Greater trade between the United States and Vietnam, and greater trade between Vietnam and the European Union, pursuant to another free-trade agreement concluded earlier this year, is expected to increase foreign direct investment in Vietnam, which could help develop a more high-tech and services-based economy and a more educated workforce.
Moreover, arguably no country in the world has suffered more at the hands of US incompetence during a war that today seems as pointless as it was brutal. From the My Lai massacre to carpet-bombing and the gratuitous use of napalm, the US-led war in Vietnam in the 1960s and the 1970s didn’t even accomplish its goal of keeping south Vietnam free of communism. The Cold War mentality at the time skewed the nature of Ho Chi Minh’s original struggle, initially more about self-determination and nationalism than about communist ideology. No one today would argue that the war was worth the sacrifices of US forces, the South Vietnamese or the North Vietnamese.
Vietnamese president Trương Tấn Sang met with US president Barack Obama at the White House in July 2015. (White House)
With TPP, the United States has a chance to ameliorate some of those harms. It was Clinton’s husband who restored normal relations with Vietnam in 1995, and it was Republican George W. Bush who facilitated Vietnam’s WTO entry in 2007. Pulling Vietnam, through TPP, into the global mainstream economy is the next logical step in reducing poverty in a country that’s growing at an estimated 6% this year, and Goldman Sachs, for example, predicts that the Vietnamese economy will surge from $186 billion (the world’s 55th largest) to $450 billion by 2025, making it the world’s 17th largest.
On Tuesday, when tens of millions of US voters go to the polls, they are very likely to deliver a US Senate majority to the Republican Party.
Six years into the administration of Democratic president Barack Obama and four years after the midterm elections that delivered control of the US House of Representatives to the Republicans and conservative speaker John Boehner, most polls and poll aggregate forecasts give the Republicans anywhere from a strong (70%) to moderate (74%) to an overwhelming (96%) chance to retake the Senate.
It’s not uncommon for the ‘six-year itch’ to reward the non-presidential party with gains in midterm elections. Throughout the post-war era, in every midterm election during the second term of a reelection president, the opposition party has made gains each time — with the exception of 1998, when the Democrats benefited from a strong economy and Republican overreach in pursuing what would eventually become impeachment hearings against US president Bill Clinton over alleged perjury in the Monica Lewinsky affair.
It’s also not unheard of that foreign policy can drive larger narratives about presidencies.
Most recently, in 2006, Democrats recaptured both houses in midterm elections, forcing then-president George W. Bush to accept the resignation of his defense secretary Donald Rumsfeld, in light of the war in Iraq’s unpopularity and the unfolding sectarian civil war taking place there despite US military occupation. As it turns out, the 2006 midterms paved the way for a much more moderate tone to the final two years of the Bush administration and a change in strategy under Robert Gates, Rumsfeld’s successor, who ultimately stayed on as defense secretary until 2011, lending a sense of continuity to the Obama administration’s approach to defense policy.
The most underreported aspect of the current crisis over the Crimea annexation is the extent to which Russia was willing to go to the brink of international crisis for the goal of a future trade bloc.
Why does Russian president Vladimir Putin care so much about the vaunted Eurasian Union, even though it’s a rewarmed version of the existing economic customs union among Russia, Belarus and Kazakhstan?
To turn Michael Corleone’s words on their head, ‘it’s personal, not business.’
Putin hoped that the revamped union could attract a few more stragglers in central Asia, Azerbaijan or Armenia and perhaps Ukraine — until February 22.
There are certainly potential gains from greater free trade, and negotiating multilateral trade blocs seems both more efficient than one-off bilateral agreements and more productive than pushing for greater global integration through the World Trade Organization (WTO) process.
Also unlike bilateral treaties or WTO-based agreements, regional trading blocs are also emerging as strategic geopolitical vehicles for advances regional agendas that have just as much to do with politics as with trade.
Ultimately, it’s same reason that the two South American customs unions, the Mercado Común del Sur (MERCOSUR, Suthern Common Market) and the Comunidad Andina (CAN, Andean Community) joined to form the even larger Unión de Naciones Suramericanas (UNASUR, Union of South American Nations), which came into existence in 2008 and covers the entire South American region.
It’s the same reason that Kenyan president Uhuru Kenyatta has put so much pressure on Tanzania to choose between the East African Community (EAC) or the Southern African Development Community (SADC) over the past year by accelerating plans for greater political cooperation within the EAC — with or without Tanzania. Or why admitting South Sudan into the EAC back in 2011 could have helped prevent its slide into civil war.
It’s the same reason that defining ‘Europe’ has been such a strategic and existential issue for the European Union and its predecessor, the European Economic Community, since its inception. Does the United Kingdom belong? (In the 1960s, according to French president Charles de Gaulle, it didn’t). How to handle Turkey? (Enter into a customs union with it, then slow-roll accession talks since 1999, apparently). Should Ukraine join? Moldova? Georgia? If Azerbaijan can win the Eurovision contest, why not bring it into the single market? What about, one day, Morocco and Tunisia, which both have association agreements with the European Union?
That’s why it’s worth paying close attention to the Trans-Pacific Partnership (TPP), but also the Transatlantic Trade and Investment Partnership (TTIP). TTIP would create a super-free-trade-zone between the United States and the European Union, which together generate between 45% and 60% of global trade.
