Thursday

23rd Mar 2017

Opinion

How Trump will redefine trade with EU and Asia

  • China sees the Trans-Pacific Partnership (TPP) as collateral damage of Obama's failures and the Trump triumph. (Photo: Gary Skidmore)

After the US election, the current US free trade plans with the EU and Asia have been suspended. New and revised deals must fulfil the requirements of Donald Trump's incoming administration.

During his campaign, Trump threatened not only to renegotiate or reject Nato, but to pull the US out of free trade agreements.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Of course, election rhetoric is one thing, and incumbency another. Nevertheless, Trump may seek to keep his word to satisfy his core constituencies in the US.

Trump considers the North American Free Trade Agreement (Nafta) a disaster for ordinary Americans. As a result, he would like to pull US out of Nafta, and perhaps even the World Trade Organisation (WTO). Is that possible?

Trump relies on Nafta’s Article 2205, which would allow the US to pull out “six months after it provides written notice of withdrawal". The deal would remain in force for the remaining parties.

The article, in turn, relies on Title 2135 of the US Code on trade agreement termination and withdrawal authority, which empowers the president to “at any time terminate, in whole or in part, any proclamation made under this chapter”.

In future trade debates, Trump may well use the threat of termination and withdrawal.

Indeed, Trump’s strategic objectives for his first 100 days include free trade that he calls “good as long as it is fair trade”. He believes that US jobs have been lost because of trade deals that incentivised American companies to make things abroad, where environmental and labour protections are minimal and wages are low. Trump pledges to “reverse decades of policies that have pushed jobs out of our country”.

In this view, in their current forms, the EU-US Transatlantic Trade and Investment Partnership (TTIP) and the Asia-US Trans-Pacific Partnership (TPP) are history.

Struggle for free trade in Asia Pacific

Historically, the Trans-Pacific Partnership (TPP) came from a 2005 free trade agreement among Brunei, Chile, New Zealand and Singapore.

Since 2010, Washington has led talks for a significantly expanded free-trade agreement (FTA), which would be a “high-standard, broad-based regional pact” that reflects US alliances in Asia and Latin America – but excludes China.

Since the US election, some of Washington’s TPP partners have sought to push a revised TPP without the US before president Trump can tear up the agreement. Tokyo has a key role in the effort. Despite three lost decades and three years of massive monetary gamble, Japan lingers amid deflation and soaring sovereign debt.

So prime minister Shinzo Abe is seeking to save a version of TPP, a bilateral free trade deal with the US, or join China-led talks for another deal involving the South East Asian bloc ASEAN and its FTA partners Australia, China, India, Japan, Korea and New Zealand.

In turn, China sees the TPP as collateral damage of Obama's failures and the Trump triumph. After the US election, Beijing is also seeking support for an Asia-Pacific free trade area at the Asia-Pacific Economic Cooperation (APEC) summit president Xi Jinping will attend in Peru next week. This free trade proposal is an incarnation of a previous US plan.

In 2006, C. Fred Bergsten, then chief of an influential US think-tank, spoke for the Free Trade Area of the Asia Pacific (FTAAP), which would represent the largest single liberalisation in history.

Oddly enough, the Obama Administration rejected the inclusive FTAAP for the exclusive TPP. China’s view is that the FTAAP, which includes both the US and China, would better serve as a foundation for other regional talks.

Trump trade scenarios

It is high time for Brussels to wake up to the realities. Today, there are three Trump trade scenarios that pertain to the Nafta, the TTIP and the TPP.

Recently, Jean-Claude Juncker and Donald Tusk invited Trump to an EU-US summit in a desperate attempt to reignite the TTIP talks.

In this revised TTIP scenario, Brussels would redefine the current terms of the deal, which would be even less acceptable to most of the EU, but possibly acceptable to the US.

In the compromise scenario, Trump would not quash the proposed FTAs, but would redefine their basic terms, which Canada and Mexico, the EU and Asia-Pacific might ultimately consider a lesser evil than full termination.

In the withdrawal scenario, Trump would push for termination, which would bury the proposed FTAs - but might leave the door open for new deals that would be more acceptable to his administration.

After the 2008-2009 recession, the Trump triumph is neither the first nor the last in the series of nativist political wins in major advanced economies. More will follow in the next few years, particularly in Europe.

In the process, the political weight of those who drafted the initial TTIP in Brussels may well diminish, or vanish.

