By Jacob M. Schlesinger
President Trump claimed a multi-front victory last week in his
bid to reshape U.S. trade policy under his "America First"
philosophy, extracting fresh commercial concessions from Mexico and
China -- while stripping the World Trade Organization of its powers
to restrain the tactics he used to secure them.
Combined, the efforts show an approach toward U.S. trading
partners and multinationals that is focused more on forcing
corporations to produce domestically and sell American-made goods
abroad than on helping them expand their global manufacturing
footprint.
On Tuesday, the White House announced the rewrite of the
country's largest trade deal, the 1994 North American Free Trade
Agreement, winning approval not only from the compact's Mexican and
Canadian partners but from longtime Nafta opponents among
congressional Democrats and organized labor. On Friday, the
administration brokered a limited truce with Beijing following a
year-and-a-half-long trade war, putting further tariffs on hold and
securing an unusual Chinese pledge to boost imports of U.S. goods
by a specified dollar amount while trade talks between the two
sides continue.
In between those two announcements, the U.S. on Wednesday
effectively crippled the Geneva-based WTO trade court that was
launched in 1995 to prevent the kinds of trade wars Mr. Trump has
deployed to coerce America's trading partners to the bargaining
table. Over the past two years, the administration has blocked the
appointment of judges to the court, and because its remaining
members' terms are expiring, the panel as of last week no longer
had enough members to issue decisions and enforce WTO rules.
Many economists, business leaders and members of Congress from
both parties say Mr. Trump's efforts have done little to boost
economic activity -- other than by defusing the uncertainty he
himself stoked with his disruptive acts. But many agree that "this
was the week where the first three years of Trump administration
trade policy all came together," said Clete Willems, who worked as
a White House trade adviser until April.
Mr. Trump's administration will now turn to negotiating the next
phase of a deal with China -- though election-year politics and
stiff Chinese resistance might make such an agreement difficult --
and to reaching new or expanded pacts with other trading partners,
including Japan and the European Union. A new agreement with the
U.K. is also a priority after last week's sweeping election victory
of Prime Minister Boris Johnson's Conservative Party makes a
British departure from the EU almost certain.
Mr. Trump took office in January 2017 with a clear vision for
how he wanted to upend the longstanding American approach to trade.
His predecessors, he has said repeatedly, negotiated bad
agreements, and he vowed to rip them up. He wanted to focus more on
concrete outcomes -- cutting the trade deficit, boosting U.S.
manufacturing -- rather than bolstering transparent, market-opening
rules. He believed previous presidents had been too responsive to
multinational companies, too deferential to multilateral rules and
too timid about wielding American power unilaterally.
The public details of the "phase-one" China deal were vague,
with many disputed issues left to later negotiations, but one
provision the U.S. announced was what it characterized as a promise
by Beijing to boost imports of U.S. goods and services over the
next two years by at least $200 billion over 2017 levels -- roughly
a doubling within four years that many analysts consider
unlikely.
Beyond the top-line number, "we have a list that will go:
manufacturing, agriculture, services energy...There'll be a total
for each one of those, " Robert Lighthizer, Mr. Trump's chief trade
negotiator, told CBS's "Face the Nation" Sunday. Those specific
targets echo various import and export quotas that Washington
imposed on Japan in the 1980s, a managed-trade approach that U.S.
governments came to shun over the past 30 years.
The new Nafta -- rebranded the U.S.-Mexico-Canada Agreement, or
USMCA -- followed 2 1/2 years of negotiations, after which Mexico
agreed to provisions designed to strengthen its workers' labor
protections. Those included measures allowing Americans to monitor
conditions there in ways some Mexicans feel intrude on their
sovereignty. The goal is to raise the cost of manufacturing in
Mexico and shift production that had moved there under the original
Nafta back to the U.S.
While that contrasts with the earlier pact's objectives of
expanding trade and raising the manufacturing efficiency of a
unified continental bloc, it encapsulates "Trump trade policy," Mr.
