I saw that you could not separate the idea of commerce from the idea of war and peace.
– Cordell Hull
former Secretary of State (1933-1944)

Three days after taking office, President Trump withdrew the United States from the Trans-Pacific Partnership (TPP), fulfilling a core campaign promise.

During the 2016 presidential race, voters in swing states had flocked to Donald Trump’s “America First” rhetoric, which promised to shift the country’s economic and political focus away from global supply chains back to the industrial heartland. Bernie Sanders and eventually Hillary Clinton would also come out against the TPP as the promise to protect American jobs resonated among voters in the Midwest, the Rustbelt, and Appalachia.

By the time of the general election, the TPP had no champion.

Months later, with one stroke of the pen, newly-inaugurated President Trump terminated a 15-year effort to reshape trade in the Asia-Pacific region.

For former Assistant U.S. Trade Representative Barbara Weisel, the chief American negotiator who invested countless hours negotiating the TPP, this meant ending a carefully managed relationship with other countries.

JAPAN-ECONOMY-TRADE-TPP
Japanese Prime Minister Shinzo Abe walks before the map of the Trans-Pacific Partnership (TPP) participating countries at his official residence in Tokyo on March 15, 2013.
TOSHIFUMI KITAMURA/AFP/Getty Images

“We left them at the altar,” Weisel said.

The United States has not let up since, slapping tariffs on allies like Canada and waging a trade war with China. The United States’ abandonment of the TPP marked the beginning of a seismic shift in American foreign policy. It has reverberated beyond trade and threatens to erode longstanding relationships. The decision to withdraw threatens to undermine America’s post-WWII leadership of the international economic order and the security it provides.

The TPP in Context

The TPP was a mega-regional free trade agreement forged by the Obama administration that tied together 12 Asia-Pacific economies, accounting for 37 percent of the world’s GDP. It created common rules to govern global value chains, which would have benefitted American consumers and multinational companies.

The map shows economic data of the 12 original member countries of the TPP. A higher GDP per capita indicates a higher likelihood that a country is at the upstream of the global value chain. Trade openness indicates how liberalized and globalized an economy is (the higher the number, the more likely a country is open to trade).

Today, companies rely on global supply chains—networks where different stages of production for goods occur in different countries. When the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT) were established, supply chains were usually national in scope and scale. As a result, the WTO and GATT largely focused on reducing and regulating tariffs as they constituted the greatest obstacles to world trade.

As supply chains have globalized, governments discovered a need for common rules to govern provisions beyond tariffs like intellectual property. Yet, those wanting to pursue deeper economic integration found it impossible to forge consensus among the 150-plus members of the WTO. As a result, many countries began negotiations outside the WTO framework.

The U.S. response was to negotiate bilateral free trade agreements in East Asia during the early 2000s. However, it found the pace of these talks so slow that the United States was at a disadvantage in the dynamic Asia-Pacific region.

According to Weisel, American policymakers began “looking around for some kind of mechanism to accelerate our engagement in the region.”

After looking closely at the details of the emerging TPP, the United States concluded that the framework with modification could provide a basis upon which to build deeper economic integration in the Asia-Pacific.

LISTEN: Under the Microscope: Is the US missing out on Malaysia?
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Scott Miller
Scott Miller
Senior Adviser and Trade Expert, CSIS

The TPP had expanded the protection of American interests with its chapters on intellectual property, investment protection, and labor, among others. The intellectual property chapter included rules that protected the copyright of films, music, digital media, and patents on pharmaceutical products. The investment chapter strengthened investor-state dispute settlement arrangements, which would have protected American companies seeking to invest in emerging economies like Malaysia.

Notably, the labor rights chapter referenced principles from the International Labor Organization (ILO) and borrowed heavily from labor provisions from prior American free-trade agreements. The Obama administration was adamant that other countries adopt stronger labor standards in exchange for access to U.S. markets. Where the United States saw especially low standards, as it did in Vietnam, Brunei, and Malaysia, it negotiated bilateral Labor Consistency Plans in parallel with the TPP. These Plans mandated additional reforms to be implemented prior to American ratification.

In 2015, eight former defense secretaries wrote to Congress expressing their support for the TPP. Then-Secretary of Defense Ashton Carter was an emphatic supporter.

“Passing TPP is as important to me as another aircraft carrier,” he wrote.

Ted Alden, an expert on U.S. economic competitiveness at the Council on Foreign Relations helps place Carter’s support in context. A rules-based trade system like the TPP encourages governments to embrace liberal norms. The resulting economic interdependence in turn promotes prosperity and peace.

“Economics and security are indistinguishable” in the region, he concluded.

However, segments of the American public remained unconvinced.

