NAFTA: THE NEXT THREE MONTHS

By Stephen Lande

On the 1st of July, voters in Mexico will go to polls to elect a new president. Both the Mexican and U.S. governments should emphasize the importance of completing at least the substance of a new NAFTA agreement before then.

The Obrador Factor

The danger is that without a full or substantive agreement in place before the end of April or early May at the latest, negotiations will take an electoral hiatus.  If the current, left-wing front runner, Manuel López Obrador, popularly known as AMLO wins, the considerable progress that has already been made in the negotiations will be lost.

He is the candidate who is most skeptical of NAFTA since he supports more self-sufficiency in agriculture by cutting imports from the U.S., and reducing foreign investment in the energy sector. The likelihood of AMLO becoming the next president of Mexico is increasing since the other two candidates are poised to split the opposition vote. Even if one of the two pro-NAFTA candidates – Ricardo Anaya Cortés for the PAN (National Action Party) and José Antonio Meade Kuribreña for the PRI (Institutional Revolutionary Party) were to drop out, AMLO, might still be the winner. All he needs is a plurality. Mexico does not require a runoff. It is also worth noting that AMLO is running as an outsider, and we seem to be living in the age of outsiders. It is outsiders who have been the most recent winners in India, the United States, and France, and they have done extremely well in other European elections, most recently in Germany and Italy.

An AMLO win in the July election in Mexico, however, would not necessarily mean the end of NAFTA. He has not said he would tear it up. If there was a completed agreement in place or even only an agreement on substancewhen he takes office, AMLO may decide to go with it. After all, he will have a host of other priorities for reform in Mexico, and he may not want to get bogged down. It is worth remembering that President Bill Clinton pushed only for cosmetic changes in the original NAFTA, which had been negotiated by his predecessor, the first President Bush – even though in the previous election, he had expressed many misgivings about the draft agreement. In addition, the dislocation brought on by the current renegotiation would only continue and possibly intensify.

On the other hand, if major elements of the revised NAFTA are still unsettled in July, AMLO may want them to reflect his left-wing views. To say the least, those positions would complicate an already difficult negotiation. And even if an agreement under those circumstances were possible, it would probably be less expansionist than the current agreement or the modernized agreement now being negotiated.

Steel and Aluminum Announcement

Any inordinate delay in a negotiation is fraught with danger, as with wine making or mackerel, waiting too long could result in vinegar or stinking fish. Note what happened to the Free Trade Agreement of the Americas and the Doha Round last century and the TPP last year.

The longer the negotiations drag on, the greater the possibility that there will be an intervening event that will prevent a successful conclusion. For example, until last week, there was no question that momentum was building towards an agreement. Then came an announcement on steel and aluminum restrictions which would have a serious impact on Canada. The current indication is that the announcement will not prove fatal to the NAFTA talks since President Trump and his United States Trade Representative (USTR), Ambassador Lighthizer, have indicated that Canada and Mexico would be exempt from restrictions if the modernization negotiations were completed in a few months. In fact, in a strange way this deadline may move the negotiations forward. However, the longer one waits, the greater the chance that an exogenous matter will intervene and derail the process.

Also, the President is under pressure to either conclude the negotiations successfully or withdraw from the agreement. More than one year has elapsed since he assumed office, and he has not yet acted on his electoral commitment to either leave or fix NAFTA. Since the new president of Mexico will not formally assume office until later in 2018 and because it will take time for him and his team to gear up for negotiations, negotiations are not likely to resume until sometime in 2019. Given President Trump’s temperament, it is doubtful that negotiations will be allowed to extend into a third year.

Leave It to The Negotiators

The suggestion here is that, currently, it is best to leave the negotiations to the negotiators. An agreement appears to be within reach, especially between Mexico and the United States. One should not be misled by negotiating statements emphasizing the remaining differences, the slow progress, and the unwillingness of the other NAFTA countries to offer meaningful concessions. This is normal negotiator talk to keep the pressure on the other side to make concessions in the final phases of negotiations.

