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When it comes to taking on China, it appears that President Donald Trump might be realizing that he can’t do it alone.
Trump indicated via Twitter that he might reconsider the United States’ withdrawal from the Trans-Pacific Partnership, a trade agreement advanced by the Obama administration that became a political football on the campaign trail.
“Would only join TPP if the deal were substantially better than the deal offered to Pres. Obama,” Trump tweeted Friday morning. To trade policy experts, it marked a stunning reversal.
Shortly after being sworn in as president, Trump signed an executive order to pull the United States out of the 12-nation agreement. At the time, he touted the withdrawal as a “great thing for the American worker,” putting him at odds with many mainstream economists who said the multilateral agreement would make imported goods cheaper and open up the export market for American-made goods.
“Most goods and services today include components that cross many borders many times before a final product is made and sold to consumers,” said Peter Petri, interim dean at the Brandeis International Business School and a visiting fellow at Peterson Institute for International Economics. “These multi-country production systems depend on not having barriers at any stage.”
The TPP would have established a framework to create new global supply chains that would let businesses more effectively compete with China, and would have established the United States as the dominant player in the Pacific Rim, said Michael O. Moore, a professor of economics and international affairs at George Washington University.
“If we’re not part of an agreement with the countries in that area, over time, they’re likely to look to China as the major player and they’re more likely to do things the way China wants to do things,” he said. “The whole point of it was for this group of countries to have a rules-based system that was in large part consistent with our values,” he said, with regard to issues as diverse as environmental regulation, foreign investment and intellectual property protection.
“If we’re not part of an agreement with those countries ... they’re likely to look to China as the major player."
“TPP can get to the root causes of the issues between the U.S. and China on trade,” said Mireya Solís, a senior fellow and co-director of the Center for East Asia Policy Studies at the Brookings Institution. “What the TPP stands for is a rules-based approach and a belief that multilateralism is best,” she said. “This administration has focused on the trade imbalances and is missing the root causes.”
Now, fears of a trade war have American manufacturing and agricultural businesses second-guessing the U.S.’s ability to unilaterally influence China. "Trade pressures work better when you have a bunch of partners,” Moore said.
A senior administration official said on Friday that trade will be a major discussion topic when Trump meets next week with Japanese Prime Minister Shinzo Abe, adding that the White House is open to individual bilateral agreements or negotiating with TPP countries as a group.
“The United States stands to lose significant market access,” Solís said. “The costs of exclusion are becoming really evident.”
Trade experts aren’t so sure the other members of the agreement will let the United States have its seat at the table back, at least not without extracting some bargaining power it is unlikely Trump will want to concede. “It’s a tough policy for him to reverse because he’s spent so much political capital attacking the TPP,” Petri said.
“I would predict the TPP 11 countries will continue towards ratification of the revised deal,” and possibly bring the U.S. back into the loop after finalization, Solís said. “That would limit the ways the United States could shape the agreement.”
The United States’ reinstatement could come at the cost of some of the provisions it fought hardest to include, Moore said. “You inherently have a weaker bargaining position,” he added.
But Petri was more optimistic that a return to negotiations could produce the kind of small change Trump could tout to save face, while leaving the bulk of the agreement intact. “He needs a symbolic win, and I think there’s room in there for a symbolic win,” he said.