Why Japan is the best path for a true ‘America First’ trade deal
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Less than two weeks have passed since President TrumpDonald John TrumpHouse Republicans move to block Yemen war-powers votes for rest of Congress Trump says he's considering 10 to 12 contenders for chief of staff Michael Flynn asks judge to spare him from jail time MORE’s inauguration, and he has been off to a vigorous start with the signing of numerous executive orders, from immigration restriction measures to ObamaCare repeal.

Additionally, the president has granted a death blow to the Trans-Pacific Partnership (TPP) that he promised during the campaign to eradicate. This action should be no surprise; indeed, both Donald Trump and Hillary ClintonHillary Diane Rodham ClintonRoger Stone challenges Dems to produce WikiLeaks evidence Steve King asks Google CEO for names of employees to see if they're liberals O'Rourke edges out Biden in MoveOn straw poll MORE opposed the TPP, despite the latter’s early support. Nevertheless, Trump’s executive order last week illustrates his distaste of multilateral trade agreements that, he contends, cost millions of American manufacturing jobs over the past couple of decades. 

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While Trump has not backed down from his campaign promises to protect American workers and industries, it would be incorrect to label his presidency as anti-trade. 

 

Notably last week, the president declared his support for future bilateral trade deals that give the United States more leverage in future negotiations. After meeting with British Prime Minister Theresa May on Friday, it would be easy to fathom a robust post-Brexit trade deal between America and her transatlantic cousin, devoid of the difficulties that preclude a multi-party pact such as the Transatlantic Trade and Investment Partnership (T-TIP).

T-TIP, another essentially dead trade deal, was stymied by similar hurdles: its fragile political bloc was fraught with internal disagreements among members of the European Union. Bilateral trade agreements could potentially reduce the complexity of the deal itself, by focusing on the priorities of two parties versus a myriad of interests encompassing a TPP-like structure.

Which countries, then, should we expect the new administration to prioritize within such bilateral trade agreements?

The United Kingdom appears to be a natural fit, given our “special relationship” and the British need for a post-Brexit partner following the divorce from Europe’s common market. Perhaps May calculated that overseeing Britain’s exit from the European single market, which will undoubtedly cause disruptions, would be buttressed by a larger future commitment by America, whose current president sympathizes with the “leave” campaign. 

Before the new administration engages Britain on any trade agreement, however, we should recognize that the United States would likely benefit far less than the United Kingdom in a future deal.

For one, overall trade between the U.S. and the U.K. is relatively meager, with approximately $100 billion in goods traded between the countries last year. That is about 20 percent of our trade in goods with America’s largest trading partner, Canada. We even run a small trade surplus with Britain — a fact that should delight President Trump.

A new U.S.-U.K. free trade agreement would increase two-way trade in goods, but Britain will undoubtedly use such an agreement to enhance capital formation, thereby ensuring the predominance of London as the global financial services leader. Do we really want to spend years in negotiating a free trade deal with the United Kingdom, only to see us subsidize their banking industry, albeit with a marginal bump in exports manufactured by hardworking Americans? 

Clearly, Britain has a lot more to gain from a trade deal than the United States. Donald Trump, a legendary dealmaker, should recognize this truth and not rush into any agreement, given America’s overarching leverage. 

Working on any particular free trade deal raises the opportunity cost of not pursuing a more advantageous bilateral agreement with another partner. We have witnessed the harsh realities of fruitless negotiations during the Obama administration, given the now-defunct status of the TPP following years of talks. If such trade negotiations unravel in the case of the U.S. and Britain, we would have expended much time and political resources that could have been put toward sealing a more impactful deal for American workers.

So, then, which country presents the best opportunity for a free trade agreement that the Trump administration should consider first and foremost? Look no further than Japan.

Currently, the United States is Japan’s largest export market, but we have a substantial trade deficit of over $60 billion with the Asian country. Trump himself has indicated numerous times in the past year that Japan has protected its own industries at the expense of American workers. While this is true to some extent, such as in the auto and steel industries, the trade deficit could be narrowed if an agreement were reached that incentivized certain U.S. industries.

Take, for example, the medical instruments sector: According to the Office of the U.S. Trade Representative, medical instruments accounted for the largest export segment to Japan from the United States. Given Japan’s rapidly aging population, demand for these goods should continue to blossom, and American workers could benefit from a U.S.-Japan trade deal that eased barriers to such exports.

Additionally, we should continue to support efforts from Japanese manufacturers such as automakers that seek to build plants in America. Based on estimates from the Japanese Automobile Manufacturers Association, approximately three out of every four Japanese cars sold in America last year were made in the USA. We should encourage the Japanese automakers to continue building plants in America that provide thousands of manufacturing jobs.

A U.S.-Japan free trade agreement would seal a renewed partnership between two of the three largest economies in the world. Shinzō Abe has already signaled his strong desire to work with the new president, as he made clear during his visit to Trump Tower shortly after the election. He will be visiting Washington in early February once again.

President Trump has an extraordinary opportunity to ensure the Japanese prime minister knows we are interested in revisiting the essential components of the TPP, which has been viewed as a U.S.-Japan agreement at its core. Only this time, we could make a bilateral trade deal that truly puts “America First.” 

 

David Karg is an international business development consultant at Checkmate IQ, where he is managing director.


The views of contributors are their own and are not the views of The Hill.