U.S. return to TPP would bring economic and strategic leverage in clashes with China
The twists and turns of the Trump administration continue as Thursday showed the mercurial president back at what he does best: changing his mind and then after a few hours tempering any potential changes.
President Trump said he would consider joining a reconstituted TPP (Trans-Pacific Partnership), currently a trade group of 11 Pacific Rim nations, including Japan, but not China. The move if made could give the U.S. additional leverage in any talks with China, which is the real reason behind Trump's possible TPP position change. During a White House meeting with lawmakers and governors, President Trump directed his chief economic adviser Larry Kudlow and his top trade negotiator Robert Lighthizer to take a fresh look at re-entering TPP negotiations.
But in a late-night tweet, Trump set a high bar for any revived TPP talks, saying the U.S. would “only join TPP if the deal were substantially better than the deal offered to Pres. Obama.” He said the U.S. already has two-way trade deals with six TPP nations and would continue pushing for one with Japan. Why the change? The Wall Street Journal in a commentary said “Lighthizer was barely out the door before he or his office was telling reporters the directive wasn’t serious.”
A spontaneous Trump development. Kudlow in an interview on Thursday with the New York Times said that the request to revisit TPP was somewhat spontaneous. “This whole trade thing has exploded,” Kudlow said. “There’s no deadline. We’ll pull a team together, but we haven’t even done — I mean, it just happened a couple hours ago.”
This continues what has become a familiar pattern — impromptu statements by Trump are often met with more-measured responses or reactions from his officials that were charged with "delivering" on what Trump says.
Still, the Trump TPP nuance surprised most of his team, which is now a usual situation. Officials note there are no position papers on what the administration would seek in a new TPP (TPP 2.0) or how it would try to convince other nations to agree to its terms. There also hasn’t been any interagency process set up to review TPP, nor has the president stated any timeline or goals for a TPP re-entry decision. And, this isn't the first time Trump had dangled returning to the TPP. On Jan. 26, Trump said he was open to a “mutually beneficial” trade agreement with the countries in the TPP.
Background. TPP aimed to counter China’s economic influence in Asia. President Trump withdrew the U.S. from the TPP talks in just his third day in office. But TPP participation now aligns with Trump’s recent decision to impose tariffs on Chinese imports. U.S. businesses fret that America’s exit from the TPP is already giving advantages to foreign competitors, who would be able to sell to those markets at reduced tariffs and under harmonized rules. After the U.S. withdrew, the 11 nations concluded a less ambitious version of the deal, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
TPP... from no way to perhaps a way for passage in Congress. Before Trump withdrew the U.S. from TPP, the trade pact faced low odds of passage in Congress. Democratic presidential candidate Hillary Clinton opposed the deal, as did her opponent in the Democratic primary, Sen. Bernie Sanders and most Democratic lawmakers. Many Republican lawmakers also had reservations. Then presidential candidate Trump railed against the TPP. “The TPP is another disaster done and pushed by special interests who want to rape our country,” Trump said in June of 2016. “Just a continuing rape of our country. That’s what it is, too. It’s a harsh word — it’s a rape of our country. This is done by wealthy people that want to take advantage of us and that want to sign another partnership.”
White House responds. In a statement, a deputy White House press secretary, Lindsay Walters, pushed back on the notion that Trump was reversing his campaign promises. The president had “kept his promise to end the TPP deal negotiated by the Obama administration because it was unfair to American workers and farmers,” she said. “The president has consistently said he would be open to a substantially better deal.”
A group of 25 Republican senators sent Trump a letter in February asking him to “re-engage with the Trans-Pacific Partnership.” Now, veteran trade policy watchers say trade policy flare-ups since Trump became president, and especially the China/U.S. trade conflicts, has now elevated the importance of trade agreements and could signal any revised TPP would face a better chance of congressional passage than the initial round.
“This is another encouraging signal from the administration, following what the president said at Davos,” said Wendy Cutler, who was among the TPP negotiators. “I always thought that with time the administration would value the TPP more and more.” Trump floated the idea of getting back into TPP at the World Economic Forum in Davos, Switzerland, putting the same caveat on the situation as he did in his late-night tweet Thursday — only if the U.S. can get a better deal.