These tendencies are reinforced by the Trump method of negotiating through attention getting tweets. Although one does not know whether they are part of an overall strategy or simply a whim of the moment, one positive result of the tweeting is that the President demonstrates toughness to his supporters while allowing his negotiators to be flexible.

In point of fact, the negotiators have been the heroes of the day. They were faced with a highly charged political atmosphere at the launch of the negotiations. NAFTA had been widely and strongly criticized, particularly U.S. concessions to Mexico. In the United States, withdrawing from NAFTA was an element in President Trump’s election campaign in 2016, and one frequently mentioned by the President since.

Lighthizer’s Good Work

In this regard, the role of Ambassador Lighthizer should be recognized. Despite having his hands full with a full trade policy agenda, going well beyond NAFTA, he has been able to focus on the NAFTA negotiations. This is even more amazing when one considers that as a result of delays in Congressional approvals of his deputies, he has been forced to operate the agency virtually alone. In the circumstances, he was fortunate that the USTR staff is considered among the most professional and hard-working in Washington, but a large amount of credit is due to the managerial ability of Ambassador Lighthizer himself.

Originally an outsider to the Trump team, he now has the confidence of the President. This may be crucial to concluding the negotiations ¬ when Presidential support of the final package will be critical. If Lighthizer believes the deal meets the campaign criteria for a renegotiated NAFTA, there is a solid chance the President will accept his assessment. Also, Presidential intervention may be required either to sell a compromise to hard-liner Trump supporters or to pressure Mexico or Canada into making final concessions.

The U.S. Private Sector

The private sector – particularly the trade associations – also deserve credit. America’s withdrawal from TPP led to the expectation that it was only a matter of time when NAFTA would be next. The Administration’s statements blaming U.S. job losses on NAFTA suggested that it might be. In short, NAFTA was on life support, with only the smallest chance of recovery. Yet since President Trump’s assumption of office, political support for NAFTA has increased significantly. This is due in large part to the private sector which, by focusing on NAFTA’s constituents in key states, has made everyone – the public and the politicians – aware of the serious dislocations that would follow quickly on the heels of a U.S. withdrawal from NAFTA.

A Guide for Success

It would help now if America’s private sector could shift its focus. So far, the major business groupshave focused on demonstrating the advantages of NAFTA. They have been particularly successful in border and agricultural states, where Trump’s support is strong and withdrawal from NAFTA could undermine his prospects for reelection.

The private sector’s priority now should be urging the Administration to complete the negotiations quickly and getting an agreement in place before the Mexican election. If not, and if the current front runner wins, one of two outcomes appears likely. One is that the differing positions of Presidents AMLO and Trump will make negotiating a modernized agreement impossible. The other is that they cobble together an alternative, new agreement. Such and agreement, however, would inevitably be at a much lower degree of ambition than that which seems possible today.

The building blocks for a successful negotiation are in place. The well-considered negotiating strategy laid out by the lead negotiators, have seen steady progress, notwithstanding the political rhetoric. The negotiators have kept their eyes on the ball. They have moved toward completion of the less disputed chapters and ironed out many of the issues in the more difficult ones. Where the original objective was “do no harm” in the NAFTA negotiations, they have reached the point where a truly improved NAFTA now seems within reach.

This does not mean that successful renegotiations are assured. There is still strong opposition to staying in NAFTA both within the White House and among core Trump constituents. Indeed, recent changes within the White House may have dampened the prospects for a deal.

As for the President, he has yet to move on from his campaign position that “NAFTA’s a horrible deal; we’re renegotiating it. I may terminate NAFTA, I may not – we’ll see what happens. … Any renegotiation must provide a better deal for our workers and companies.” This means the question is still open.

Thus, the private sector’s support for a timely and successful conclusion of negotiations is particularly important. Those in the Administration who argue that NAFTA modernization will meet the President’s goals to make NAFTA more effective in promoting manufacturing and US employment must be reinforced. The challenge for the private sector, of course, is how to support the Administration’s effort to conclude the negotiations while continuing to fight those Administration proposals they oppose.

