Op-Ed: TPP, USA and Free Trade – The Hindu (10.03.18)

(Guidelines for Reader: Latest Op-Ed First; Verbatim Compilation of The Hindu Op-Ed; Best to read in the order of oldest to latest article to get a comprehensive understanding; Consider repetition to be revision)

(We are drowning in information and starving for wisdom. READ and develop a PERSPECTIVE!!)

Current Op-Ed

Trade goes on: on U.S and free trade (10.03.18)

The United States under Donald Trump may not be a huge fan of free trade across borders, but that’s not stopping other countries from embracing it. On Thursday, 11 Asia-Pacific countries, including Japan, Australia and Canada, signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in Chile. The CPTPP is, in effect, the original Trans-Pacific Partnership struck during the Barack Obama presidency minus the U.S. On the campaign trail, Mr. Trump had promised to pull the U.S. out of the TPP, and went on to do precisely that within weeks of assuming office. Interestingly, the CPTPP comes soon after the U.S. had made clear its plan to impose tariffs on the import of aluminium and steel in an attempt to protect domestic manufacturers. The countries signing the agreement, which account for more than 13% of the world economy, have agreed to bring down tariffs on cross-border trade by as much as 98% after domestic ratification. More countries are expected to sign the CPTPP in the future, and there is hope that a post-Trump U.S. may join the bloc. But even in the absence of the world’s largest economy, countries that are currently part of the deal will only gain from any reduction in the costs imposed on trade. This will leave the world, which has largely been moving towards increasing free trade even as the U.S. has turned inwards, better off than without the deal.

The CPTPP, as it looks to expand influence by adding other countries into its fold, will need to address other problems as well. One of the points of criticism of the TPP, even in its original form as a 12-member agreement, was the alleged influence of special interests in dictating its broad framework. Mr. Trump, in fact, smartly capitalised on these sentiments to attack and then pull out of the agreement last year. The TPP text, which has in large part been incorporated into the new deal, had also been flayed for mandating labour and other regulations that increase the bureaucratic burden on businesses. Many have cited the size of the agreement, which runs into several chapters and thousands of pages, to contend that the benefits from tariff reductions may be cancelled out by the massive increase in regulatory requirements. While there may be no hard and fast rule to gauge the net benefit of the agreement, addressing these concerns will only strengthen the chances of more countries joining it. A simpler trade agreement can also help the cause of transparency and lower the chances of lobbying by special interests in the future. Last but not least, amid palpable fears of a global trade war, the survival of a free trade agreement despite the sudden pullout of the U.S. offers some respite to the supporters of free trade.

XXX

Older Op-Eds

Harbinger of change in global trade (07.02.18)

The >formal signing of the Trans-Pacific Partnership (TPP) by the 12 member-countries of the mega-regional free trade agreement is a milestone for international trade and, by extension, the global economy. With worldwide trade having slowed sharply since the 2008 financial crisis and now faced with headwinds from China’s slowdown, the deal, yet to be ratified, could provide a much-needed fillip to growth. As the World Bank noted in a study in January on the macro-economic implications of the TPP, the pact could, by 2030, help boost the overall GDP of member-countries by 1.1 per cent. And given that the grouping includes two of the world’s three largest economies — the U.S. and Japan — and overall accounts for more than one-third of the world’s economic output, the spillover benefits would be significant. Moreover, given the diversity of the member-countries — from the mineral-rich, trade-intensive Latin American economies of Peru and Chile, to the NAFTA triumvirate of Canada, the U.S. and Mexico, ASEAN members Malaysia, Singapore, Brunei and Vietnam, trans-Tasman neighbours Australia and New Zealand, and Japan — the TPP also demonstrates a willingness to look beyond domestic political considerations and hammer out a far-reaching agreement that could act as a template for future multilateral trade deals. Yet, the pact is far from a done deal as it still needs to win legislative backing in the member-states. That may be far more difficult than the seven-year-long negotiations, with both the Democratic presidential candidates and two leading Republican contenders in the U.S., Donald Trump and Ted Cruz, opposed to it. Mr. Trump and Democrat Bernie Sanders >are the most vocal critics, arguing that the TPP will cost American jobs.

For India, the agreement provides an opportunity to reflect on its approach to multilateral trade talks, while underscoring the need to build a strong multi-disciplinary cadre of specialist free-trade analysts and negotiators. Though the World Bank projects a limited ‘trade diversion’ impact on non-members, including aggregate GDP losses of about 0.1 per cent by 2030, India could suffer market share losses in certain categories of exports as a result of preference erosion. With the South Asian Free Trade Agreement (SAFTA) having made little to no difference to India’s terms of trade in the neighbourhood, and the country having ceded substantial ground at the latest Nairobi meeting of the World Trade Organisation, it is high time the government proactively girded for the challenges ahead. Like China, where an editorial in the state-run Global Timesexhorted the Asian giant’s leadership to focus on strengthening its own economy than worry about the TPP, India too needs to aim at setting its house in order. From ensuring the creation of a domestic common market through adoption of the long-delayed Goods and Services Tax, to building its own multilateral bloc of emerging and developing economies that can act as a bulwark against TPP-like groupings, India has its task cut out.

