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February, 2017


Trump Pulls America Out of the Trans Pacific Trade Pact

President Donald Trump officially withdrew the US from the Trans-Pacific Trade Deal recently, distancing the country from many of its allies in Asia, a region that is slowly coming under the influence of China. The executive order was signed by Trump and it sees America’s exit from a 2015 trade pact that involved 12 nations. This was, in fact, a key part of Trump’s campaign promises.

Trump, who is all for manufacturing within the US, stated that he preferred one-on-one trade deals, where, countries could terminate the deal in 30 days if problems arose between them. Supporting the withdrawal from the Trans-Pacific Trade Pact, Trump also stated that he would end all “ridiculous” trade deals that had removed companies and people from the US. The statement was made during a meeting with union leaders at the White House. The pact was supported enthusiastically by businesses in the US, when, it was originally negotiated by former President, Barack Obama. However, it never gained approval from the Congress.

The pact, which didn’t include China, was drafted by Obama as a way to create trade rules for Asia before China did, thereby, cementing the US’s economic dominion in the region. China has been against the idea of a Free Trade Area in the Asia Pacific region and has even promoted the Regional Comprehensive Economic Partnership, which is supported by Southeast Asia. Trump’s move against the pact, along with his demands for more security from allies, has troubled the Asia Pacific region including Japan. His stance, with regard to trade, is seen as being reflective of what many Americans feel – that international trade deals have been detrimental to the job market in the US. Though Republicans have been longtime supporters of free trade, they have realized a recent shift in people’s opinions. According to Lanhee Chen, Domestic Policy Adviser to Mitt Romney, Presidential Nominee for 2012, it would be tough going against such rhetoric as the trend is old and apparent one.

Harry Kazianis, Director of Defense Studies, Center for National Interest in Washington, believes that Trump will have to find alternative ways to keep allies reassured. He suggests methods such as bilateral trade agreements and that countries such as Vietnam, Japan, and Taiwan be the first to be approached. The Director supported his suggestions stating that the mentioned countries would play a key role in Trump’s new Asia strategy.

More Cuts and Deregulation

Trump, after announcing the US’s exit from the pact, also met with manufacturers in the White House and spoke to them about cutting corporate taxes and regulations. However, he remained firm on taking action against unfair trade deals. He spoke to heads of various firms and suggested a 15 to 20% reduction in corporate taxes. However, this would require the support of the US Congress, which is presently led by Republicans. Current corporate tax rates are estimated to be around 35%.

Trump had also emphasized on trimming regulations, which, he claims, business leaders find to be a matter of priority. He has suggested a 75% cut in regulations; if possible, even more. The President, in his own words, stated that it would become very easy for companies to get the necessary approvals after his regulatory cuts were implemented. Mark Field, CEO of Ford, stated that he felt encouraged by Trump’s statements. The CEO even mentioned that he felt confident about the President’s stance towards strengthening the American economy by implementing growth friendly tax, trade, and regulatory policies. Trump is believed to have also encouraged companies to negotiate with governors concerning the shifting of production between states. The President also aims to keep his promises concerning bringing back manufacturing jobs back to the US. This is one of the key campaign pledges that were responsible for his victory. Trump has even named companies that he thinks should bring back manufacturing units to the US.

Renegotiating Trade

Trump has criticized trade deals such as Nafta and the Trans-Pacific Trade Pact ever since his campaign began. In fact, he made a promise to withdraw the US from the pact on day 1, citing that it was a disaster for the country. The Trans-Pacific Trade Pact was created to make trade easier between US and 12 other countries including Singapore, Japan and Mexico. Trump stated that he would also meet with Canadian PM, Justin Trudeau and Mexican President, Enrique Pena Nieto, to discuss his other target – Nafta. The President blames Nafta for the loss of job in the USA.

He stated that negotiations on Nafta , along with talks about border security and immigration, would be conducted during the meet. He added that the meeting would prove to be beneficial for Mexico and the United States. Canadian officials stated that they were not interested in getting involved with Trump’s move against importing from China or Mexico. Mexico, China, and Canada happen to be the US’s largest trading partners.

Canadian Ambassador to the US, David MacNaughton, stated that he would focus on preventing Canada from becoming collateral damage from these trade disputes. As for what will happen to the Trans-Pacific Trade Pact remains uncertain. According to Japanese PM, Shinzo Abe, the pact would have no meaning without the US. Even so, countries like Australia and Vietnam have said that they will uphold the deal despite the exit of the leading party. Some supporters of the pact are concerned about Trump’s decision ceding power to China, which, they claim, will create an “Asia for Asians” climate and lead to state controlled capitalism.

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