Politics

Massive 11 Country Trade Deal Goes into Effect Tomorrow – Without the U.S.

Published on December 29, 2018 by Athena Pallas

President Trump pulled the United States out of a multinational trade deal that goes into effect tomorrow to the benefit of 11 countries, including Canada, Japan, Mexico, and Australia. That trade deal, originally called the Trans-Pacific Partnership (TPP) when the U.S., under the Obama administration, committed to being part of the trade agreement, was renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) after President Trump withdrew the United States from it.

Among the benefits of the agreement is a gradual phase out of trade tariffs among the countries that are signatories, taking place over a period of 15 years. The phasing out of tariffs of course gives an advantage to businesses operating in countries that are part of the agreement which are seeking to send their products into other countries in that agreement. That of course also means a disadvantage for countries that did not sign the agreement, including the U.S., where some companies, including Tyson Foods and Welch’s, are already complaining that Trump’s withdrawal will put them at a disadvantage. According to CNN:

A major 11-country agreement goes into effect Sunday, reshaping trade rules among economic powerhouses like Japan, Canada, Mexico and Australia — but the United States won’t be a part of it. That means that Welch’s grape juice, Tyson’s pork and California almonds will remain subject to tariffs in Japan, for example, while competitors’ products from countries participating in the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership will eventually be duty-free. Japan will offer similar tariff relief to the European Union, in a separate trade deal set to go into effect on February 1. “Our competitors in Australia and Canada will now benefit from those provisions, as US farmers watch helplessly,” said US Wheat Associates President Vince Peterson at a hearing on the potential negotiations with Japan…Tyson Foods and Welch’s have both complained to the US Trade Representative’s Office about how their products will be at a significant disadvantage around the world if no action is taken.

The TPP was originally seen by the United States as a key component of a strategy to respond to Chinese economic influence in the Pacific region, but President Trump, instead of continuing a long U.S. tradition of multilateral, mutually beneficial trade agreements that often work to lower or eliminate tariffs, has decided to go for bilateral agreements, along with the threat and actuality of the imposition of tariffs. Many economists disagree with Trump’s methods and do not believe they will lead to economic success for the United States. Of course another problem with Trump’s tariffs is that they may represent an abuse of power – the president only has the authority to impose tariffs without congressional approval for reasons of national security. So Trump has stated that national security is his rationale for the imposition of tariffs, even against countries like Canada and the EU, but it is neither accurate nor reasonable to describe these key allies as national security risks.

The signatories to the CPTPP, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, have left open the possibility of additional countries, including the U.S., joining the agreement at a later date. Phil Levy, a senior fellow at the Chicago Council on Global Affairs who served as a senior economist for trade under President George W. Bush described this opening by saying, according to CNN, “They’re trying to say, ‘We’re moving forward and we hope you come to your senses at some point and join us, too’.” The U.S. coming to its senses about the CPTPP seems very unlikely to happen while Donald Trump is president, however.

Featured image by G20 Argentina – Fotos en la sede de la Cumbre via Wikimedia Commons.