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Talking Trade blog

US presidential politics sours further on the trade front

Published 09 March 2016

Yesterday’s New York Times carried a front-page article that neatly captured the inside-out world of the US presidential campaign season for trade watchers.  The article highlighted both Donald Trump’s bashing of Japan’s trade policies and the increasing concern within Tokyo over this potential narrative.

Where to begin with reactions to this story?

First, perhaps to Japan—get in line.  Anyone with an interest in trade has been watching the Trump campaign (especially) with a growing sense of unease or even horror for a long time. 

This is a candidate, of course, who has already threatened to slap China with 45% tariffs on all products shipped to the United States.  This would, Trump has claimed, stop China from unfairly dumping products into the American market. 

It’s not entirely clear, but it seems that he expects that, if China were not “unfairly dumping” all these products into the US market, then the goods would be made in the United States by American workers?  Or perhaps he just wants Americans to pay an additional 45% for goods?  Or shift production to some other country like Vietnam or Myanmar?

At the same time, the Financial Times is reporting the largest collapse in Chinese trade in years, with exports and imports plunging faster than at any time since 2009.  The IMF is now warning of the risk of “eminent economic derailment.”

Whatever the original justification might have been for wanting to impose huge tariffs on Chinese imports, in such stagnating conditions, such a policy would be doubly disastrous.  But logic is not a key element of Trump’s brand.

For Japan specifically, Trump has long claimed that Japan practices a host of “unfair” policies, including manipulating its currency to keep it artificially low. 

One huge irony, of course, is that Japan is embarking on some of the biggest changes in domestic policy in a very long time as a result of commitments made in the Trans-Pacific Partnership (TPP) agreement.  These will include tackling sensitive issues in agriculture and services, revising regulations, and changing legislation to bring Japan into compliance with this 12 party agreement.

Japanese leaders have decided to proceed with the TPP precisely because such reforms are necessary to achieve higher levels of economic growth after a prolonged period of domestic stagnation. 

In the face of impressive political courage in Tokyo, Donald Trump has instead raised the specter of old ghosts from decades ago.  Others may start to pick up and run with his ideas as well.

In the 1980s and 1990s, when Japan was experiencing rapid economic growth, the two countries came perilously close to important trade “wars” over issues like autos and auto parts, construction, and insurance.  Trump’s language now restarts some of the same debates of this time period and may make it harder for Japanese officials to take critically important bold steps at the domestic level.

Equally alarming, of course, is that Trump is not alone in his comments.  Although, in typical Trump fashion, he has gone much further out on a branch than anyone else, other top political contenders for the position of US president are also bashing trade in general.

Ted Cruz, another top Republican party contender, once backed his party’s stance in favor of freer trade.  He had been a supporter of Trade Promotion Authority (TPA).  However, once he became a candidate for President, he suddenly switched his stance on the issue last summer and voted against the bill in the Senate. 

On the other side of the aisle, Democrat Bernie Sanders is strongly against trade.  He argues that trade agreements have done untold damage to American workers in the past and will continue to harm their prospects in the future.

Hilary Clinton was, of course, a frequent and vocal supporter of trade and of the TPP in particular when she was serving as President Obama’s Secretary of State from 2009-2013. 

When she began her run for president, she was as non-committal as possible.  Generally she argued that she needed time to study the deal before she could declare her position.  Once the texts were released in November 2015, however, this became harder to defend. 

In addition, with Sanders running an unexpectedly strong campaign, Clinton was forced to tack left of where she had likely hoped to remain.  This appears to have pushed her to make recent statements on the TPP particularly complaining as well about possible currency manipulation by key trading partners (not all of whom are also TPP members). 

Other areas of concern for her are state-owned enterprise behaviors, lax American enforcement of existing rules, and tax avoidance by American companies.  (See her recent op-ed for details.)

In short, the entire slate of top contenders for the US presidential office are either clearly hostile to trade and the TPP or are, at best, not supportive of the agreement “in its current configuration.” 

This is a problem.  Not just for businesses in the United States, but regionally and globally, as many stand to reap considerable benefits from the implementation of the TPP.  The agreement cannot come into force without the Americans. 

What to do?  We have been suggesting that the best pathway is to have the US Congress vote on the implementing legislation for the TPP as soon as the ITC issues its report in May and before Congress leaves for the summer recess. 

Most people would regard this as a crazy strategy.  Voting on a complex trade bill ahead of a general election is not seen as a sensible approach for candidates.  But this is not, as we have clearly seen, a normal election cycle either.  With all candidates at the top of the ticket lukewarm or hostile to trade, waiting to get approval for TPP is looking increasingly problematic. 

In the upside-down world of today, the TPP might not cost as many votes as might otherwise be expected either.  Voters are making decisions based on a lot more than the usual criteria. 

Hence, holding the TPP vote early and getting it out of the way may look increasingly possible.  But this will only happen if members of Congress believe that there is sufficient support from the business community to justify the vote. 

So call or write Congress.  Today.  Even if you are not American.  Don’t pass it off to your GR or PR person.  Do it personally.   And ask others to do so as well.  Congressional staffers count the number of times members are contacted and aggregated numbers are critical.

The TPP matters to too many in the broader trade community to let this fall down over narrow parochial concerns in a handful of districts or, even worse, nonsensical policy based on a misreading of facts from 25 years ago. 

© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).

Dr. Elms is Head of Trade Policy at the Hinrich Foundation in Singapore. Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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