When Trump yanked the U.S. out of the TPP deal, the other TPP countries suspended 20 provisions in the original accord and announced a new deal (CPTPP). The provisions, including key intellectual property protections such as those involving biological drugs, were measures the U.S. had demanded in return for granting access to its market. The U.S. also might seek to revive the 12-nation deal, which would take effect if the U.S., Japan and four other signatories formally approved it. Or, the administration could seek to negotiate a new agreement, Cutler said. “They do want us back in. But the question is: at what price?” Cutler said.
Sen. Ben Sasse (R-Neb.), said, “We should be leading TPP... China is a bunch of cheaters and the best way to push back on their cheating would be to be leading all these other rule-of-law nations in the Pacific that would rather be aligned with the U.S. than with China.”
Sen. John Thune (R-S.D.) who attended Thursday's trade policy confab at the White House said he and others at the table argued that “if you really want to get China’s attention, one way to do it is start doing business with all the people they’re doing business with in the region: their competitors.”
"I did not jump to the conclusion, as some of my colleagues did, that it was like, 'Oh we're getting back into TPP,'" Sen. Deb Fischer (R-Neb.) said. "Maybe I'll be proven wrong on this, but I don't see this big rush back into TPP."
But can the TPP/CPTPP be altered in big enough ways to temper its U.S. critics and just as important get leaders from the 11 countries in the current agreement to go along? Top Japanese diplomats have repeatedly said they would take a fresh look at the deal and that they would welcome Trump and the U.S. back with open arms. Japanese Prime Minister Shinzo Abe has reportedly continued to encourage Trump in private conversations to come back into the TPP fold. But Japan maintains that it has already given all the concessions it could. Yoshihide Suga, Japan’s chief cabinet secretary, today cautioned against any efforts to change the agreement to accommodate Trump, calling it a “well-balanced pact” that addressed the needs of the 11 nations that signed the deal.
The geopolitical importance of TPP cannot be overestimated. Observers note that entering into a new TPP could unify Trump with other trading partners and put new pressure on Beijing to either allow more imports into China or risk being alienated by other Asian countries, that would now receive new trade benefits as part of the deal. China is not a member of the TPP/CPTPP.
TPP is one of the White House’s few remaining options as Trump searches for ways to exert pressure on China to back down from its threat of new tariffs on U.S. exports. And American farmers and their lobby groups have made it clear to Trump and his trade and agriculture officials that they the U.S. ag sector will get caught in the middle of the trade spat Trump and Beijing have recently escalated, and they want assurances that they will not lose out on foreign buyers.
Trump earlier this week acknowledged that U.S. farmers were caught up in his administration’s trade dispute with China, and asked USDA for a list of options to mitigate the economic hit. A multibillion-dollar farmer tariff-aid program is under review. If the plan is implemented, it would cost billions of dollars to compensate farmers suffering from Chinese retaliatory tariffs on U.S. farm products.
“Stay with us while we go through this difficult process,” Kudlow told farm-state lawmakers during Thursday's meeting, according to a White House transcript. He added, “And at the end, if the worst case has come out as the president said, you will be helped. That’s a promise.”
Trump floated the idea of subsidy payments for farmers in Thursday's meeting, but nobody signaled support. Iowa Governor Kim Reynolds got the Trump's attention by saying “our farmers don’t want welfare — our farmers want to work and win.” Farm-state senators at the White House session agreed. “Farmers don’t want a handout. They want access to markets,” Sen. Steve Daines (R-Mont.) said, adding that other senators made that point “very clear” and that Trump was “surprised by that. He’s like, ‘really?’ He said, ‘Oh really? Ok, so we won’t do that,’” Daines said.
Kudlow, in the interview with the NYT, said that farmers had “a legitimate concern” but added that it would be “at least two months before final decisions will be made... I’m not here to say we won’t use tariffs — everything’s on the table in these negotiations — but I am here to say we don’t know yet,” he said. Trump administration officials say that back-channel talks have occurred, but they would not characterize them as official negotiations.
Trump administration officials are also working to renegotiate NAFTA, and the president told senators Thursday they were making progress. “The president said it could be two weeks, it could be two months, it could be six months,” said Sen. Deb Fischer (R-Neb.). “He’s keeping his options open. That’s important.”