Lighthizer said Sunday. "He doesn't want American manufacturing
workers to have to compete with people who are operating in very
difficult working conditions."
Another last-minute change in USMCA was the removal of a
provision for U.S. drugmakers forcing other countries to extend
their patent protections, something the pharmaceutical industry had
succeeded in making standard in new trade deals. The USMCA also
drops protections for American multinationals investing in other
countries, another hallmark of recent U.S. trade agreements. Both
changes show how Mr. Trump sees trade deals as less about helping
multinationals do business abroad than encouraging them to focus
production at home.
"This is the first trade agreement the U.S. has ever done that
raises trade barriers and degrades investor protections," said
Daniel Price, a top trade official in the George W. Bush
administration.
Skeptics saw in last week's frenzied activity the limits of
unilateral American might in bending the global trading system to
its will. The Friday agreement with Beijing, in particular, was
less the sweeping market-opening than a cease-fire.
"Trump was right to call China out on their violations of rules
and norms," said Fred Bergsten, a trade expert at the Peterson
Institute for International Economics. "But he has been going at
them for three years, unleashed a lot of firepower, and has gotten
essentially nowhere on the big issues." He added that Mr. Trump's
disdain for multilateralism undercut his goals: "China can stand up
to us one on one, but it cannot stand up to us if we maintain our
alliance structure."
Farmers fret that the gains Mr. Trump touts might not even
sufficiently offset their losses to date from his actions. The
American Farm Bureau Federation noted Friday that "China went from
the second-largest market for U.S. agricultural products to the
fifth-largest since the trade war began."
Yet to Trump supporters, "the latest deals show that the United
States has a great deal of leverage, when that leverage is used
effectively," said Stephen Vaughn, who worked until April as an
administration trade negotiator shaping each of its initiatives.
"This U.S. is actively making its own trade policy right now, and
that's going very well."
Mr. Trump's tactics in pursuing the USMCA and China deals marked
a sharp break from his recent predecessors. He imposed tariffs
unilaterally to force concessions. Mexico and Canada agreed to
rewrite Nafta in part to get Mr. Trump to remove steel and aluminum
tariffs he had placed on them, and to respond to Mr. Trump's
threats to add new levies on cars. The China import pledge was
given in part to get Mr. Trump to drop new tariffs on $156 billion
in Chinese goods scheduled to take effect Sunday.
Since the WTO's creation a quarter-century ago, American
presidents have avoided using those unilateral powers, instead
taking their complaints to the WTO and letting the judges there
determine whether the U.S. had a legitimate grievance and, if so,
the proper response. Mr. Trump has regularly said the Geneva trade
court treats the U.S. unfairly, arguing American interests were
better served by undermining the institution. After last week's
neutering of the trade court, other countries will have a harder
time using the WTO to challenge American actions.
The president's critics cite studies showing modest gains at
best for the economy -- and argue that positive market response to
the recent announcements reflect more relief that the
administration appeared to cease disrupting the system than any
celebration of substantive progress made.
"If your metric is that we've stopped bleeding ourselves, then
these have been a plus," said Robert Zoellick, a former chief trade
negotiator in the Bush administration from 2001 to 2005. "If your
metric is whether we're expanding trade, opening markets and
setting higher standards, then these have been a total waste of
time."
Despite warnings that the president's tactics would tank markets
and the economy, both have remained strong throughout his term.
"This might have been Trump's best week in the White House,"
said Stephen Moore, a fellow at the conservative Heritage
Foundation and an informal adviser to the president. He noted that,
in addition to the trade deals, "you had a monster jobs report"
Dec. 6, when the unemployment rate matched a half-century low of
3.5% and then, by some benchmarks, "the stock market hit an
all-time high."
Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com
(END) Dow Jones Newswires
December 15, 2019 14:09 ET (19:09 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.