By Quitting the Trans-Pacific Partnership, Trump Cedes Asia-Pacific to China
Abdicating economic leadership in southeast Asia while increasing confrontation over the South China Sea is terrible strategy
President Trump officially abandoned the TPP, scrapping a trade deal that took seven years to negotiate.
TPP critics focus on economic issues, including the misguided argument that trade destroys American manufacturing. But the most important aspect, by far, is geopolitical.
The agreement facilitated commerce between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
Notice how that list excludes China?
The United States just walked away from the best long-term strategy to contain China’s rise.
Even worse, the Trump administration harmed America’s relationship with southeast Asian countries right as it’s escalating with China over the South China Sea.
As that map shows, Brunei, Malaysia, and Vietnam all dispute China’s maritime territorial claims.
They’re all threatened by China’s rise.
And they were all counting on the TPP.
Trump decided to abandon them while picking a fight where we could really use their help.
Trade Hasn’t Killed Jobs
The economic evidence decisively shows that NAFTA and China’s entry into the World Trade Organization did not, and the TPP would not, significantly harm American employment.
Nevertheless, populists of the left (Bernie Sanders) and right (Donald Trump) insist that trade kills jobs, especially in manufacturing. And Hillary Clinton, putting political expediency over principle, pretended she agrees.
That’s probably because foreigners are easy to scapegoat, and dealing with the real reason manufacturing employment declined — automation — is much harder.
America’s making more stuff than ever. It’s just doing it with robots.
As Brad Delong shows, NAFTA and China’s entry into the WTO account for, at most, 0.36% of American manufacturing job losses.
NAFTA and other trade deals have not gutted American manufacturing — period
Politically speaking, there was no debate on United States international trade agreements in 2016: All politicians…
By standardizing regulations and lowering barriers to trade, NAFTA and China-WTO decreased the cost of consumer goods and manufacturing inputs in America, and provided American exporters with additional customers, raising U.S. GDP.
However, these positive effects are modest; and as Arc’s Berny Belvedere argues, they do not address the political problem:
What the cosmopolitan elite don’t realize is that it will never work to offer the counterfactual that if not for free trade, Target’s goods would be more expensive. That will never be a winning argument.
A Tale of Two Speeches
Donald Trump and Xi Jinping project two very different visions
That’s probably true, but it’s mostly a grass-is-always-greener problem.
As I joked during the Democratic primary, I’d like to travel to the alternative universe where Bernie Sanders gets the protectionism he wants, and now spends his time complaining how unfair it is that only the 1% can afford smart phones.
What matters for individuals’ economic well-being is purchasing power.
Lower income + lower cost of living = higher income + higher cost of living.
They’re effectively the same. The only difference is whether people lament how they haven’t gotten a raise in a while or how expensive everything is.
Reducing trade will help some Americans and hurt others, but the net effect will probably decrease the average American’s purchasing power.
Trade and Geopolitics
The TPP wasn’t perfect. For example, strident, long-lasting patent rules were a giveaway to the pharmaceutical industry, blocking generics in developing countries even after drug companies made back their investment in the United States.
The agreement probably would have caused a small increase in American GDP, but it’s fair to say much of that gain would have gone to the wealthy.
The economic benefits for developing countries, such as Vietnam, would have been larger.
But even with the strongest possible economic case against the TPP, the geopolitical benefits dwarfed any economic downsides.
As China gains economic power, it will become increasingly difficult for its neighbors to resist its political influence.
To counter this trend, the TPP tied 11 Pacific Rim countries’ economies to the United States. In trading communities, the largest economy has a lot of political power.
Trump seems to understand this, seeing as how he called the E.U. a vehicle for Germany to dominate Europe.
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However, instead of improving trade ties with Chile and Peru, Trump made it easier for China to make inroads into South America. And the administration’s hostility to TPP member Mexico provides China with a great opportunity to improve relations with America’s southern neighbor.
Instead of containing China, Trump is helping China contain America.
The South China Sea
The worst part is that the Trump administration bailed on economic cooperation with southeast Asia right as it’s threatening confrontation over Chinese expansion in the South China Sea.
Secretary of State nominee Rex Tillerson told the Senate Foreign Relations Committee:
We’re going to have to send China a clear signal that, first, the island-building stops and, second, your access to those islands also is not going to be allowed.
China responded that to do this the United States would have to “wage war.”
As I warned last month, these escalating threats are dangerous because Chinese and American leaders fear backing down would make them look weak to their domestic audiences. That could lead to a conflict neither side really wants.
What if Trump Does to International Relations What He Did to American Politics?
The diplomatic ruckus over Taiwan is just the start
Because Tillerson often seemed less-than-knowledgeable about international relations in his confirmation hearings, reporters asked White House Press Secretary Scott Spicer if Tillerson’s comments reflected the administration’s position. Spicer said yes:
It’s a question of if those islands are in fact in international waters and not part of China proper, then yeah, we’re going to make sure that we defend international territories from being taken over by one country.
On it’s own, there’s a decent case for challenging Chinese island building in the South China Sea.
Over $5 trillion of trade passes through the South China Sea each year, more than a quarter of the global total, arguably making it the most important waterway in the world.
Of that $5 trillion, over $1 trillion of trade involves the United States, giving America a clear interest in maintaining free passage.
In response to Chinese territorial assertiveness, Barack Obama ordered American ships and planes to traverse areas claimed by China to demonstrate that they’re international waters. For example, in May 2016, an American destroyer sailed within 12 nautical miles of a disputed Chinese island. China scrambled fighter jets and deployed three warships in response.
But Obama’s policies didn’t stop Chinese expansion.
In July 2016, an international tribunal in the Hague dismissed China’s territorial claim, ruling that Chinese island building violated the Philippines’ sovereign waters.
China rejected it.
As it grows in prominence, China’s ability to control the South China Sea will only increase. It therefore makes sense to push back sooner rather than later.
But the United States would be in a much stronger position to do so with the support of Brunei, Malaysia, and especially Vietnam, whose claims overlap the most with China’s.
By abandoning the TPP, the United States abdicates leadership in southeast Asia, putting potential American allies in a position where they may have no choice but to cosy up to China.
Hegemonic decline was inevitable. But there’s no reason America should hasten its arrival.