The times they’re changing.

Dr Dan Steinbock is guest fellow of Shanghai Institutes for International Studies (SIIS), a leading global think-tank in China. This commentary is based on his SIIS project on “China and the multipolar world economy.”

Obama and Merkel defend free trade

The US and German leaders have said TTIP was a chance to “shape globalisation based on our values”, amid fears that Donald Trump would unravel trade and security relations.

EU delays decision on trade defence

Trade ministers send a discussion on the level of import duties back to diplomats, also admitting that TTIP talks with the US are "in the freezer".

Steel overcapacity crisis - from Europe to China

While the debate has escalated about China’s steel overcapacity, it is not exactly new. The first postwar steel crisis occurred in the US and Europe. Beijing seeks to avoid a deja vu of bad policies.

Magazine

Trump: The day that shook the Western world

The election of the property magnate after a campaign marked by racism, sexism and "post-truth" arguments will have consequences for EU security, politics and public debate.

News in Brief

  1. EU summons Turkish envoy over threats to Europeans
  2. British police make first arrests in London terror probe
  3. EU commission has received Facebook reply on WhatsApp
  4. Rome expects thousands of protesters at summit
  5. Dijsselbloem says his comments had 'Dutch directness'
  6. Ukraine spy agency bars Russian Eurovision singer
  7. Turkish president Erdogan threatens Europeans
  8. Russia invites EU diplomats to occupied Crimea

Stakeholders' Highlights

  1. EJCExpresses Concern That Extremists Still Have the Ability and Motivation to Murder in Europe
  2. European Gaming & Betting AssociationAudiovisual Media Services Directive to Exclude Minors from Gambling Ads
  3. ILGA-EuropeTime for a Reality Check on International Day for the Elimination of Racial Discrimination
  4. UNICEFHuman Cost to Refugee and Migrant Children Mounts Up One Year After EU-Turkey Deal
  5. Malta EU 2017Council Adopts New Rules to Improve Safety of Medical Devices
  6. Nordic Council of MinistersNordic Energy Research: How to Reach 100 Percent Renewable Energy
  7. Party of European SocialistsWe Must Renew Europe for All Europeans
  8. MEP Tomáš ZdechovskýThe European Commission Has Failed in Its Fight Against Food Waste
  9. ILGA-EuropeEP Recognises Discrimination Faced by Trans & Intersex People
  10. Nordic Council of Ministers25 Nordic Bioeconomy Cases for Sustainable Change
  11. Malta EU 2017Consumer Protection Laws to Be Strengthened by EU-Wide Cooperation
  12. European Free AllianceSupporting Artur Mas: Democracy and Freedom Cannot Be Convicted

Latest News

  1. Ending the migrant deal with Turkey may save the EU
  2. Poland unlikely to face EU discipline on rule of law
  3. Rutte courted Wilders' voters, now he must deliver
  4. Barnier to UK: trade talks will come after settling accounts
  5. EU declaration to voice unity in troubled times
  6. Terror attack shuts down UK parliament
  7. Catalonia and Scotland at core of Europe's geopolitical conundrum
  8. La présidentielle française sous cyber-alerte maximale

Stakeholders' Highlights

  1. UNICEFSyria Conflict 6 Years On: Children's Suffering at Its Worst
  2. International Partnership for Human RightsDomestic Violence in Tajikistan: Time to Right the Wrongs
  3. European Trust SummitCorporate Strategy and Public Affairs in a Low-Trust World - Conference 31 May
  4. GoogleDigital Transformation in the Mobile Era: New Skills, Jobs & Growth - Debate 28 March
  5. UNICEFNew Law in Hungary on Detention of Migrant Children Raises Alarm
  6. Malta EU 2017Agreement Reached to Involve Consumers in Financial Services Policymaking
  7. Nordic Council of MinistersNordic Cities Gather Against Violent Extremism & Introduce Nordic Safe Cities
  8. World VisionFears and Dreams of Syria's Children and Their Peers Around the World
  9. Malta EU 2017Maltese Presidency and EP Agree on Visa Liberalisation for Ukraine
  10. Mission of China to the EUEU Window Chinese Government Academic Scholarship 2017/18 - Apply Now
  11. Nordic Council of MinistersNordic Countries Lead the Way on Women's Economic Empowerment
  12. Center for Data InnovationBuilding Smart Cities for Tomorrow's Data Economy – 28 March - Brussels