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The big trade move America got wrong

·Senior Columnist
·7 min read
FILE - In this Jan. 23, 2017, file photo, U.S. President Donald Trump signs an executive order to withdraw the U.S. from the 12-nation Trans-Pacific Partnership (TPP) trade pact agreed to under the Obama administration in the Oval Office of the White House in Washington. Members of a Pacific Rim trade initiative rejected by Trump are to hold working-level talks Wednesday, July 12, 2017 in the Japanese mountain resort town of Hakone, west of Tokyo. The three-day meeting among envoys from the 11 remaining members of the TPP follows a breakthrough last week on a Japan-European Union trade deal seen as a repudiation of the U.S. moves to pull back from such arrangements. (AP Photo/Evan Vucci, File)
President Donald Trump signs an executive order to withdraw the U.S. from the 12-nation Trans-Pacific Partnership (TPP) trade pact agreed to under the Obama administration in the Oval Office of the White House in Washington, January 23, 2017. (AP Photo/Evan Vucci, File)

Remember the Trans-Pacific Partnership?

A few years back, the TPP morphed form a wonky trade deal among the United States and 11 other Pacific nations into a litmus test of fealty to the American working class. As a 2016 presidential candidate, Donald Trump trashed the TPP as “a rape of our country,” saying it would harm U.S. businesses and workers. Trump’s 2016 opponent, Hillary Clinton, praised the trade deal when she was Secretary of State under President Obama. But she flip-flopped and opposed the deal as a presidential candidate, as polls showed free trade deals falling out of favor. After Trump won in 2016, he reversed Obama’s position on TPP and pulled the United States from the pact. TPP seemed dead.

But the other 11 nations surprised the world by forming the trade bloc without the United States, providing member countries privileged access to each other’s markets. The United Kingdom, not an original member, now plans to join. And China recently indicated it would like to follow the UK into the pact, which would be a geopolitical switcheroo: The TPP was originally meant to be an economic counterweight to China’s growing heft. But instead, it could end up amplifying China’s might.

That’s why there’s growing interest in revising the trade pact, rebranding it and bringing the United States into the bloc, after all. “If China joined, this would be the irony of all ironies,” says Wendy Cutler of the Asia Society, who called for the United States to rejoin the deal recently in Foreign Affairs. “It was a U.S.-brokered trade agreement, and China is putting itself up to join. China wants to put the other countries on notice, and see how they respond.”

WASHINGTON, DC - JANUARY 23:  (AFP OUT) U.S. President Donald Trump shows the Executive Order withdrawing the US from the Trans-Pacific Partnership (TPP) after signing it in the Oval Office of the White House in Washington, DC on Monday, January 23, 2017.  The other two Executive Orders concerned a US Government hiring freeze for all departments but the military, and
President Donald Trump shows the Executive Order withdrawing the US from the Trans-Pacific Partnership (TPP) after signing it in the Oval Office of the White House in Washington, DC on January 23, 2017. (Photo by Ron Sachs - Pool/Getty Images)

Refocus priorities toward Asia

Obama announced U.S. participation in the TPP in 2009, and his administration led the drafting of the deal’s language. Obama argued the deal would boost U.S. exports to many growing nations in Asia, and economists thought it would modestly boost U.S. growth. Obama formally signed onto the deal in 2016, but Congressional approval—necessary for implementation—bogged down and Congress never approved it. Withdrawing from the TPP was one of Trump’s campaign pledges, and he did so shortly after taking office in 2017.

TPP signatories included nations such as Australian, New Zealand, Japan, Chile, Mexico and Canada—but not China. The deal was part of Obama’s plan to refocus U.S. economic priorities toward Asia and build a trading partnership that could rival China in size. But free trade was starting to become controversial. There was growing evidence the “China shock” was gobbling up middle-class American jobs. Relief programs meant to help workers displaced by offshoring turned out to be woefully weak. Digital technology was putting further downward pressure on middle-class wages. Trade did add to U.S. growth, but it helped some while harming others and there was no way to distribute the gains evenly.

Obama began pushing the TPP during the “jobless recovery” that followed the Great Recession. There was no evidence directly linking a slow recovery to free trade deals. But frustrated American workers wanted answers, and demagogues like Trump cast trade as the bogeyman hollowing out the middle class. Trump’s critique of the TPP was dubious and he even seemed to think China was a participant in the deal, when it was more like the target of the deal. But Trump, as we now know, had a special talent for riling up voters with bogus information. His success vilifying the TPP doubtless contributed to Clinton’s flip-flip on the issue, which undermined support for the deal even more.