Pacific Ocean’s 11: on TPP without U.S. (19.11.17)

When Donald Trump abandoned the 12-nation Trans-Pacific Partnership (TPP) in his very first week after being sworn in as U.S. President, there were doubts whether the trade agreement, painstakingly negotiated over more than a decade, would survive. Japanese Prime Minister Shinzo Abe had termed the TPP without the United States — which contributed 60% of the combined Gross Domestic Product of the 12 members — as “meaningless”. Ten months on, exactly at a time when Mr. Trump was visiting Vietnam, trade ministers from the remaining 11 nations agreed in Danang in principle to a new pact, the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), revising some of the features of the TPP. For the agreement to take effect, the pact requires domestic ratification, which is expected to be complete by 2019. This major step taken by the 11 countries of the Pacific Rim excluding the U.S. is a reflection of two things. First, these countries recognise that multilateral free trade, contrary to any misgivings, is beneficial in the long run. The TPP in its current form has significant protections for labour and environment and is in this regard an advance over other free trade agreements. Second, the U.S.’s self-exclusion reflects a failure on the part of the Trump administration; studies have shown significant benefits in comparison to minor costs — in terms of jobs — to the U.S. on account of the pact.

As things stand, the pact without the U.S. can only be interpreted as yet another step that diminishes American power and the international order that it has so far led. Already, Mr. Trump’s decision to pull out of the Paris climate accord and his repudiation of the Iran nuclear deal have raised suspicions about American commitment to well-negotiated treaties that seek to solve or have solved long-standing issues. Mr. Trump couches his regime’s policies as populist nationalism — ‘protecting labour’ in the case of the abandonment of the TPP, promoting jobs in fossil fuel-intensive sectors to justify the repudiation of the Paris Accord, and retaining American exceptionalism in West Asian policy in scrapping the Iran nuclear deal. While rhetoric to this effect had fuelled his presidential campaign with a heavy dose of populism, the actual effect of going through with these actions has been to create a suspicion among America’s allies about his reliability when it comes to standing by old commitments. Mr. Trump’s agenda to pull his country out of multilateral agreements has coincided, ironically, with the rise of China as the leading world power promoting globalisation. Now the ASEAN-plus-six Regional Comprehensive Economic Partnership (RCEP), on which China is pushing for an agreement, could benefit from complementarities with the CPTPP. India, which is also negotiating the RCEP, must utilise this opportunity to win concessions on services trade liberalisation as part of the plan.

Rolling back free trade? (06.03.18)

Contrary to his apparently conciliatory tone at the World Economic Forum in Davos, last Thursday’s announcement of steep metal tariffs leaves no one in doubt about the meaning of U.S. President Donald Trump’s “America first” agenda. A 25% duty on steel and 10% on aluminium imports for an unspecified period comes close on the heels of the safeguard tariffs imposed in January on solar panels and washing machines. These blanket tariffs are the most comprehensive of the recommendations by the U.S. Commerce Department, compared to the targeted levies and quotas against specific countries that were overruled by an instinctively protectionist President.

In justifying the measure, the administration invoked a national security law, departing from an international consensus not to impose trade barriers. Countries are allowed recourse to that means under the General Agreement on Tariffs and Trade in times of war and other emergencies. Mr. Trump reportedly did not heed suggestions that the national security argument should exempt member states of the North Atlantic Treaty Organisation. This break with convention could prove a potent tool for populist forces that hold sway in many countries. Ominously, it could once again revive protectionist sentiment which has been on the wane following the recovery from the global economic meltdown.

Against this backdrop, Washington’s traditional allies, who will be hit the most from the tariffs, have warned of bilateral retaliation on U.S. goods, besides mounting a challenge at the WTO. A concern for the European Union would be to deal with the fallout from the U.S. levy on the bloc’s bloated steel industry. Hopes that the current escalation could be defused depend on the chances that countries can negotiate their way out of the tariffs, and corporations can win exemptions for their products.

In the U.S., the latest levy is expected to put at risk millions of manufacturing jobs that rely on these metals. Conversely, it is unlikely to create significant new employment in these two sectors given that current U.S. steel and aluminium production remain close to a 10-year average. Paradoxically, imports of steel and aluminium surged substantially in anticipation of higher prices, ever since investigations were launched last spring into their impact on domestic industry. Experts have opined that the spike may have contributed to Washington’s 2017 trade deficit, which widened to its highest level since the global financial crisis.

Republicans opposed to Mr. Trump’s approach worry that the hefty tariffs could undermine recent tax initiatives to lure investment. But the punitive levies, as with the fixation over the U.S. trade imbalance, underscore the President’s penchant for unilateral action, rather than seek redress through rules-based institutions.

Seeking to roll back the U.S. liberal trade regime is hardly the way to influence other economies to open their markets. Instead, Brussels would have to show leadership to defend the current open trading system.

(All of the above articles have been taken straight from The Hindu. We owe it all to them. This is just an effort to consolidate opinions expressed in The Hindu in a subject-wise manner.)