Fallout of the TPP, One Year After the U.S. Departure

On January 23, 2017, U.S. President Donald Trump signed an executive order which withdrew U.S. participation from the Trans-Pacific Partnership, more commonly known as the TPP. The TPP, if it had been signed by all members, would have been a landmark free trade agreement among 12 countries located surrounding the Pacific Ocean: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, The United States, and Vietnam. Among the provisions of the treaty were a vast reduction in tariffs across the board for participating nations, environmental protections, and human rights guarantees. A little more than a year after the deal, the fallout from the U.S. withdrawal is still significant, most notably in the context of American international relations.

Despite the fact that the U.S. is no longer part of the deal, the 11 remaining countries in the pact have moved forward with a revised version of the deal in the past year. This new deal, which is now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and is abbreviated as TPP-11, was signed by the 11 members on March 8, 2018. Also on March 8, President Trump announced hard tariffs on foreign steel and aluminium imports, increasing steel tariffs by 25% and aluminium tariffs by 10%.His decision was met with an outspoken and negative response by trade experts and economists who are concerned about a potential trade war between the U.S. and its allies. South of Washington, 11 countries representing 15% of the global economy and totaling a trade value of $13.7 trillion signed their long-awaited trade agreement in Santiago, Chile. For those countries wishing to join the pact, including the U.S., the treaty includes provisions for future expansion. The deal is essentially the same as the deal was with the U.S, with one notable exception: a reworking of the provisions for the deal to take effect. In the original agreement, the nations stipulated that at least 6 countries representing 85% of the group GDP would have to sign on or else the deal would fail. The U.S. represents more than 15% of the total GDP, and so the U.S. pulling out meant that the deal could not be ratified. From a U.S. perspective, there was a mixed but generally positive reaction to the original TPP. 49% of Americans in 2015 supported the deal, compared to only 29% opposed. However, U.S. support was among the lowest of the group, contrasted with Vietnam, which saw 89% approval of the deal. In the 10 years after the deal, when most of the effects are predicted to normalize, there was expected to be only a marginal effect on the U.S. economy. Experts predicted that overall, though, the benefits of the deal outweighed the costs. In the past year, with the signing of the TPP-11, expectations for GDP growth of the signatory countries have decreased by 50%, meaning that U.S. involvement would slightly help the U.S. but would greatly aid the other countries involved. If the U.S. were to sign the new deal, the same criticisms from the original deal would apply. One of the most prominent criticisms is that the deal helps big multinational corporations at the expense of U.S. individuals.

There are a plethora of negative policy effects regarding the United States since TPP-11 has been negotiated without the U.S.. First and foremost, the negotiations for the TPP took quite a long time and were a significant commitment, so for the U.S. to pull out at such a late stage sends a signal to future potential allies about the trustworthiness of U.S. commitments. Also, by signing the TPP, the U.S. had an opportunity to reassert its influence over a region that has been hotly pursued by the Chinese government.. By withdrawing, the U.S. is leaving behind a chance for China to step in and align itself with the original signers of the TPP. Had the U.S. stayed in the agreement, then the framework would have limited potential Chinese intrusion into the area. Now, however, countries are likely to be more accepting of trade deals proposed by countries which aren’t the United States.

The U.S. in the past year has struggled with its own trade endeavors, which have included trying to negotiate or renegotiate bilateral trade agreements. As the world moves towards freer trade, the U.S. is moving towards higher tariffs, a move which has helped to isolate the U.S. regionally and internationally. At best for the United States, this new TPP-11 deal will turn out to be more rhetoric than actual economic growth, with no real opportunity cost to U.S. economic growth. At worst, however, the United States stands to be marginalized from the rest of the Pacific community, left behind in what could be fairly significant economic growth for the region. Furthermore, the United States could find itself with damaged relationships, as countries will react negatively to the U.S. and its continued defiance of the trade agreement. Donald Trump has called for better trade deals, but he can’t make trade deals if no one wants to negotiate with him. In the midst of turnover at the State Department, this could be quite worrying for the United States.