The Trans-Pacific Partnership Would've Isolated China and Allowed the United States to Shape Trade in Asia
Trump Pulled America Out of the Trade Agreement in 2017
The trade war initiated by Donald Trump doesn’t seem to have a clear-cut goal or exit strategy. There’s some hint that the trade war is part of the so-called “Mar-a-Lago Accord” or just following through on Trump’s tendencies when it comes to trade. Regardless of the logic behind the trade war, it demonstrates a particular economic illiteracy that is particularly concerning. The power wielded by one person over the economy should, quite frankly, be enough for Congress to reclaim its Article I, Section 8 authority. Sadly, House Republican leadership is doing everything it can to prevent votes to undo the damage Trump and his advisers have done and will continue to do.
Obviously, Trump has a particular disdain for China—the United States’ second-largest trade partner—against which his administration has imposed tariffs and retaliatory tariffs. The total tariff against imports from China is 145 percent. The tariff rate China has imposed on the United States in retaliation is 125 percent. A trade war is always a race to the bottom. The only person who doesn’t see that is Trump.
In the course of thinking about the tariffs, you can’t help but wonder what could have been if Trump hadn’t pulled the United States out of the Trans-Pacific Partnership (TPP). Remember that trade agreement? TPP was a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States, and Vietnam. Several other countries—including South Korea and Taiwan— had an interest in joining. We’ll turn to The New York Times to describe significance of TPP: “The Trans-Pacific Partnership, the largest regional trade accord in history, would set new terms for trade and business investment among the United States and 11 other Pacific Rim nations — a far-flung group with an annual gross domestic product of nearly $28 trillion that represents roughly 40 percent of global G.D.P. and one-third of world trade.”
The agreement had been in the works since 2008. Congress passed Trade Promotion Authority in 2015 as part of the Defending Public Safety Employees’ Retirement Act. This allowed the Obama administration to negotiate the agreement and paved the way for quick consideration in Congress. President Obama signed TPP in February 2016. Notably, Congress didn’t pass Trade Adjustment Assistance. The Senate included Trade Adjustment Assistance with the Trade Promotion Authority in H.R. 1314 and sent it to the House. Then-Speaker John Boehner (R-OH) allowed separate votes on Trade Adjustment Assistance and Trade Promotion Authority. Trade Adjustment Assistance was shot down by a vote of 126 to 302.
Why did Trade Adjustment Assistance fail? Well, Trade Adjustment Assistance is often viewed by conservatives as welfare. Essentially, it’s assistance provided to people who are affected by a trade agreement. It usually includes job training and benefits to help people as they look for a new career or new job. In the grand scheme of federal spending, this assistance isn’t that large of an expense. Congress spent $441 million on assistance in FY 2021.
Most House Republicans voted not only against Trade Adjustment Assistance, but also against inital Trade Promotion Authority H.R. 1314. In the end, 190 Republicans voted for the final version of Trade Promotion Authority included in the Defending Public Safety Employees' Retirement Act, which became law. (To make this even more confusing, H.R. 1314 did eventually become law as the Bipartisan Budget Act of 2015, but it didn’t include any of the trade provisions.)
TPP was important for the United States because it lowered tariffs in the countries that were part of the agreement, giving new or increased access to American-made goods in these markets. The National Association of Manufacturers even endorsed the agreement, despite some reservations, in part, because of China’s influence in Asia. President Obama said it best: “When it comes to Asia, one of the world’s fastest-growing regions, the rule book is up for grabs. And if we don’t pass this agreement — if America doesn’t write those rules — then countries like China will.” He was right.
That the thing about TPP. The geopolitics of the agreement were hugely important, perhaps even more so than trade liberalization that the agreement would’ve brought between the 12 countries and potentially others that may have joined. TPP would’ve used the considerable economic influence of the United States in Asia to keep China’s rising influence in check.
Within days of entering office, Trump pulled the United States out of TPP. Although Trump directed his administration “to begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages,” a trade agreement of the same scale with Asian nations wasn’t reached. There were separate but limited deals reached with South Korea in 2018 and Japan in 2019. There was also a deal reached with China in 2020, described as a “Phase One,” but the deal has obviously fallen apart since then.
TPP didn’t die. It was reimagined as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United Kingdom, and Vietnam signed CPTPP in March 2018. Much of CPTPP is the same as TPP, but there are key differences. After Trump pulled the United States out of TPP, the other countries involved revisited policy areas over which the United States had significant influence, including intellectual property rights, investment protections, and copyrights.
President Joe Biden had an opportunity to kickstart TPP. Unfortunately, the Biden administration preferred to create a new framework for trade, likely because of some of the differences between TPP and CPTPP that were less favorable to the United States. Since CPTPP was ratified, China has applied for membership. Granted, there’s a lot of skepticism of China from CPTPP countries, most notably Japan. However, Trump’s dumb trade war managed to bring China, Japan, and South Korea together on regional trade. Quite a feat, indeed.
It's highly unlikely that the United States comes out of the trade war ahead. A recession appears increasingly likely, and once reliable trade partners are looking to establish new relationships now that the leadership of the United States is looking shaky, at best. It’s hard to blame them. Trump’s trade war is a policy choice. The pain the United States will endure—particularly, lower to middle class families—is a policy choice. This trade war was brought on by the ignorance of basic economics and hubris.