Global trade didn't stop when President Trump officially nixed U.S. participation in the Trans-Pacific Partnership (TPP), a proposed 12-nation free-trade agreement that the Obama administration arduously negotiated. But U.S. leadership on shaping trade rules with the world's most populous and dynamic region did screech to a halt.
Predictably, China stands to benefit. In fact, Beijing is wasting no time seizing on America's retreat, as evidenced by this week's meeting in Kobe, Japan, between 16 Asian nations considering the Regional Comprehensive Economic Partnership (RCEP), China's alternative to the TPP.
While no treaty is ready to ratify, the direction is clear: Unless Washington wises up to the economic and geostrategic necessity of leading on global trade, Beijing will fill the void with a treaty with far less focus on environmental, labor, intellectual property and other concerns that the U.S. made sure were mandated by the TPP.
"The U.S. has traditionally set those standards to reflect its own domestic standards, so these trade agreements have been essentially very effective tools to get the rest of the world do what the U.S. already does domestically, and that's no longer going to be the case," Joshua C. Meltzer, senior fellow for global economy and development at the Brookings Institution, told an editorial writer. And, added Meltzer, as far as reducing barriers to trade and investment, U.S. businesses — including Minnesota multinationals like Cargill — could be at a disadvantage if the RCEP is inked.
Trump, in his address to Congress on Tuesday, crowed that, "We have withdrawn the United States from the job-killing Trans-Pacific Partnership." But the reality is likely the opposite: U.S. exporters — and thus U.S. workers — may face disadvantages in a RCEP-dominated Asia. The tilt toward China may be geopolitical, too, at a time when the U.S. should be strategically responding to a rising China.
That's why several Asian nations wary of China's claims in the South and East China seas welcomed the Obama administration's "pivot" policy to Asia. The multipronged policy had diplomatic and military components, but also counted on tighter trade ties with regional countries. But the U.S. trade retreat may make Asian allies "hedge," Meltzer said, if "they start to discount the value of U.S. strategic assurances, and they start to accommodate China in more and different ways."
The U.S. may be accommodating China in its own way, too, by ceding leadership in shaping trade protocols that will define global commerce.
It's not too late for Trump and Congress to reconsider their positions on global trade. Given the rhetoric, it's unlikely that the TPP will be revived soon, if ever. But they should swiftly move to re-engage in negotiations that build the U.S. economy and project American values.