Even if Trump wants to rejoin TPP, that ship may have sailed

Even if Trump wants to rejoin TPP, that ship may have sailed
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One week into his term, President TrumpDonald John TrumpTrump: Meetings on potential North Korea summit going 'very well' Freed American 'overwhelmed with gratitude' after being released from Venezuela Ivanka Trump to campaign for Devin Nunes in California MORE pulled out of the Trans-Pacific Partnership (TPP), which had been intended to help the U.S. and allies rein in China’s push for economic dominance. The U.S. withdrawal amounted to a unilateral gift to China.

Now, 15 months later, in the midst of a bilateral trade face-off with China, President Trump announced during a meeting with farm-state agricultural interests that the U.S. may “rejoin” TPP and asked his advisers to prepare options.

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U.S. markets surged in response to the good news that the U.S. might once again value and reap the benefits of multilateral trade agreements.

 

Moreover, as National Economic Council Director Lawrence Kudlow stressed, the U.S. might organize a “trade coalition of the willing,” with, for example, Japan, Australia, Canada and Europe, to counter China’s influence.

At about the same time, President Trump decided to ease his demands on U.S. and North American content for autos covered by the North American Free Trade Agreement (NAFTA).

News that the president may now perceive strategic value in joining TPP, avoiding a dismantlement of NAFTA and in working with others to engage China on economic issues, is very positive. We congratulate the administration on this smart pivot.

The decision has been percolating for some time. In January at World Economic Forum meetings, the president hinted openly that he was thinking about re-joining TPP. Shortly thereafter, 25 Republican Senators wrote to urge him to do just that.

There are good reasons why the president may have taken this decision now, but there are also real barriers — both domestic and international — to the U.S. rejoining TPP.

First, the other 11 original TPP signatories have moved on. In early March, they signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), after more than a year of re-negotiation.

More than 20 TPP provisions, including many that reflected U.S. interest in protecting intellectual property rights, were suspended and do not now appear in the CPTPP. On the other hand, CPTPP does cover service sectors and agricultural products, unlike many other trade deals, and offers benefits for U.S. agriculture.

Much of the trade the CPTPP would cover already is, or soon will be, covered by other agreements, so its value may be as much political as it is strictly economic.

Japan claims to be eager to have the U.S. back in the TPP/CPTPP fold — in no small part because of China — but perhaps also because CPTPP as it stands would be more favorable to Japan’s exports of trucks and SUV’s to the big U.S. market than TPP would have been.

Japanese Prime Minister Abe is due to meet the president at Mar-a-Lago on Tuesday and Wednesday to discuss, among other things, why Japan, a close ally, was not exempted from steel tariffs as other countries were. He will also likely broach with President Trump how the U.S. could join CPTPP on terms that could be a win for both leaders.

After recently softening NAFTA demands, President Trump may also back off the May 1 deadline to impose steel and aluminum tariffs on Mexico and Canada if a new NAFTA agreement has not been reached. These two countries might then be inclined to support the U.S. rejoining CPTPP.

Most experts still deem it unlikely that all current CPTPP members will welcome the U.S. back with open arms, especially if the president makes tough demands. Last week, trade ministers from Australia, Japan and Malaysia made clear that they would welcome the U.S. joining the CPTPP, but that the U.S. should not expect substantial changes to be made. 

Second, while agricultural interests, farm-state members of Congress and some manufacturers are keen to rejoin the Asia-focused trade pact of Pacific nations, U.S. unions are not.

President Richard Trumka, head of the AFL-CIO union, which enthusiastically applauded President Trump’s withdrawal from TPP, responded to news that the U.S. might rejoin TPP that it “was killed because it failed America’s workers and it should remain dead."

Trumka’s statement signals that President Trump’s political base of blue-collar workers might see his reversal as a betrayal of campaign promises.

Last, and not least, President Trump has insisted by tweet that the U.S.: "Would only join TPP if the deal were substantially better than the deal offered to Pres. Obama. We already have BILATERAL deals with six of the eleven nations in TPP."

It is difficult to see how this could occur. TPP no longer exists, so we do not know how the administration will want to see CPTPP modified, nor how its members would respond. Six of 11 countries must ratify the current agreement for it to enter into force, already a demanding proposition.

Japan’s Abe, who propelled CPTPP forward, faces new challenges at home, and Japan’s farm sector has long resisted market-opening. CPTPP might be ratified sometime early next year. After that, all 11 current members must agree to admit a new member.

If the U.S. were to overplay its hand and its demands, it will make it hard for allies to seize the opportunity that President Trump has opened for a new approach to China, to the CPTPP and to multilateral trade.

While joining CPTPP would give the United States more leverage in the tariff battle with China — and limit damage to U.S. agricultural interests — doing so is no easy matter. CPTPP countries may “welcome” U.S. re-engagement,but  they will not welcome U.S. demands.

It was much easier for Trump to leave TPP, with all the collateral damage that caused, than it will be to rejoin its CPTPP successor, especially in a manner that provokes its members. The president abandoned TPP, which was more favorable to the U.S. than CPTPP is in its current state.

Joining CPTPP may prove neither “easy” nor tilted toward U.S. interests. It is welcome if the president is genuinely having a change of heart on trade, but if he pulls back, it will leave even more ill-will among our friends and allies. 

In thinking about how to join Pacific nations in the CPTPP, the administration should take the time to think it through. Trade interests and relationships are multi-dimensional, and dynamic. The U.S. needs allies to confront China and to fix flaws in the trading system. Trade is not a zero-sum game.

CPTPP countries have much to gain by the U.S. joining the agreement. They will welcome it, if we do it right. The administration would be wise to reach out to experienced trade and regional experts in the U.S. who could help the Trump administration chart a path that ensures a good outcome for U.S. interests.

A successful pivot on TPP could contribute to improving confidence in United States ability to lead in a complex world.

Stuart Eizenstat is the former U.S. ambassador to the European Union, undersecretary of commerce and international trade, undersecretary of state for economic, business and agricultural affairs and deputy secretary of Treasury in the Clinton administration (1993-2001). He was also the chief White House domestic policy adviser to former President Jimmy Carter (1977-81).

Anne Pence is a former international policy adviser to the State Department (1992-2005).