Plump Trump dumps TPP trade pump
President Snowflake slots in an easy campaign goal first thing
US President Donald Trump has made good on a campaign promise and signed an executive order backing the United States out of the controversial Trans-Pacific Partnership (TPP) trade deal.
"We've been talking about this for a long time," he said at the signing in the Oval Office Monday morning, arguing that it was a "great thing for the American worker."
The deal took seven years to draw up and was intended to create a free-trade bloc between 12 nations around the Pacific Rim – including Australia, Canada, Japan, Mexico, New Zealand and Singapore but, notably, not China.
The executive order, titled "Withdrawal of the United States from the Trans Pacific Partnership Negotiations and Agreement," did not come as much of a surprise. During the lengthy election campaign, the TPP became a political hot potato and almost all presidential candidates – including Hillary Clinton, who had earlier supported it – vowed to oppose it.
The signing does, however, mark the return of some level of normalcy with respect to the US presidency after an extraordinary and occasionally baffling initial few days.
That Trump has come good on one of his most persistent campaign promises is in stark contrast to a number of backtracks on other high-profile topics, such as getting Mexico to pay for a wall along the US border and a formal investigation into Hillary Clinton's use of email while at the State Department.
The text of the executive order was not available at the time of writing, but it is likely to simply note that the United States will be withdrawing from the agreement, which was never ratified by Congress despite the best efforts of President Obama to argue why the trade deal was a good one for the country.
Criticism of the TPP has centered on claims that it will cause American jobs to be lost, although there was scant evidence of it. The most respected analyses of the trade deal (by the World Bank and the Peterson Institute) concluded that there would be a slight increase in wages in the United States with some possible job losses as the US was forced to deal on a more level playing field.
The TPP was also opposed by people who baulked at the ability of corporations to sue governments, and disliked the extension and expansion of intellectual property and copyright laws across a big part of the world. US corporations were almost universally in favor of the deal. When we explored it in detail, we concluded that most of the fears expressed were likely overblown and had stemmed from the secretive process used to draw up the text.
It came as no surprise that Donald Trump was opposed to the trade deal. He has persistently expressed very strong and consistent personal opinions on trade going back several decades. He believes firmly in a mercantilist system where imports are limited and exports are encouraged. "There is no way to fix the TPP," he said back in June.
The most well-known aspect of mercantilism is protectionism, where government policies are used to restrict foreign trade and the influence of foreign businesses within the domestic economy. Trump has repeatedly promised to put high taxes on imports, and just this week again reiterated a claim that he will punish US corporations if they move jobs or operations outside the United States.
In his inaugural speech, Trump stressed the same policies. "From this moment on, it's going to be America First," he noted. "Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families."
He surmised: "We will follow two simple rules: Buy American and Hire American."
Although withdrawing from the TPP is a clear sign that Trump intends to act on that claim, it is also the easiest and simplest thing he could do. His claim that he will renegotiate the NAFTA agreement with Mexico and Canada is likely to prove much more complicated.
To Trump's eyes, moving the United States to a mercantile system will ensure that the country brings back manufacturing jobs that have slowly drifted to other parts of the globe over the past few decades, and will so boost the economy.
Economists are significantly less certain. The approach Trump proposes was developed in the 16th century and used through to the 18th century. Many believe, however, that in the digital age and with the emergence of global corporations, such an approach would backfire on an economy. The tech sector and particularly Silicon Valley are concerned that it goes against the very ethos of their profit-making products.
Some are also concerned that the biggest impact of withdrawing from the TPP will be to give China more opportunity to seize a larger proportion of world trade.
Whether Trump's approach "makes America great again" or leads to a dangerous decline in economic activity – or does something in between – will take years to see. But there is one benefit to the TPP executive order regardless – it has introduced at least a small element of predictability to what has so far been a roller-coaster of a presidency. ®