Labor unions were among the most vocal opponents of the TPP. AFL-CIO President Richard Trumka expressed his opposition early on in a 2015 interview with PBS News Hour.

The TPP will “hurt everybody in the economy,” Trumka said. “It doesn’t just hurt industrial workers. It hurts professional workers. It hurts teachers. It hurts public workers by doing away with the tax base.”

Consumer groups also criticized the deal. The Consumers Union and the Consumer Federation of American argued in a September 2016 letter to Congress that the TPP, “risk[s] undermining important safety, health, and other interests of consumers.” Environmental groups also expressed opposition, arguing that the TPP threatened “our air, water, and climate.”

Voters were also sharply divided. A poll conducted by the Pew Research Center in late 2016 found that 68 percent of Trump supporters opposed free trade agreements in general, while 58 percent opposed the TPP. By contrast, 55 percent of Hillary Clinton supporters favored the TPP. Trump’s campaign seized on this division by promising to leave the agreement if elected.

Withdrawal and Fallout

In the short-term, Trump’s decision to exit from the TPP means that potential new markets for investment remain closed, and patents remain less protected. In the long-term, it could diminish other countries’ willingness to negotiate with the United States because they can’t trust American leaders to stick to deals.

LISTEN: Under the Microscope: The Rise of the “America First” Ideology
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Ted Alden
Ted Alden
Bernard L. Schwartz Senior Fellow, Council on Foreign Relations

“The steps the United States is taking in withdrawing from the TPP [are] risking unraveling the trading system,” said trade expert Scott Miller at the Center for Strategic and International Studies (CSIS) in Washington. He added that America’s retreat from global economic leadership leaves the job of creating and maintaining the rules of the game to someone else.

 Trade negotiator Weisel echoed Miller’s sentiment.

“Globalization,” said Weisel, “will go on without us.”

Indeed, it already is. In March 2018, America’s eleven former partners signed what was renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). These countries retained the market access provisions embodied in the original TPP, leaving most of the text unchanged.

However, the CPTPP suspended items central to American interests, including provisions on intellectual property rights and investment protection. It also tabled the Labor Consistency Plans.

Perhaps the most salient difference between the TPP and the CPTPP is that the latter does not push the frontier in setting standards. In short, it leaves unresolved issues critical to American corporations’ participation in global supply chains.

As Matthew P. Goodman, the William E. Simon Chair in Political Economy at CSIS noted, the WTO alone doesn’t “meet the current challenges of a supply chain-based global economy.”

Text analysis shows that 45% of the text of U.S. preferential trade agreements (PTAs) since 1995 can be found in the TPP, while the chapters most relevant to U.S. interest reach 80% text commonality. Following U.S. withdrawal from the TPP, the content of the CPTPP suspended select text from 9 original chapters, 4 of which are in the top 7 chapters for US text commonality. At an average of 2.3% removed per chapter across the agreement, 83.7% of total words cut from the agreement came from the two chapters most pursued by U.S. interests: investment and intellectual property.

In April tweets, President Trump suggested the United States may rejoin the agreement if a new deal “were substantially better than the deal offered to Pres. Obama.” The  statement surprised most observers, including his trade advisers, and was reversed two days later. Although administration policy has not changed, the episode raises the question if the United States could rejoin the TPP if it wants to do so.

“If the United States wants to rejoin, we’ll find a way,” argued Scott Miller of CSIS. Access to the U.S. market remains a valuable bargaining tool, but major obstacles to American reentry exist. International support for U.S. membership remains high, but domestic political opposition compounded by congressionally-imposed legal hurdles complicate U.S. reentry.

Should the United States stay outside the TPP, the trajectory for the rules-based international order remains uncertain.

Brian Harding, deputy director and fellow of the Southeast Asia Program at CSIS, claims that others will write the rules of the global economy should the United States remain reluctant to re-engage with the TPP framework.

The future and the history of the 21st century is being written in Asia, economics are fundamental to the international relations of Asia, and we are absolutely absent from that arena.
LISTEN: An Executive Statement: Obama on the TPP and China
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Brian Harding
Brian Harding
Deputy Director and Fellow of the Southeast Asia Program, CSIS
Bill Reinsch
Bill Reinsch
Scholl Chair in International Business, CSIS

“Failure to stay in the TPP has been very damaging for U.S. global leadership,” Harding said. “The future and the history of the 21st century is being written in Asia. Economics are fundamental to the international relations of Asia, and we are absolutely absent from that arena.”

Two countries might be positioned to assert leadership in the region: China and Japan. However, both face obstacles. While China may see U.S. withdrawal as an opportunity, it does not currently possess the soft power needed to assume global responsibilities. And despite Japan’s unexpected leadership role in CPTPP negotiations, it has typically shown itself to be a reluctant power. Moreover, none of the other countries in the region are eager to see either China or Japan become a regional hegemon.