A three-prong approach is suggested.  In some areas – automotive rules of origin and a sunset clause for example – Canada and Mexico can be relied upon to take the same line as the strongest U.S. business groups. There are other issues, however, issues which are not deal breakers for Mexico and Canada,  where the positions of the U.S. government and America’s leading private sector groups are still far apart. These include U.S. proposals to opt out of investor state dispute settlement (ISDS) and some government procurement obligations.

A second prong could be areas where the U.S. private sector should recognize that there are some issues where the Mexican and Canadian governments will accede to U.S. positions which the U.S. private sector opposes.  The major U.S. trade associations and their members should recognize that they cannot win on all the issues under discussion and my lose on these.  Although they should continue to advocate for their positions, they must send the clear signal that failure to achieve all their goals will not prevent them from supporting a timely conclusion of the agreement.

Labor

A third prong could be labor.   It is not clear how hard the U.S. will push for reforms of Mexican labor practices.   If the U.S.  makes changes in Mexican labor practices a make-or-break issue, the private sector should refrain from involving itself in those negotiations.

This may be the time for trade associations and their members to begin considering where they may have to compromise and the best way to alleviate the deleterious impact of measures they oppose. At least in private, they  might consider fallbacks, including compromises and alternative measures.   For example,  a possible fallback for the absence of U.S. to allow third-party arbitration in investor-state disputes could be unilateral Mexican and Canadian commitments to allow such cases to be considered by the World Bank’s arbitration bodies.

Again, the U.S. private sector may have to accept some disappointments, but that would be a small price to pay for getting the NAFTA talks essentially wrapped up in a timely fashion. And who knows: as Lighthizer claims, a compromise on investor-state and labor might bring some added Democratic votes in support of a revised NAFTA. That would be a welcome change from the current situation, where trade bills either pass by the narrowest of votes or languish in legislative limbo because of the partisan divide.

Canada

I have not said much about Canada’s role in these negotiations. For the U.S., the talks with Canada are every bit as tough or may even be tougher as the negotiations with Mexico.

US access for dairy exports into Canada and trade remedy arbitration are the best examples of intractable U.S.-Canada issues. But the timeline is not so unforgiving since the U.S.-Canada FTA will continue in effect even if the U.S. withdraws from NAFTA. Let me be clear. I am not advocating this position, but, at the end of the day, it may be necessary.

It would be foolish to just assume that the NAFTA negotiators will in fact manage the kind of success they need. Failure is always a possibility. So, we are left with the adage: “where there’s a will, there’s a way”. Personally, I think the will is there. As for the way, that is not clear yet. It is the job of the negotiators to find it. However, chances of the final agreement being accepted will be strengthened by strong private support of their efforts even if there are cases where private sector demands are not met.

Stephen Lande is the President of Manchester Trade. A former U.S. Foreign Service Officer, he has been involved in international trade since the 1960, was the first Assistant USTR and served as chief bilateral US trade negotiator in the Office of the U.S. Trade Representative.

AT THE WTO – AMERICA STEPS BACK

“Atlas, tired of his burden, shrugged. The country that was indispensable to the creation of the international trading system has opted out of its leadership role, and the date and nature of its return to anything like its former position is completely uncertain.”

Alan Wm. Wolff
November 8, 2017

CONTEXT

Back in June, the Director General of the World Trade Organization, Roberto Azevêdo, announced that Alan Wolff would join the organization as one of the WTO’s four Deputy Directors General. On October 1, Mr. Wolff took up those new responsibilities.  A former Deputy USTR, former chairman of the National Foreign Trade Council, and one of the America’s – indeed the world’s – best known trade lawyers, it is hard to imagine anyone better prepared for a senior role at the WTO than Alan Wolff.

In Washington earlier this month, Mr. Wolff gave a lecture at American University on November 8 and a major speech at the CSIS on November 13. Today’s quote is from the first of these, the lecture at American University, and that is the focus of this entry. We have, however, slipped in a line or two from his presentation at CSIS as well.

