“I explained to the President of China that a trade deal with the U.S. will be far better for them if they solve the North Korean problem!” This Tweet from President Trump is a continuation of many years of presidents from both political parties using trade policy in the service of foreign policy.
Since WWII, trade agreements have been used as much to achieve foreign policy objectives as trade objectives. During the cold war era, trade agreements were used to sway countries to the side of capitalism over communism. If you doubt this, then consider the following question: Have you ever been able to explain why U.S. automakers had such limited access to Japan’s auto market for years while Japanese automakers seemed to have unlimited access to our market? Or consider this, why are our tariffs often significantly lower than the tariffs of other countries we trade with? Were our negotiators really that much worse than the negotiators of other countries? No. According to author Alfred Eckes, a primary reason why our trade agreements since WWII have been so unfavorable is because U.S. Presidents from both political parties have used trade agreements as tools in foreign diplomacy. Mr. Eckes provides impressive detail and facts to support this view in his book, Opening America’s Market: Foreign Trade Policy Since 1776. It includes extensive research and a litany of facts to support his view.
Was the same thing going to happen again with the Trans-Pacific Partnership? The following countries were parties to the Trans-Pacific Partnership: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States. Notice anything about this list? If not, ponder the following two questions. Which country located in the Asia-Pacific region is considered the only potential rival to America’s status as the sole superpower in the world? Second, what is the largest Asia-Pacific region country that is not part of the TPP? That’s correct, China. Remembering how trade agreements have been used since WWII as tools in “buying” allies to counter other superpowers, now do you notice anything about the list? If not, take a look at the map below. It shows South Korea, with which the U.S. currently has a trade agreement, plus the Trans-Pacific Partnership countries located in the Asia-Pacific region. To make the strategic, non-trade importance of the TPP clear, American flags have been added to each of the Asia-Pacific region TPP countries.
1 The Philippines’ constitution prohibited it from joining the trade talks but was exploring how to overcome this obstacle to joining the talks.
From this perspective, the map begins to look like a game of Risk in which one player is attempting to secure allies in a strategic region of the world. Seven of the eleven non-U.S. countries participating in the TPP talks are based in the Asia-Pacific region. Do you think the pattern of using trade agreements to secure allies might have been a consideration in the Trans-Pacific Partnership trade talks? And while some of the countries participating in TPP negotiations were already allies of the U.S., trade agreements structured to disproportionately favor these Pacific region countries can be used to maintain key military commitments that may not be popular in those countries. Foreign policy may have been a key reason Senator Warren, like so many of her Congressional predecessors, was against granting fast track authority to President Obama.
We can debate the merits of using trade agreements to achieve foreign policy objectives. What cannot be debated is that it has been done. This is why there could have been very real threats to job creation contained in the Trans-Pacific Partnership: The agreement may not have had negotiating the most favorable trade terms as its sole consideration.
Global Trade Reality # 2: Trade Agreements Are as Much About Foreign Policy As They Are Global Trade
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