America Alone – US trade policy under Trump

10 mins. to read
America Alone – US trade policy under Trump

The Trans-Pacific Partnership is up and running – without America. The trade war with China continues. Is Mr Trump’s trade policy making America greater or weaker – and what is behind it?

Pacific sunrise

At midnight in Auckland on New Year’s Day the world’s newest club opened for business. The Comprehensive Agreement for Trans-Pacific Trade Partnership (CPTTP) went live with eleven member nations, namely: Japan, Singapore, Mexico, Australia, Canada and New Zealand, all six of which have already ratified the treaty, plus Vietnam, Malaysia, Peru, Chile and Brunei which are yet to ratify. The Pacific Eleven will account for about 13.5 percent of global GDP – that’s more than the EU post-Brexit and that figure is rising even as the EU share of global GDP declines. South Korea, Thailand and Taiwan have also expressed an interest to join.

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The CPTTP will eliminate virtually all tariffs on goods traded between these nations in stages. In addition, it seeks to erode all non-tariff barriers such as regulatory restrictions, though these are always more problematic to remove entirely. The pact provides for trade in services on the basis of equal treatment. It cuts the cost of customs clearance, rules of origin and compliance.

Japan’s Prime Minister Abe famously invited the UK to join CPTTP last year. Dr Fox, the UK trade minister has expressed enthusiasm. But the UK would not be able to join CPTTP so long as we remained inside the EU customs union – as the May-Barnier deal envisaged at least temporarily – and as apparently the Labour party now wishes to perpetuate indefinitely.

One strong appeal of British membership of CPTTP is that it would re-connect the UK commercially with the three other CANZUK nations – Canada, Australia and New Zealand – who share a common language, system of law and head of state with the UK. From there they would no doubt be further evolution of those deep bonds: some have proposed future freedom of movement between those four nations, not least former Australian prime minister Tony Abbott.

Outside the tent

Mr Trump’s United States is not a member of the new trading bloc. The irony is that it was a team of US trade specialists which drafted the original text of the agreement under the Obama administration, basing compliance on US standards and practices. The idea was that it would be the US, and not China, which would write the rules on global trade in the 21st century. Under the Obama administration T-TIP (as it was then called) was a key part of US foreign policy. It would fulfil Mr Obama’s notion of an Asian pivot – a focus on Asia at the expense of Europe – which would underpin the network of military and diplomatic alliances that America sustains around the Pacific Rim.

I am actually writing this piece in beautiful Hawaii (the 50th State of the USA and home to the US Pacific fleet). My visit here has brought home to me that America is as much a Pacific power as an Atlantic one – in fact, more so. Trade between China and the US – the largest single trading relationship in the world, worth nearly $1 trillion a year – is largely facilitated by means of the millions of containers which are shipped mostly from Shanghai to container ports at Long Beach (Los Angeles), San Francisco and Seattle. (It is mostly in that direction.) America’s second largest trading partner, Japan, sends its exports to America through many of the same international waters. Just look at the map.

So T-TIP was to have been a key tool in the USA’s most important foreign policy goal of the first half of the 21st century – the containment of China. But Mr Trump did not see it that way and scuppered America’s involvement soon after taking office in January 2017, describing T-TIP as a “potential disaster” for American workers.

Mr Trump’s critics, such as the Peterson Institute in Washington, are already saying that he has made a huge strategic blunder. One view is that Mr Trump and his key trade advisors – Commerce Secretary Wilbur Ross and Trade Advisor Peter Navarro – thought the Pacific trade deal would come to nought without the participation of the USA. Instead, the Pacific countries actually speeded up negotiations. Now, farmers from Washington state exporting apples to the fruit markets of Tokyo will be undercut by New Zealand producers who will not be subject to tariffs.

To make matters worse, the Chinese have begun to make noises suggesting that China might like to join CPTTP. That is not likely to happen since China would have to conform to the now-agreed standards – and it would fundamentally tip the balance of power within the CPTTP arrangements: so it is not at all clear that the Pacific Eleven would welcome China. The Chinese may have wanted just to tweak the lion’s tail; but the vulnerability of the USA has been exposed – or so say Mr Trump’s critics.

The reason why Mr Trump calculated that America is better off outside the Pacific partnership is that any trade bloc would be a constraint on America’s options. In Mr Trump’s world view, great nations should never relinquish the right to impose tariffs on trading partners who are getting “a better deal”, as he would see it. He abominates multilateral arrangements which always require subservience to some kind of supranational judiciary (a classic oxymoron, since justice can only be administered at the level of the nation state).

On the other hand, Mr Trump is quite open to bilateral trade agreements so long as they are to America’s advantage. There are many British, pro-American Brexiteers – myself amongst them – who have reservations about a UK trade deal with Mr Trump’s America.

One Belt, One Road

Before Christmas, a 90-day truce was agreed in the US-China trade war. The US agreed to suspend the imposition of new tariffs on an estimated $200 billion of Chinese goods at a rate of 25 percent, leaving them at 10 percent for now. Mr Trump tweeted in January that there is every possibility of a satisfactory resolution to the trade dispute – one that will significantly reduce (though not entirely eliminate) China’s trade surplus with America.

