As the Trump administration took another step away from free trade on Thursday, 11 nations bordering the Pacific Ocean made an equally loud statement in favor of free trade.
“It’s quite a juxtaposition, one of the great ironies of today,” said Michael Froman, who had negotiated the Trans-Pacific Partnership as U.S. trade representative under President Barack Obama. “The rest of the world is moving ahead without us. It shows the divergence of the United States from the rest of the world at the moment.”
The two scenes — in Washington and Santiago — reflect a cultural and political shift. For seven decades, the United States has labored, with some exceptions, to forge a world with lower trade barriers, a way of strengthening the liberal consensus by tying allies closer together. In 1947, 23 nations signed on to the General Agreement on Tariffs and Trade, and in 1994, 123 nations signed on to the more sweeping World Trade Organization.
In part because of domestic political pressure, the United States also used trade as a bargaining tool to press for transparency, worker and environmental protections, and economic reforms in countries, most notable among them China, which was eager to join the WTO in 2001.
And the United States has had aid from its allies, from Australia to the European Union, in tearing down barriers. Since the WTO was launched, trade among its members has nearly quadrupled, while average applied tariffs declined by about half to 9 percent.
Although absent from Thursday’s signing in Chile, the United States was the catalyst for the Trans-Pacific Partnership, first under President George W. Bush and later under Obama.
Even without the United States, the new agreement covers nearly 500 million people and more than 13 percent of global trade, down from the 800 million people and 40 percent of trade for which it would have accounted if the United States had joined. That is still the world’s third-largest trade bloc.
“The rest of the world is doing pretty well in keeping momentum going without the United States,” said C. Fred Bergsten, a senior fellow at the Peterson Institute for International Economics. He said “nothing could be more dramatically opposite” than Trump’s tariffs and the trade deal signed in Chile.
The TPP agreement included a raft of issues the United States had raised — protection of pharmaceutical patents, the digital economy, labor rights and the environment as well as ending preferences for state-owned enterprises. Ultimately, the diverse TPP nations concluded that the agreement would make their economies stronger.
Many policymakers have viewed the organization as a counterweight to China. But at the same time, the members of the group are major trading partners of China. “It’s not about containing China but about creating an alternative model and grouping that could balance the natural role China plays in the region,” Froman said.
Even so, Obama did not have the votes in Congress, facing opposition not only from Republicans seeking to curtail his achievements but also from Democrats opposed to free trade. Like Trump, Hillary Clinton opposed the TPP.
During the 2016 presidential campaign, Trump argued that erecting tariff barriers could be good, that a U.S. trade deficit with any single country required a remedy, and that bilateral agreements offered the United States more leverage to extract concessions from its trading partners.
The TPP was an easy target. Trump called the TPP the equivalent of a “rape” of the U.S. economy. And key voting groups viewed international trade of any sort as a threat to their livelihoods.
Bilateral agreements seemed more limited and fit more naturally into Trump’s self-portrayed image as a dealmaker.
Three weeks after Trump took office, his trade adviser, Peter Navarro, briefed Senate Finance Committee members on the new administration’s key principles, one of them being an emphasis on bilateral trade deals with triggers for renegotiation when trade deficits occur. Germany, Japan and South Korea were high on the list for bilateral deals.
But German officials pointed out to Trump officials that Germany was prohibited from negotiating with the United States outside of the E.U. framework. And Japan not only rebuffed Trump’s overtures for a bilateral agreement but took over the U.S. leadership role in forging the Pacific trade accord.
The Peterson Institute’s Bergsten said that the Trump administration hoped to “hive off” Japan and kill the TPP with a bilateral deal but that Japan surprised people by “stiffing” the Trump administration and “filling the void left by the United States.”
In rejecting a bilateral deal, Japan helped undercut a key tenet of Trump’s trade strategy.
“You don’t have more leverage in a bilateral agreement,” said Christopher Smart, a senior fellow at the Carnegie Endowment for International Peace and a former Treasury and National Economic Council adviser on trade. In a multilateral negotiation such as the TPP, he said, the United States can allow dairy imports from New Zealand in return for greater access to the Canadian dairy market. “You can use the strength of the network to get a much better set of outcomes than you would in a whole set of narrow bilateral deals,” he sad.
In Chile, officials from the 11 nations celebrated the new trade bloc, now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
The member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Heraldo Muñoz, Chile’s minister of foreign affairs, told a news conference the agreement was a strong signal “against protectionist pressures, in favor of a world open to trade, without unilateral sanctions and without the threat of trade wars,” according to a Reuters report.
But Trump’s imposition of tariffs still poses dangers to the global trading system. One reason is his use of national security to justify the tariff imposition. Instead of relying on the Defense Department to analyze that issue, Trump relied on the Commerce Department, which could cite either military or economic issues.
“It’s geopolitically disastrous and economically illiterate,” Smart said. “We are undermining a whole bunch of rules we have tried to establish in the global trading system. We have now invoked a national security reason that nobody really believes, which means that others will invoke it for their own narrow purposes while economically we’re raising the costs of a major input into our manufacturing economy.”
“Trade wars are easy to get in, difficult to get out of,” said Carlos Gutierrez, commerce secretary under President George W. Bush and now chair of the National Foreign Trade Council, which represents multinationals. “We are dismantling the international trading system, and it’s going to take years to put it back together if this keeps going.”
David J. Lynch contributed to this report.