A Bit More Detail

Assorted Personal Notations, Essays, and Other Jottings

[LINK] “Trump’s Gift to China”

Bloomberg View’s Michael Schuman notes that the end of the TPP leaves China in a stronger position relative to the United States, economically and geopolitically. Among other things, new China-centered trade arrangements seem likely to fill the void left by Trump’s protectionism.

A successful TPP would’ve bound important economies around the Pacific Rim, from Japan to Vietnam to Chile, more closely to the U.S., while solidifying America’s presence in the most vibrant and vital part of the global economy. Asian nations now have every reason to question U.S. commitment and staying power, not to mention the promises of its leaders. Several will focus their energies on China’s own free-trade pact for the region, which will increase rather than decrease their dependence on the Chinese economy. If Trump asks for their backing to roll back Chinese expansionism, they’re unlikely to answer the call.

By contrast, a successful TPP would’ve put pressure on China — which isn’t a signatory to the pact — to respond. In theory, to compete, it would’ve had to open its markets further to foreign companies and begin abiding by rules of trade and business written in Washington. (Indeed, at least some reformers in China privately welcomed the deal as a means of encouraging liberalization at home.) Trump’s threats of tariffs are unlikely to accomplish the same goal.

And if nothing else, why would a supposedly sly negotiator voluntarily give up one of his most powerful points of leverage? Even if Trump genuinely hated the TPP, he could’ve maintained an air of uncertainty about his intentions (this, at least, he seems to excel at). Instead he’s shown his hand before any real bargaining with China has begun. So much for the art of the deal.

If you think none of this matters very much, then you’re dealing in “alternative facts.” The future of American business lies in Asia, where hundreds of millions of people are getting richer by the day. U.S. exporters need access to these markets. Businesses need clarity of rules across borders and the ability to build inexpensive and reliable supply chains. Bilateral free-trade agreements, which Trump claims to favor, won’t suffice.

And what about the jobs threatened by the TPP? Well, the pact would indeed have killed off some jobs — in China. By awarding preferential treatment to exports from China’s low-cost competition, especially Vietnam, the TPP would likely have greased the flow of manufacturing jobs out of the mainland. That would’ve placed extra strain on a Chinese economy already struggling with fading competitiveness, an aging workforce and slowing growth.

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Written by Randy McDonald

January 25, 2017 at 10:30 pm

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