Mr. Wolff sees the GATT–the agreement and the institution that grew up around it—and its successor, the World Trade Organization as a marvelous achievement, and one for which the United States deserves the lion’s share of the credit. Indeed, his lecture began with the statement that “Since the mid-1940s most of world commerce has been conducted within a Pax Americana.” He explained:

The United States did not choose [after World War II] to create a system like that which colonial powers had had in the prewar period of imperial preferences, although it could have done so. What the United States did was foster most-favored-nation treatment. This expression of enlightened self-interest was created in reaction to and flight from the severe, self-absorbed and self-destructive protectionist policies of the 1930s. There was to be benefit for all.

The rules-based liberal trading system was and is extraordinary, and has been a central factor in lifting hundreds of millions of the earth’s inhabitants above subsistence levels. It has been fundamentally beneficial for the American people as well.

At the outset, Mr. Wolff made it clear that he was not speaking for the WTO but rather sharing views formed over a lifetime of work in the vineyard of trade policy. Nevertheless, his lecture included, as one would have expected, references to the major WTO achievements of the last few years, including the agreements on Trade Facilitation, trade in information technology products, and disciplines on agricultural subsidies. It also included references to agenda items for next month’s WTO ministerial meeting in Buenos Aires, Argentina. We shall return to those in later entries.

Our focus today is on just two elements of Mr. Wolff’s lecture at American University: i) his lament at America’s withdrawal from the GATT-WTO leadership role it filled for 70 years and ii) his question, who will step in to fill the void? As for the first of these, here is the full paragraph with today’s featured quote, plus a few words from the next one.

It is easy to be critical of aspects of America’s stewardship of the world trading system, but to focus now on any past American shortfalls from its ideals is to miss the central challenge to the world economy here and now—the absence of American leadership in the word trading system. Atlas, tired of his burden, shrugged. The country that was indispensable to the creation of the international trading system has opted out of its leadership role, and the date and nature of its return to anything like its former position is completely uncertain.

The change in America policy was not the result of long-term planning. It was the almost incidental product of direct, as opposed to representative democracy.

That second paragraph concludes with a reference to Donald Trump becoming the 45th president of the United States.

COMMENT

We know of no one in the world of trade policy who gives a better speech than Alan Wolff and no one more worth listening to. And there is no denying that the Trump presidency has brought sharp, dramatic changes in American trade policy. The President’s withdrawal from the Trans-Pacific Partnership Agreement was the first of these. The American insistence on a renegotiation of NAFTA the second. But for us, the WTO doesn’t quite fit the pattern.

TPP was a new agreement, forged with American leadership. NAFTA, we would argue, was working well. But the WTO is a different story. At the very least, the debacle that was the 1999 Seattle Ministerial – the battle in Seattle – was a hint that maybe the bloom had gone off the rose of American leadership. Yes, two years later in Doha, Qatar, (and two months after 9-11) a new trade round was launched. What followed then was the long deadlock of the Doha Round negotiations, a deadlock that American leadership could not break.

These comments are in no way a criticism of the American officials involved in any of those efforts. The simple fact is that the world of the second decade of the 21st Century is very different from that of the late 1940s. The United States is no longer the world’s largest exporter; China is. And China is not far behind the U.S. as an importer, which means that, increasingly, countries look to China and the EU as the customers with whom they most need to curry favor. These changes in trading patterns were bound to have some effect on the GATT-WTO trading system. If anything, those effects were magnified by the creation of the World Trade Organization in 1995, which changed the character of the system’s core. Where once the center had been an agreement, now it is an organization.
All that said, and before turning to the question of where leadership in the WTO will come from, there were some critical points in Mr. Wolff’s speech at CSIS – points with which we strongly agree – and we need to mention them. For us, these three, in particular, stood out.

On the function of the WTO. “The chief value of the WTO system is providing essential stability without which business would have far less certainty. Without the WTO system in place, economic activity – both cross border and domestic – would be sharply reduced.”

