America's Asian allies view NAFTA as litmus test for US leadership

America's Asian allies view NAFTA as litmus test for US leadership
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The fate of NAFTA goes much beyond trade in North America.

Hong Kong’s South China Morning Post aptly marked the launch of the North American Free Trade Agreement (NAFTA) re-negotiation with a cartoon featuring Uncle Sam boxing a red-shorted fighter marked “NAFTA” while a large Chinese panda looks on.

Recent travels by the author in South and Southeast Asia have confirmed that the Trump administration’s decision to re-open and possibly scrap the agreement is reverberating globally. 

In Myanmar, for example, a discussion about NAFTA with a senior business leader ended with a plea that America does not abandon them.

In a recent panel discussion in Sri Lanka, a top economic advisor from India cited the NAFTA re-negotiation as evidence of American retrenchment and as justification for India shelving further trade liberalization.

In Vietnam, still smarting from the Trump administration’s abandonment of the Trans-Pacific Partnership (TPP), the NAFTA re-negotiation is viewed as a litmus test for America’s engagement in the world. 

Countries near and far are wondering whether America’s abandonment of leadership on trade will lead to a retrenchment in other areas, most notably security. Faced with a growing, assertive China, the countries of South and Southeast Asia are particularly concerned with this question. 

They fear that if the United States is willing to destroy its long-standing commercial framework with Canada and Mexico, its closest neighbors, it will not hesitate to walk away from commitments with more distant countries. 

While the United States recently has scheduled regular “freedom of navigation” missions in the South China Sea and has deepened defense cooperation with Vietnam, uncertainty about the Trump administration’s intentions persist. After all, American leadership in the post-war era has been about much more than military assets. 

Each day, policy makers throughout Asia make calculations about confronting versus cooperating with China. An active, engaged America allows countries a much greater scope to resist Beijing’s demands. A collapse of NAFTA would bolster the harsher interpretations of the Trump administration’s “America First” doctrine. Many Asian policy makers may therefore consider tacking more toward China’s orbit. After all, China is geographically a lot closer than America. 

So what should the Trump administration do to avoid a diminution of America’s reputation?

First, it needs to recast the NAFTA talks in a non-zero sum manner. President Trump should consider desisting from future threats to pull out the agreement. Negotiators also need to develop a robust NAFTA modernization package (and corresponding narrative) that covers key areas such as e-commerce, trade facilitation and regulatory cooperation. 

In addition, America should champion the development of a North American Commercial Cooperation Agreement that can sit along of side NAFTA. It could include a variety of elements, including coordinated investigations of unfair trade practices by third countries (especially China), collaboration on cybersecurity, and the establishment of a new mechanism to fund trade-related infrastructure.

The message to the rest of the world is that if America will work with its neighbors to address pressing regional and global challenges, then perhaps it can be counted on to work with them. 

Second, Trump is scheduled to travel to the APEC Leaders Summit in Vietnam in November. This will be a crucial opportunity for a critical group of leaders to hear directly from the president about his vision for trade and cooperation. Given its important signaling qualities, he will need to clearly explain the context around the NAFTA negotiations. 

It also behooves the president to arrive in Vietnam with at least the outlines of a strategy for post-TPP relations in Asia. With the launch of the so-called “TPP-11” negotiations — the original members minus the United States — likely on the margins of APEC, the absence of U.S. leadership would only be amplified. 

The president needs a bold plan that perhaps could be built around bilateral free trade negotiations with Vietnam — a crucial ally — and a deeper framework of cooperation with ASEAN. Failure to engage would be disastrous as would as the abandonment of existing commitments, such as the U.S.-Korea Free Trade Agreement. 

Twenty-five years ago, the negotiation of NAFTA set off a wave of free trade agreements around the world. A quarter century later, NAFTA’s destruction would similarly reverberate. Nothing short of America’s global standing is now on the line.

Eric Miller is president of Rideau Potomac Strategy Group, global fellow at the Woodrow Wilson Center, and fellow with the Stimson Center’s “Trade in the 21st Century Program.”