That outcome, while good short-term for America, will put renewed vigour into China’s One Belt One Road initiative (previously rather more intelligibly known as the New Silk Road). This is President-for-Life Xi’s overwhelming plan to re-instate the People’s Republic of China as the successor to the Ming dynasty Chinese Empire. Only, this time – bigger.

The main thrust of One Road is to lock dozens of Central Asian and East African states into China’s technical and financial orbit by rolling out massive infrastructure projects for these developing nations, gratis. As I have shared many times before in these pages, there are far more Chinese workers labouring on the Mombasa-Kigali railway line than Kenyan. Moreover, I am told by people who know about these things that many of the Chinese “engineers” working on these projects are in fact intelligence officers…

In liberal America, and in ultra-liberal Europe (and especially in Britain’s The Guardian), the supposition is that if Trump hates China, and they hate Trump, then China must have something going for it. My enemy’s enemy must be my friend. As Mr Trump tries to redress the trade balance with one of the most protectionist nations in the world, China is lauded in ghastly Davos by the Western globalist financial Mafiosi as the sine plus ultra of free trade…

China’s rise, thus far, has been relatively peaceful (unless you happen to live in Tibet or Xinxiang); but, as I pointed out recently, China’s leaders are becoming more strident in tone – even threatening war. China has been vigorously infiltrating universities in Australia and New Zealand, using naturalised students of Chinese heritage as a kind of Trojan horse called the Confucius Institute. China is increasingly intimidating its critics abroad – just look at its bullying tactics towards Canada of late.

Beyond trade

If the globalist elite who run the World Bank and IMF and who dominate the freemasonry of international finance find Mr Trump’s economics and trade policy intemperate, there is an academically respectable counter-argument that globalisation has gone too far.

As Rory Sutherland recently pointed out[I] the promotion of the free movement of people, the launch of trans-national currencies, large scale immigration resulting from successive spurious “refugee” crises (we know that most refugees are in fact economic migrants), the progressive diminution of national sovereignty through multi-national trading arrangements (of which the EU is the most rampant) – even allowing China to join the WTO – all these things were imposed on the populations of supposed “democracies” by an ideologically motivated elite with very little public consultation. These policies were formulated by economists who often show little understanding of history or of human psychology. There was simply too much change in a matter of just half a human lifespan.

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Mainstream economics cares little for the issue of national identity. As a result, some years ago American economists George Akerlof and Rachel Kranton put forward a theory which they called Identity Economics. According to this approach, people’s pride in their collective identity can be considered as an analogue of wealth – an intangible asset, if you will. People seek to grow and protect this national pride for their own emotional well-being just as much as they seek to protect their savings.

When you strip people of this collective pride, or sense of mutual cooperation (it’s not just waving Union Jacks at the Last Night of the Proms but also the sentiment of common purpose shared with your neighbours) that has the same impact on their emotional well-being as depriving them of their earnings.

Human society has evolved over the last million years or so such that we receive psychological benefit from shared allegiances which entail common bonds and obligations. At its worst, this can manifest itself in tribalism – one manifestation of which is what these days we call racism (though it has been around for millennia). At its best, it confers the sense of collective joy when your team triumphs over adversity – as when England fought back to win against Japan at Twickenham last November. (Many congratulations to the Japanese who played magnificently – in the first half, at least.)

As Rory Sutherland writes: “Economics is obsessed with the gains arising from scale. But identity does not scale easily or quickly”. So, for example, whatever your view of the UK Leave-Remain debate, the fact is that the overwhelming majority of British people do not feel European (whatever that is). Similarly, Americans have a fundamental notion of their own distinct identity – and it does not involve outsourcing their precious constitutional right to formulate laws to some remote supranational bureaucracy.

The globalists are trying to equate Mr Trump’s policies and those of all so-called populists (though I hate that term) like Mr Orbán in Hungary and Signor Salvini in Italy as a form of fascism. In reality, Mr Trump and the populists are just trying to recover the sense of common pride and purpose in national identity which, psychologically, is worth even more than money.

The irony is that the Chinese are doing something very similar. Their new-found wealth is really just a means to an end – which is the restoration of their national pride, power and prestige after a century of humiliation. The question for the Americans is: What will the Chinese do with that pride, power and prestige once they have been finally regained?

[i]Economics is having an identity crisis, The Spectator, 05 January 2019. Mr Sutherland is Vice Chairman of Ogilvy UK.

Comments (2)

  • Howard Lewis says:

    I’m not sure it’s accurate to say “the overwhelming majority of British people do not feel European”, we feel British first and then European, but not wanting to be in the EU does not make us any less European, just less federal.

  • Andrew Morton says:

    An excellent article.

    I thought at first it was written by Jim Mellon, for its forthright views, until I noticed there was no moan about FAANG stocks.

    How many advertising men write this positive stuff?

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