On the need for change. “Going forward, the WTO … needs to change in a number of respects. … Without change the Organization is at risk of not remaining fully relevant.”

On leadership. The institution needs renewed leadership on the part of its member countries.

With respect to that last point, Mr. Wolff suggested at CSIS that “The United States should return to a leadership role, working with others for common objectives.” As we read it, the American University speech was somewhat more speculative, as he walked through the list of possible candidates. Among the smaller countries in the WTO, those who see themselves as friends of the system may have more to offer than one might expect.

Among the larger countries, Japan has other fish to fry. The EU is pre-occupied with Brexit, and “China seems hesitant to take up the mantle cast aside by the United States.” One needs to say just a bit more about both the EU and China. While Mr. Wolff’s comments on China struck us a straightforward assessment, his comments on the EU had in them the germ of a petition. “Perhaps it is unrealistic for Brussels to consider a change in priorities,” he said, “but the impact on the world economy of a rudderless WTO is potentially far greater than any of the possible BREXIT outcomes.”

Doubtless you will read the Wolff Washington speeches for yourself. The only point we would add on this question of leadership in the WTO is the parallel question, who, what country or countries, would be followed? Ultimately, we suspect Alan Wolff is right: the outlook for American leadership is brighter than that for any other country. We say that for the simple reason that, arguably, America has the best track record for relatively altruistic action on a global scale. But it is going to take time. For its part, America needs to work through the immediate issue of the NAFTA negotiations. As for the WTO’s other 163 members, they don’t seem ready to follow anyone. So first they need to be a little more concerned than they are now about the future of the WTO.

Sources & Links

Evaluating the System is a link to the Alan Wolff’s November 8 lecture at American University as posted on the website of the World Trade Organization. This was the source for today’s featured quote.

At CSIS takes you to the speech Mr. Wolff gave at the Center for Strategic and International Studies in Washington on November 13,  2017.

Originally published on November 28 as TTALK Quote No. 68 of 2017.

© 2017, Global Business Dialogue, Inc.

TPP: THE DA NANG ANNOUNCEMENT

“This is a remarkable achievement.”

Wendy Cutler
November 16, 2017

CONTEXT

Wendy Cutler is a Vice President of the Asia Society and the Managing Director of the Asia Society Policy Institute, the Society’s Washington Office. It was in November of 2015 that she left the government to take up those private sector/think tank roles. Before that, Ms. Cutler was a top USTR negotiator. She was the lead negotiator for KORUS, the U.S. free-trade agreement with South Korea and, as (Acting) U.S. Trade Representative, she was responsible for the TPP negotiations, especially the critical negotiations with Japan.

On Thursday,  November 16, Ms. Cutler was one of four panelists at GBD’s first public event on TPP since the United States withdrew from the agreement. She said a lot in short period of time.  Before turning to some of the highlights of Ms. Cutler’s presentation – including today’s featured quote – we would note these four dates in the life of TPP:

• September 22, 2008 – Then-U.S. Trade Representative Susan Schwab announces that the United States will join in the effort to negotiate a Trans-Pacific Partnership. Her statement is made at a meeting in New York with the trade ministers from Brunei, Chile, New Zealand, and Singapore or the P4.

• February 4, 2016 – Meeting in Auckland, New Zealand, representatives of the twelve countries that negotiated the Trans-Pacific Partnership Agreement (TPP) sign the agreement. The twelve countries are: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam

• January 23, 2017 – President Trump announces America’s withdrawal from TPP.

• November 11, 2017 – Meeting in Da Nang, Vietnam, the TPP 11 – that is the above 12 minus the United States – issue this statement on a revised TPP:

“Ministers are pleased to announce that they have agreed on the core elements of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).” That’s the new name.

But now let’s return to some of what Ms. Cutler said last week. She told her audience she had eight points to make. A recording of her full presentation is available under the GBD Events tab of this website. If you listen to it, you will see that, here and there, we have ignored the numbers and shifted some observations from one segment to another.

