By Jacob M. Schlesinger
WASHINGTON -- Eleven Pacific Rim nations agreed to forge a new
trade bloc that excludes the U.S. on Tuesday, as President Donald
Trump signed an order to block certain cheap Asian imports,
illustrating the battle lines of a new global trade climate.
The announcements underscore Mr. Trump's challenge as he
prepares to defend his new "America First" trade policy in a speech
on Friday to the champions of globalism at the World Economic Forum
in Davos, Switzerland.
U.S. officials say that as they escalate more aggressive trade
policies in the coming weeks, they will also try to persuade
skeptical allies that their actions are intended to improve the
international economic system, not to destroy it. The underlying
message: the U.S. is neither retreating from trading partners nor
fighting them.
"A strong U.S. economy benefits the world, having fair and
reciprocal trading relationships help the world, and the U.S. is
engaged in trying to help the global economy through reforms like
that," said a White House trade official. "That's a message you're
going to see us using more frequently in the near future."
It will be hard to convince allies that "America First" goes
beyond isolationism and protectionism. The risk is that other
countries retaliate against American producers with their own
sanctions and step up new trade accords without the U.S.
"Now in some parts of the world, there is a move toward
protectionism," Toshimitsu Motegi, the Japanese economy minister
said in Tokyo, announcing the agreement of the Trans-Pacific
Partnership, redrafted for 11 members after Mr. Trump pulled the
U.S. out a year ago. "TPP-11 is a major engine to overcome such a
phenomenon."
The emerging Trump trade policy involves three main components,
each advanced in different forms this week.
The first is ramping up trade enforcement actions, like the
broad, steep tariffs announced Monday aimed at protecting U.S.
makers of solar panels and washing machines. Administration
officials say more such protections are coming, with studies under
way for action on steel and aluminum. The U.S. will also probe
weighing action against an array of Chinese goods and investments
in retaliation for China allegedly pressuring U.S. companies to
turn over valuable intellectual property.
"You'll see what's going to take place over the next number of
months," Mr. Trump said during an Oval Office ceremony held Tuesday
to sign the solar and washer actions.
The second is either shunning trade pacts negotiated by previous
administrations, like TPP, or rewriting them. A large delegation of
American trade negotiators is in Montreal this week to press Canada
and Mexico for concessions to "rebalance" the North American Free
Trade Agreement in ways aimed at steering manufacturing from Mexico
back to the U.S.
Mr. Trump's chief trade negotiator, Robert Lighthizer, has
indicated that if his counterparts don't show sufficient compromise
in this round, Mr. Trump will be more inclined to pull the U.S. out
of the quarter-century-old pact. "Nafta is moving along pretty
well," Mr. Trump said Tuesday, but added: "I happen to be of the
opinion that if it doesn't work out, we'll terminate it."
The third element is to shake up the World Trade Organization,
the overseer of the global trading system since 1995. Trump
officials say the Geneva body too often rules against U.S.
interests, and doesn't do enough to rein in China's state-driven
trading system. To make its point, the U.S. is blocking
appointments the WTO's court responsible for arbitrating trade
disputes between members, a move that risks gumming up the world
commercial legal system.
In a tense meeting of world trade officials in Geneva on Monday,
Mexico introduced a proposal backed by nearly 60 members demanding
the U.S. end its filibuster. Eighteen delegates -- including those
from Canada, Europe, and China -- spoke to support the proposal,
one warning of "major consequences" for the WTO. The U.S.
representative refused to yield.
As the administration advances those three goals, officials are
honing their message for how they plan to explain those significant
shifts in American international economic policy to allies and
trading partners. One theme: "We're not turning away from the
system, we're saying the system needs to be reformed to survive,"
the White House trade official said. "And if anything, we are the
ones to save the system from itself."
"There won't be a trade war," Mr. Trump declared Tuesday.
Indeed, many trading partners are sympathetic to one aspect of
the Trump administration's criticism: that the WTO doesn't do
enough to counter Beijing's government-driven industrial policy.
That policy has helped fuel Chinese exports and growing market
shares that have destroyed vital industries abroad, from steel to
semiconductors. Both the European Union and Japan have recently
joined with the U.S. in efforts to get the WTO to more directly
pressure China.
But the U.S. challenge is to avoid alienating those countries as
Washington either hits them with new trade barriers or rejects
longstanding trade arrangements with them. None have so far taken
up Mr. Trump on his offer to negotiate new bilateral deals, and
many, including the TPP participants, have chosen to strike new
deals elsewhere.
Since Mr. Trump's inauguration, the European Union has
accelerated a campaign to sign new free-trade agreements around the
world, seeking to fill what it sees as a new void in advancing
market-opening agreements.
While U.S-EU talks launched under President Barack Obama have
stalled under Mr. Trump, the EU last year implemented new pacts
with Japan and Canada. The EU this year is seeking to build on that
by clinching deals to slash tariffs and open new markets from
Mexico to Chile. The EU is also negotiating a trade deal with the
Mercosur bloc comprising Argentina, Brazil, Paraguay and
Uruguay.
Meantime, both Canada and Mexico signed onto the new TPP pact,
with some officials seeing it as a hedge to open non-American
markets if Nafta collapses.
The U.S. withdrawal from TPP and its hard-edge negotiating over
Nafta have "prompted governments and stakeholders across the region
to reassess their reliance on American economic leadership and the
U.S. market," the Asia Society Policy Institute wrote in a recent
report. U.S. allies, the report added, are "hard at work developing
contingency plans for... advancing trade and investment
liberalization without the United States."
--Emre Peker in Brussels contributed to this article.
Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com
(END) Dow Jones Newswires
January 23, 2018 16:22 ET (21:22 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.