Trump Is In For A Very Long Haul With His Three New Trade Agreements
As the Trump administration embarks on trade negotiations with Japan, the EU and the United Kingdom, it will be under pressure to come up with better deals than the Obama administration got, or was working on, with those countries.
It will have a tough row to hoe.
The Obama administration came to terms bilaterally with Japan as part of the Trans-Pacific Partnership negotiations, the 12-country deal that President Trump deep-sixed during his first week on office. He called the TPP “a rape of our country.”
Obama’s trade negotiators were also working on a trade agreement with the EU, the Trans-Atlantic Trade and Investment Partnership, or TTIP, but were a long way from being finished when Obama’s term ended.
The United States can’t negotiate formally with the UK until it has left the EU, which is planned for March 29, 2019.
Then, there’s Congress. If the Democrats take control of the House in the November elections, as appears probable, it should not be assumed that they’ll vote to approve these trade agreements.
In Japan, the government of Prime Minister Shinzo Abe initially resisted negotiating a free trade agreement with the Trump administration. But Trump’s threat of a 25% tariff on Japanese car imports brought him around.
In a letter to Congressional leaders announcing the administration’s intent to negotiate an agreement with Japan, U.S. Trade Representative Robert Lighthizer complained of “chronic U.S. trade imbalances with Japan,” owing to “multiple tariff and non-tariff barriers” on auto, agricultural and services imports.
A U.S.-Japan joint statement of negotiating objectives suggests that the Trump administration is most concerned about trade in motor vehicles.
When the negotiations start, the Japanese negotiators are likely to remind the Americans that the two countries had a deal within the TPP, which Trump rescinded; that Japan has no car tariff; that Japanese car companies operate 24 manufacturing plants in the U.S. and directly employ about 92,700 Americans, according to the Japanese Automobile Manufacturers Association; that Japan voluntarily limited auto exports to the U.S. between 1981 and 1994 and that such voluntary restraint agreements are now prohibited under World Trade Organization rules.
Consequently, the U.S. side is likely to demand a relaxation of non-tariff barriers that affect market access for American cars.
According to USTR’s 2018 National Trade Estimate Report, they include “certain issues relating to certification; unique standards and testing protocols; an insufficient level of transparency, including the lack of sufficient opportunities for input by interested persons throughout the process of developing regulations; and hindrances to the development of distribution and service networks.”
These are hardly egregious restrictions and getting rid of them is not likely to increase U.S. car sales in Japan. Also, the Japanese aren’t going to remove any of them without getting something in return. The U.S. lifting its tariffs on Japanese steel and aluminum would be a likely candidate.
European publics were ambivalent, to say the least, about TTIP during the presidency of Obama, who was popular in Europe. Trump is not. A Pew Research Center survey of citizens of nine European countries released on Oct. 1 found that “confidence in the U.S. president” ranged from a low of 7% in Spain to a high of 35% in Hungary.
Rather than picking up where they left off with TTIP, the two sides started from scratch on a much less comprehensive agreement. After meeting with European Commission President Jean-Claude Juncker in July, Trump said the two sides had agreed to work toward “zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.”
That work hasn’t got off to a good start. Tempers flared on Oct. 17 when the U.S. accused the EU of intransigence. Gordon Sondland, the US ambassador to the EU, said the Europeans were “giving the impression that things are moving forward. They are not moving forward, not moving at all.”
U.S. TTIP negotiators had similar complaints about their EU counterparts during the Obama administration, but they didn’t air them publicly.
On the other hand, U.S. Commerce Secretary Wilbur Ross said Trump wanted “good faith, quick negotiations that produce tangible results.” Trade negotiations are never “quick.” The Canada-EU trade agreement, which took effect in September 2017, took seven years to negotiate. The United States is one country. The EU is 28. Juncker and Malmström will have to arrive at a deal that’s acceptable to all of them.
Any trade agreement between the U.S. and the United Kingdom would be a very long time coming, even if there were no disagreements between them. Even after the UK leaves the EU on March 29, 2019, there will be a 21-month transition period that could be extended for another year. The UK can negotiate, but can’t ratify, a trade agreement during that period, said Amanda Sloat, a senior fellow at the Brookings Institution.
Once formal negotiations start, some of the issues that bogged down the TTIP negotiations will reappear.
“The biggest area is going to concern agriculture,” Sloat said. There is resistance among British citizens to genetically-modified foods and American chlorine-washed chickens, even though there is no evidence that either is harmful to human health. The EU has banned chlorine-washed chickens from the U.S. since 1997, even though the EU food safety regulator examined them and found them “unlikely to pose an immediate or acute health risk for consumers.”
Sloat said those issues would cause “the greatest amount of friction between the UK and the U.S.”