(L-R) Singapore's Minister for Trade and Industry Lim Hng Kiang, New Zealand's Minister for Trade and Export Growth David Parker, Malaysia's Minister for Trade and Industry Datuk J. Jayasiri, Canada's International Trade Minister Francois-Phillippe Champagne, Australia's Trade Minister Steven Ciobo, Chile's Foreign Minister Heraldo Munoz, Brunei's Acting Minister for Foreign Affairs Erywan Dato Pehin, Japan's Minister of Economic Revitalization Toshimitsu Motegi, Mexico's Secretary of Economy Ildefonso Guajardo Villarreal, Peru's Minister of Foreign Trade and Tourism Eduardo Ferreyros Kuppers and Vietnam's Industry and Trade Minister Tran Tuan Anh pose for an official picture after signing the rebranded 11-nation Pacific trade pact Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in Santiago, on March 8, 2018.
A slimmed-down trade pact signed on Thursday will allow eleven Asia-Pacific nations to push forward with economic integration in the face of greater US protectionism, even if the new deal will offer less benefits than originally hoped. / AFP PHOTO / CLAUDIO REYES        (Photo credit should read CLAUDIO REYES/AFP/Getty Images)
An official picture after signing the rebranded 11-nation Pacific trade pact Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in Santiago, on March 8, 2018. AFP PHOTO / CLAUDIO REYES

The case for joining the Pacific trade pact now is stronger. Perhaps much stronger. China is further down the road on its plan to dominate key global industries during the next decade, including massive theft of technology from the United States and other developed countries. Chinese President Xi Jinping is more militant than predecessors. He’s rapidly building China’s military capabilities, including assets needed to win a war to retake Taiwan. Xi’s hard-line approach may also make confrontation with the west more likely than cooperation, both militarily and economically. Finally, the coronavirus pandemic revealed an alarming overdependence on Chinese products to fill U.S. supply chains.

The case for rejoining

Rejoining the Pacific deal, which has been renamed the CPTPP (here’s the full mouthful of a name), would lower tariffs and other trade barriers between the United States and the other countries, and potentially open up new supply lines that are comparable in price to China, but more reliable in the event of conflict. It would create an opportunity for new U.S. leadership in Asia. Most nations in the bloc would welcome U.S. participation, because it would provide better access to the U.S. market and make the whole bloc more potent. The gains from lower trade barriers would boost U.S. real income by $130 billion per year, according to Jeffrey Schott of the Peterson Institute for International Economics.

The TPP stalled the first time around because of objections from labor groups, environmentalists and some Democrats. Opponents argued the TPP would send more U.S. jobs overseas, to low-income countries such as Vietnam and Malaysia (which belong to the revised CPTPP). There were also concerns about human rights and environmental rules in some of the participating nations. At the same time, there were pleas by business groups to pass the deal and claim more turf in fast-growing Asian markets other than China.

QINGDAO, CHINA - SEPTEMBER 19, 2021 - Bridge cranes load and unload foreign trade containers automatically at Qingdao Port automation Terminal in Qingdao, East China's Shandong Province, Sept. 19, 2021. (Photo credit should read Yu Fangping / Costfoto/Barcroft Media via Getty Images)
Bridge cranes load and unload foreign trade containers automatically at Qingdao Port automation Terminal in Qingdao, East China's Shandong Province, Sept. 19, 2021. (Photo credit should read Yu Fangping / Costfoto/Barcroft Media via Getty Images)

Biden hasn’t outlined a full trade agenda yet. But there is some bipartisan interest in rejoining the Pacific trade pact. Senators Tom Carper, a Delaware Democrat, and John Cornyn, a Texas Republican, have called for the United States to join the CPTPP, arguing that “China is not waiting to assert itself in the region,” while the US is “waiting in the hallway.” Labor unions would have to approve any new U.S. effort to join the pact, especially since Biden has made unions a key plank of his political base. It would probably also be important to develop effective messaging that conveys the benefits of such a deal and deflects the inevitable attacks by isolationist Trumpers.

“It would be an uphill battle to rejoin the deal, but I don’t think it’s impossible,” says Cutler of the Asia Society. “China’s recent announcement may light a fire under the United States. Some leading people in the White House may be a bit more concerned than they were a week or two ago.”

Trump’s revised version of NAFTA, the U.S.-Mexico-Canada Agreement, could be a model for how to create a new and improved version of the TPP. Labor groups that disliked NAFTA ultimately supported the new USMCA because it called for higher levels of U.S.-made materials in products such as automobiles. Similar provisions could get labor behind the CPTPP, or whatever a successor deal might be called. If Trump could do it, in theory, Biden should be able to. Before China does. 

Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.

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