The demise of what could have been the world’s most significant trade agreement is proving costly for the United States.
As we approach the end of 2019, the repercussions of President Trump’s hasty withdrawal from the Trans-Pacific Partnership (TPP) are becoming increasingly apparent. This decision, made mere days into his presidency, has proven to be a pivotal moment in recent American economic and foreign policy, with far-reaching consequences that extend beyond mere trade statistics.
The TPP, envisioned as a groundbreaking trade agreement encompassing 40% of the global economy, represented an unprecedented opportunity for the United States to shape the rules of international commerce in the 21st century. Larger in scope than both NAFTA and the EU combined, it promised to create a new paradigm for trade relations, particularly in the strategically crucial Asia-Pacific region. However, President Trump’s characterization of the TPP as a “rape of our country” and his subsequent withdrawal from the pact have set in motion a series of events that are reshaping global economic alignments, often to the detriment of American interests.
At the heart of Trump’s decision lay a fundamental misunderstanding of modern trade dynamics and their impact on the American economy. The administration’s stance was bolstered by a controversial study from Tufts University, which predicted a loss of half a million American jobs within a decade due to the TPP. However, this analysis, like much of the economic advisement received by Trump, was critically flawed. It failed to account for the complex, multifaceted nature of international trade and its effects on domestic economies.
To understand the shortcomings of this perspective, one must grasp the concept of comparative advantage that was first articulated by David Ricardo in the early 19th century. This principle suggests that countries benefit from specializing in the production of goods and services in which they are relatively more efficient, and trading for others. In the context of the TPP, this would have allowed the U.S. to leverage its strengths in high-tech manufacturing, services, and innovation, while shifting some lower-value manufacturing to other so-called ‘low-cost’ countries.
The Tufts study, like Trump economic advisers, overlooked the beneficial supply-side impacts of trade liberalization. By reducing barriers to trade, the TPP would have lowered the cost of inputs for American businesses, which would have spurred innovation and productivity growth. It also underestimated the adaptability of American labor and capital markets to the transformative forces of new industries. Historical precedent suggests that while trade agreements can lead to short-term displacement in certain sectors, they often create new opportunities in emerging fields, leading to net job creation and economic growth over time.
A more comprehensive evaluation by the U.S. International Trade Commission (USITC), mandated by Congress, painted a starkly different picture. It suggested that abstaining from the TPP would cost the U.S. an opportunity for 128,000 additional full-time jobs and a 0.15% GDP growth by 2032. While these figures may seem modest, they represent significant missed opportunities in an increasingly competitive global economy.
Beyond job creation, the TPP promised to dismantle approximately 11,000 tariffs on American exports. According to the Peterson Institute for International Economics (PIIE), this could have boosted U.S. exports by 9.1% or $357 billion annually. Such an increase would have been particularly beneficial for American agriculture, manufacturing, and service sectors, all of which have faced increasing competition from emerging economies.
Contrary to President Trump’s assertions, the TPP included provisions designed to protect American interests. Notably, Chapter 17 of the agreement aimed to curtail the ability of foreign state-owned enterprises to flood the U.S. market with subsidized, low-cost goods. This provision was particularly important in light of concerns about China’s state-capitalist model and its impact on global trade dynamics.
The aftermath of the U.S. withdrawal has seen the remaining 11 nations form the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CP-TPP). This development has led to a diminished U.S. trade surplus in Asia, particularly in agriculture. American farmers, already grappling with the effects of climate change and market volatility, now face additional challenges as competitors gain preferential access to key Asian markets.
The situation has been further exacerbated by the ongoing trade conflict with China. While the Trump administration’s tough stance on Chinese trade practices has garnered support from both sides of the political aisle, the unilateral approach has left the U.S. isolated in its efforts. The TPP, with its emphasis on high standards and rule-based trade, could have provided a multilateral framework for addressing these concerns more effectively.
Perhaps even more significant than the economic implications are the geopolitical consequences of the U.S. withdrawal from the TPP. The agreement was designed not just as a trade pact, but as a strategic tool to check Beijing’s rising economic influence and coercive strategies in the Indo-Pacific region. By setting high standards for labor rights, environmental protection, and intellectual property safeguards, the TPP aimed to create a rules-based economic order that would have challenged China’s state-capitalist model.
The U.S. exit from the TPP has ceded strategic ground to China, enabling it to promote its own trade frameworks, such as the Regional Comprehensive Economic Partnership (RCEP). This 16-nation pact, while less comprehensive than the TPP, now stands to become the world’s largest trade agreement, significantly boosting China’s economic and political clout in the region.
Furthermore, China’s Belt and Road Initiative (BRI), a massive infrastructure and investment program spanning Eurasia and beyond, has gained momentum in the absence of a strong American-led alternative. While the BRI has faced criticism for its lack of transparency and potential to create debt traps for participating countries, it has nonetheless expanded China’s influence across a vast swath of the developing world.
The U.S. withdrawal not only eroded its credibility among Pacific nations, who had ceded significant policy reforms in promise of access to the American market, but also marked a stark departure from the GOP’s traditionally pro-trade stance. This shift has created uncertainty about the future direction of U.S. trade policy, potentially deterring long-term investment and strategic planning by both domestic and international businesses.
As we near the end of 2019, there are signs that the Trump administration is beginning to recognize the strategic error of abandoning the TPP. The Asia Reassurance Initiative Act (ARIA), signed into law in December 2018, signals a renewed focus on engaging with the Indo-Pacific region. There have also been hints of a possible return to the TPP fold, with President Trump himself suggesting at the 2019 World Economic Forum in Davos that the U.S. might consider rejoining if it could secure a “substantially better deal.”
However, the damage may already be irreparable. The remaining TPP members have moved on, implementing their own agreement and forging new economic ties that exclude the United States. Rejoining the pact would likely require significant concessions from the U.S., undermining the very benefits it sought to secure in the original negotiations.
Trump’s hasty decision to abandon what could have been the largest free trade agreement in history is now haunting the U.S., both economically and geopolitically. As the US moves towards a election year — and a potential change in the White House — rebuilding American leadership in global trade will require a more nuanced understanding of the complex interplay between economics, geopolitics, and diplomacy. The TPP debacle serves as a stark reminder of the costs of shortsighted, politically driven policy decisions in an increasingly interconnected world.
This “current affairs op-ed” was written to fulfill part of the college application requirements for Georgetown University’s School of Foreign Service and the University of Richmond, which the author has been successfully admitted.