On the Overall Effort.  Ms Cutler’s first point was the one quoted above. “This was a remarkable achievement.” As noted by another panelist, Atsushi Yamakoshi of Keidanren USA, America’s withdrawal from TPP came as a shock to the countries concerned and to the region. The first clear public effort to regroup and regain some momentum for TPP was the meeting in Chile back in March, a meeting which included not only the 11 TPP countries but also Korea and China. It was certainly not clear then, however, that the TPP 11 would be able to salvage the deal.

Japan’s Leadership. Ms. Cutler had high praise for all of the TPP countries but focused particularly on the leadership role of Japan. She herself had worked with Japan in the effort to bring them into the TPP negotiations, where they became an active participant. But being an active participant, she said, is far different from being a leader. And in the wake of the U.S. withdrawal, Japan was the leader. And she offered this illustration:

In TPP, remember, there were rules, and then there were market access commitments. These market access commitments are very detailed, and for Japan a lot of that was about what they were going to do on agriculture. … Japan had agreed in certain instances, particularly with respect to some very sensitive products, to what we called TPP-wide quotas. So, it was one number for all TPP 12.

The question, I am sure, that was under internal discussion [in Japan] was, do we keep that number for the TPP 11? Or do we somehow take a percentage out of that quota to reflect the U.S. exit from TPP? ….

I am sure that the Ministry of Agriculture probably wanted to reduce that quota. But if Japan was going to be the leader here, it needed to keep its market access commitments intact or else it would be a slippery slope. If Japan took some agricultural concessions off the table, others would follow. And that’s what leadership is about. And so, again, congratulations to Japan.

Suspended and Retained. The TPP 11 have agreed to suspend some 20 provisions of the original agreement, and naturally, as Ms. Cutler noted, the U.S. stakeholders who had argued for those provisions – provisions on things like the length of copyright protection and the treatment of certain pharmaceutical data – are unhappy that those elements have been suspended. But the suspensions are hardly the whole story. In Ms. Cutler’s words:

We need to remember everything that they kept in [the agreement]. .. That means labor, environment, the SOE rules [for state-owned enterprises], … the market access commitments, the digital commitments. And, in the areas where there were suspensions, they’re not suspending the whole chapter. … The TPP is largely intact, and all of the TPP 11 countries .. did a magnificent job in keeping almost all of the provisions intact.

More to Do—Canada. Brunei, Canada, Malaysia, and Vietnam all have outstanding issues, but the one Ms. Cutler highlighted was Canada—Canada and culture. When Canada joined the TPP 12, she said, it sought a broad carve out for cultural policies, but “that was not the outcome that was achieved” in the TPP agreement. Of course, in some respects the CPTPP is a new agreement, and Canada may again be seeking a broad carve out for culture. The weight she attached to that challenge was evident in her comment to the effect that “it may be necessary at some point to think about a TPP 10.”

Effect on RCEP. RCEP, the Regional Comprehensive Economic Partnership, is the other major trade agreement being negotiated in the Asia-Pacific Region. Anchored by the ten countries of ASEAN, the Association of Southeast Asian Nations, the negotiations also include Australia, China, Japan, India, Korea, and New Zealand. Ms. Cutler said that “This conclusion or near conclusion of the TPP Eleven, I think, provides important momentum to the RCEP negotiations.”

Without America – The Confidence Effect. Ms. Cutler’s point in this portion of her remarks was a serious one, but there was a sense of fun in her language. This is what she said:

The TPP 11 agreement, I think, really will build the confidence of TPP 11 members but also others in the region. … They must now feel like, ‘Wow. [We] can now do this without the United States.’ I would have loved to have been a fly on the wall for the negotiations. I’m thinking of all the different phases they probably went through. I would like to think there were times, particularly in the beginning, when they really missed the United States. But I also have to believe they probably had a stage in which – one night, a late-night meeting – where they were all kind of like laughing and thinking, ‘We don’t want to do this. Let’s take this off the table. The United States isn’t here.’ Kind of acting like kids with a bowl of candy.