The Future

Since withdrawing from the TPP, the United States has introduced steel and aluminum tariffs that hit heavily on Canada, Mexico, and the European Union. Trump’s protectionism led to a confrontational G7 meeting in June 2018 where President Trump called Canadian Prime Minister Justin Trudeau “dishonest and weak” and repeatedly highlighted the unfairness of Canada’s tariffs on dairy products. Ironically, the TPP would have reduced these same dairy barriers.

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Ted Alden
Ted Alden
Bernard L. Schwartz Senior Fellow, Council on Foreign Relations
Brian Harding
Brian Harding
Deputy Director and Fellow of the Southeast Asia Program, CSIS
Bill Reinsch
Bill Reinsch
Scholl Chair in International Business, CSIS

Just a few days after clashing with the G7, President Trump travelled to Singapore to meet North Korean leader Kim Jong Un. After the summit, the leaders signed a document promising “new relations” between Washington and Pyongyang, suggesting that the United States recognizes a continuing interest in East Asia. However, untethered from economic leadership, U.S. involvement in the region risks taking on a narrow focus on the military dimension of regional security.

Ongoing NAFTA negotiations will more thoroughly test “AmericaFirst” trade strategies, as will the unfolding trade war with China. Results from these interactions will reveal whether the United States can maintain world leadership with short-sighted protectionist policies. In this context, withdrawal from the TPP is not just about trade politics; it’s about the future of the U.S.-centered international order.

Contributors

Dawn Edelman

Tulane University
Dawn Edelman is a rising senior at Tulane University, studying economics, international relations, and Chinese. She previously interned at the Business for Social Responsibility (BSR) office in Shanghai, China, and at the American Israel Public Affairs Committee in Washington, D.C. This summer she will be interning at Eurasia Group as a member of the Global Markets team.

Cullen Fagan

Tulane University
Cullen Fagan is pursuing a bachelor’s degree in international relations with a minor in Arabic at Tulane University. She previously interned with the City of Cambridge Community Development Department, where she helped implement sustainability programs through local government.

Peter Kintner

Tulane University
Peter Kintner is pursuing a B.S. degree in economics and mathematics at Tulane University. He has interned at the Office of California State Senator Steve Glazer and serves as chief justice of the Judicial Council of the Tulane University Undergraduate Student Government.

Paige Montfort

Tulane University
Paige Montfort is pursuing a bachelor’s degree in political science–international development and public health at Tulane University. She is a Stamps scholar and honors student and serves as an undergraduate student government senator for the School of Public Health. In the summer of 2018, she will intern at the Cincinnati office of Taft Stettinius & Hollister LLP and volunteer with the Ngong Road Children Association outside of Nairobi, Kenya.

William Pankey

Tulane University
William Pankey is pursuing a B.A. degree in political science with a focus in international relations and Asian studies and a minor in Arabic language at Tulane University. He is a member of the Navy ROTC program.

Natalie Strauber

Tulane University
Natalie Strauber is a rising junior at Tulane University, studying international relations and international development. She previously interned in the Office of Lovely A. Warren, mayor of Rochester, New York. She looks forward to participating in a legal internship this summer in the Housing and Consumer Projection Unit of the Legal Aid Society of Rochester, New York.

Stefan Suazo

Tulane University
Stefan Suazo is working toward a bachelor’s degree in political economy at the Murphy Institute at Tulane University. He previously interned at the National World War II Museum in New Orleans and the New Orleans District Attorney’s Office. Stefan is currently running for School Board in District 3 of Jefferson Parish, Louisiana.

Henry Walther

Tulane University
Henry Walther is a rising sophomore at Tulane University, majoring in political science, social policy and practice, and public health. He previously served as the founder of a nonpartisan media outlet called Side by Side News, where he hosted a 17-episode podcast. Henry was a lead organizer for the voting rights advocacy group, Let America Vote, and will be campaign manager for a school board race in Jefferson Parish, Louisiana.

Emma Watters

Tulane University
Emma Watters is an undergraduate at Tulane University, majoring in political economics and digital media production. She is a freelance digital illustrator, having shown work in RAW artist galleries, as well as the New Orleans Museum of Art’s digital art symposium. Emma previously interned at Ekistics Inc. and volunteered with the Martha’s Vineyard film festival. She is preparing to study abroad in New Zealand this fall.

Wenqi Zhao

Tulane University
Wenqi Zhao is pursuing a bachelor’s degree in international relations at Tulane University. She has completed several political science courses that equipped her with the fundamental skills and knowledge of related issues, with a regional concentration in Asia.

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