Economics & Trade Policy Global Global Policy Studies & International Security

Trade Wars and Trump: Why the U.S. Might Rejoin the TPP

Thursday morning, President Donald Trump announced that he had directed his economic adviser Larry Kudlow and U.S. Trade Representative Robert Lighthizer to look into rejoining the Trans-Pacific Partnership (TPP). To remind readers, the TPP was the subject of bipartisan scrutiny during the 2016 election cycle – every major candidate denounced the deal. President Trump withdrew the U.S. from the TPP within days of assuming office, a decision that was praised by certain American industries.

Rejoining the TPP is a major policy reversal, and the big question is: why now?

Trump’s policy flip-flop is, first and foremost, the result of a looming trade war with China. New tariffs on over 120 U.S. goods, many of which are food products like pork, fruit, and wine, pose a tremendous threat to American agriculture. Farmers and ranchers will suffer heavy losses, and consequently, the average American will see these tariffs in the form of higher bacon prices at their local grocery store.

The TPP will protect our agricultural industry from Chinese tariffs. Past estimates stipulated that the TPP would add an additional $4.4 billion to net farm income annually. Tariff reductions will increase trade of U.S. food goods, and international marketing opportunities are purported to create over 40,000 new jobs. In short, the TPP will protect and grow American agriculture in a critical time.

In addition to reassuring farmers, rejoining the TPP also reassures critics of Trump’s trade policy. In the last few months, Trump’s seemingly erratic economic decision-making has garnered criticism from both sides of the aisle. The idea of rejoining the TPP in the eleventh hour is being praised by those wary of repercussions to Trump’s imposition of a 25% tariff on steel imports and a 10% tariff on aluminum imports.

Aside from the immediate concerns that provoked this policy reversal, (i.e. shielding the U.S. economy from a trade war and the Trump Administration attempting to compensate for potentially disastrous fiscal policy), rejoining the TPP allows the U.S. to reap the original benefits that the deal offered. It brings the U.S. back into the picture of Asian economic integration, decreases regional dependency on China, and grows the American economy. In my last article, The TPP Precedent and the RCEP Reality, I broke down the original objectives of the TPP:

  1. Reduce and remove tariffs over 30 years
  2. Enforce reforms for state-owned enterprises (SOEs)
  3. Increase connectivity and data sharing between partied states
  4. Enhance opportunities for service industries in developing nations
  5. Enforce high labor and environmental standards for all partied states

The TPP imposes higher standards for government-controlled industries, intellectual property, labor, and the environment in all partied states, and it sets an international precedent for engaging in these reforms. If we can hold nations like Vietnam and Malaysia to these standards, perhaps the world will hold China to a higher standard as well. Additionally, the deal helps bolster the U.S.’s vital strategic position as a regional leader in the Asia Pacific.

If the U.S. does choose to rejoin, what would re-entry look like?

It is unclear how willing other states would be to renegotiate if the U.S. decides to re-enter. In the last year, the remaining 11 states have engaged in near-fatal renegotiations, but were able to resurrect the deal as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The new name comes with some revisions. With the U.S. no longer at the table, other partied states chose to suspend some provisions that were U.S. priorities – namely, provisions on intellectual property. These provisions were only suspended, not revoked.

Some say that our seat is still open if we want it. Even with these suspensions, the ‘weakened’ IP regulations stipulated in the CPTPP are still the most stringent in the world. Even more impressively, the most transformative sections of the deal – SOE reform, information-sharing requirements, e-commerce and digital protections – were left wholly untouched.

Ultimately, there is a possibility that if the U.S. decides to re-enter the deal, we will have to sign on to the CPTPP as is. However, I think it is worth noting that we chose to walk away from the table. If we choose to sit back down, we might have to play with the hand we’re dealt. But it’s definitely still a winning hand.

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