President-elect Trump ran his campaign largely on the theme that he could negotiate trade deals that would slow globalization and prioritize American interests. He has pledged that the U. S. will withdraw from the Trans Pacific Partnership (TPP), a trade agreement with eleven other Pacific Rim countries that President Obama’s administration has been negotiating for the past eight years, on his first day in office.
President Obama has claimed that the TPP will increase the number of American exports to the global market, help grow and strengthen the American economy, support well-paying jobs in the United States and throughout the rest of the world, and strengthen the American middle class during this period of dramatic globalization. Still experiencing the effects of the North American Free Trade Agreement (NAFTA), the TPP’s predecessor, many Americans remain unconvinced.
NAFTA went into effect in 1994, creating the largest open market bloc in the world: Mexico, Canada, and the United States. While “free” trade (already a strange term for an economy so regulated) had existed between the U. S. and Canada since 1989, NAFTA has had a significant impact in the U. S. and northern Mexico. The agreement was supposed to allow the forces of supply and demand, rather than tariff battles that hurt everyone, to regulate trade. American businesses were expected to have a much easier time than before when trading with both Mexico and Canada due to lowered tariffs, eliminated investment restrictions, and the security of intellectual property rights; the combined economies of these three NAFTA countries at the time exceeded $6 trillion, with the United States being by far the most powerful economy, an unprecedented economic powerhouse. However, Mexico continued to place extremely high tariffs (often exceeding 30%) on American imports while inefficient bureaucracy further hindered trade, making it difficult for smaller American businesses to sell goods south of the border. This meant that the flow of goods from the U.S. to our neighbors has grown at half of the rate before the deal, quite the opposite of its stated intention. Meanwhile, many American workers saw large employers setting up manufacturing facilities in Mexico, and Mexican tariffs remained on average 250% higher than American tariffs, an imbalance that placed the U.S. at an extreme disadvantage. In Mexico, poor farmers found themselves unable to compete with U.S. producers, due to huge subsidies from the U.S. for corn and other crops that the Mexican government simply couldn’t match. Both American blue-collar workers and Mexican agricultural workers, rightly or wrongly, began to blame job losses on NAFTA and establishment economics, and felt threatened by the globalization and technological advancement that NAFTA encouraged. This anger, fear, and resentment has come boiling to the surface in the past few years with the debate over the TPP, and when Mr. Trump promised to put a 35% tariff on imports from American facilities like Ford who have set up in Mexico, many Americans finally heard someone who they thought represented them.
In terms of the U.S. – Mexican relationship, the TPP is essentially a renegotiation of NAFTA that will increase the quality of living and working conditions in both of these two countries. The TPP adopts higher standards for American and Mexican businesses, governments, workers, and environmental protection. Mexico has been advancing extremely rapidly in the areas of energy, telecommunications, finance, and labor practices, and conservative lawmakers and the Obama administration hope that the TPP will only increase the many opportunities for U. S. businesses to become more competitive and to export more goods to Mexico.
There are plenty of objections to the TPP, with typically unsatisfactory excuses from the outgoing establishment. Top-secret negotiations hidden from American workers are justified as political necessity. Arbitration panels designed for giant international corporations to circumvent or even influence American regulation are “balanced out” by weak commitments from Asian governments, when these lopsided labor and environmental responsibilities are admitted at all. But these aren’t the real reasons for anger at the TPP, at least on the far-right; it’s more about a perceived “rigged system,” run by and for large corporations with no regard for the concerns of the American people. Grievances against international trade have, in fact, been boiling in the hearts and minds of Americans, with little acknowledgement or sympathy from the Republican Party, since George H. W. Bush and Bill Clinton’s negotiation of NAFTA.
One of the main issues in the American debate on trade has been our relationship with China, which is notably not part of TPP. President Obama has often criticized Mr. Trump’s harsh language toward China, especially his pledge for a 45% tariff on Chinese imports and allegations of an effective Chinese trade war on the U.S. A careful, cerebral leader, President Obama has instead chosen to snub China less directly, using the TPP to forge a protective economic alliance of Pacific Rim nations in a Cold War-style attempt to check the regional influence of our rival economy. The energy put into this agreement went to waste; the President-elect and new leader of the Republican party has a stance on trade that makes Senators Sanders and Warren look restrained.
Mr. Trump is already bringing jobs back to the U.S., having convinced Carrier Corporation through tax incentives and economic threats to keep in the country at least half of the 2,000 Hoosier jobs that it had planned to move to Mexico; however, negotiating an international trade deal acceptable to foreign leaders and the American people will be a true test of his abilities.
In a time where many are searching for unity, maybe trade is a place to start, as the 2016 election saw the Democrats and Republicans unite once again on the issue—this time to oppose free trade—with Secretary Clinton, in a rare moment of independence from the men in her political circle, vowing to immediately ditch the agreement and renegotiate. The TPP’s only hope was Gary Johnson, two-time Libertarian nominee for President, who supported the trade deal because “I’m being told that [it], in fact, would advance free trade,” echoing the establishment delusion that Americans want more open markets with low-wage countries.
Opposition to the broad free trade deals currently in place has become a political necessity because of the broad perception, which the political establishment has done little to dispel, that President Obama’s administration has come to the negotiating table with a well thought-out compromise and left with little. Mr. Trump promises as President to come to the negotiating table with extreme demands (i.e., his insistence on absurdly high tariffs) and leave with a fair compromise, which seems like a reasonable expectation for the world’s most powerful economy.
Free trade is a great phrase. After all, what could be more American than liberty and capitalism? This idea isn’t just economic; our rejection of the TPP would open up the Pacific Rim, especially East Asia, not only to China’s economic influence, but to its political and military control. But free trade only works when your partners agree to follow the same rules. An ideal trade agreement would compel foreign governments to put the same economic restrictions on their workforce as the U. S. does, so that our country wouldn’t need to sacrifice competitiveness in the global market for workers’ rights and environmental responsibility.
The world this year has seen too many referendums where the people rejected free markets, from Brexit to the election of Mr. Trump, and the refusal of many policymakers to recognize these intense and legitimate concerns has led to many of their political downfalls. President Obama and the traditional wing of the Republican party seem to think that spreading economic treats around the Pacific will curtail China’s dominance of the region, despite the fact that, not being a party to the TPP, our rival is playing by a completely different set of labor and environmental rules. The President’s opposition, on the other hand, has offered no real alternative besides tougher rhetoric and a “better deal.” But until President Obama makes a serious effort to explain and defend his stance on free trade to the American people, the country will continue to see the TPP as simply an expansion of NAFTA, complete with the obligatory $40 million of lobbying by the Koch brothers, that has been more influenced by its signatories, some of the most sluggish economies in Asia, than the Unites States.
International trade is complex and confusing, far more so than either side would like to admit. They say wisdom can come from the most unexpected places, so perhaps Gary Johnson had it right all along, and we should stand aside and let the “experts” figure out what’s best for the people.