But I think, by the end, while maybe they still miss us, I think they figured out a way to work together, to adjust to the new reality, and now to move forward.

TPP and China. Ms. Cutler was emphatic:

I think the TPP 11 agreement underscores that the TPP was never a U.S. conspiracy to contain China. If it had been, then TPP 11 would not have happened.”

A Personal Assessment. She said:

I get this question a lot: What does this mean to you personally?
My response is, I am so happy for the TPP 11. I think this deal is great for the region. I think it’s great for the multilateral trading system. I believe it’s a serious mistake for the U.S. to withdraw from TPP. And I think this is a decision we will come to regret.

On the New Name. As noted above, what used to be the Trans-Pacific Partnership or TPP, is now the Comprehensive Progressive Agreement for Trans-Pacific Partnership or CPTPP. Asked about the name in the question period, Ms. Cutler said:

It doesn’t roll of the tongue. I kind of like what Prime Minister Abe called it, and that was “Oceans 11.”

COMMENT

This is already a long entry, and, moreover, we know we will be returning time and again to TPP or CPTPP, and we strongly suspect we shall be sharing much more from last week’s event. So, we shall keep our comments to the one, absolutely de rigueur observation: Happy Thanksgiving!

SOURCES LINKS

Wendy Cutler Looks at TPP 11. This is a link to the audio recording of Ms. Cutler’s presentation at the GBD event TPP, AFTER APEC on November 16, 2017. This was the source for today’s featured quote (and most of the rest).

TPP, AFTER APEC is the page of the GBD website devoted to materials related to this event.

Official Statements takes you to the Ministerial Statement from the TPP 11 issued in Da Nang on November 11 as it appears on the website of the New Zealand Government.

Originally published on November 22 as TTALK Quote No. 66 of 217.

© 2017, Global Business Dialogue, Inc.

 

DICHOTOMY IN DA NANG

A post by Joanne Thornton
November 13, 2017

In their speeches at the APEC CEO summit in Vietnam last Friday, the American and Chinese leaders enunciated strikingly different visions of past and future trade relations in the Pacific region and beyond. US President Donald Trump underscored that henceforth the United States will eschew multilateral deals and instead will pursue mutually beneficial bilateral relationships—and he implicitly encouraged others to do the same. In contrast, Chinese President Xi Jinping promoted ever-stronger regional and global economic linkages, with China pulling the train.

To the dismay of many, Washington appears to be abandoning the global trade project that it once led, and Beijing stands ready to become the standard bearer.   If Xi’s ideal is realized without American participation, US-based companies will face a serious competitive disadvantage.

Yet multi-country agreements are not getting any easier to accomplish, and the future is unclear. It remains to be seen whether the TPP-11—now called the “Comprehensive and Progressive Agreement for the Trans-Pacific Partnership” or CPTPP— will be completed, let alone entered into effect; although there appear to be few outstanding issues.  Meanwhile, the conclusion of RCEP—an “Indo-Pacific” initiative, has taken much longer than intended.

Will Donald Trump’s disaffection for the legacy system prove to be more widely shared than we realize, and China’s dream less so? Or will Asian countries prefer larger collective, inclusive arrangements to a multiplicity of smaller ones? Time will tell.

For now, this brief note is aimed simply at marking the important differences in the American and Chinese game plans as outlined in Da Nang.  To that end, here are a few contrasting quotes.

President Trump:
Countries were embraced by the World Trade Organization, even if they did not abide by its stated principles…. They ignored the rules to gain advantage over those who followed the rules, causing enormous distortions in commerce and threatening the foundations of international trade itself…. We can no longer tolerate these chronic trade abuses, and we will not tolerate them.

President Xi:
Over the last few decades, economic globalization has contributed greatly to global growth. Indeed, it has become an irreversible historical trend….
We should uphold multilateralism, pursue shared growth through consultation and collaboration, forge closer partnerships, and build a community with a shared future for mankind.

President Trump: 
I will make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and that will abide by the principles of fair and reciprocal trade. What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible…. We know it is in America’s interests to have partners throughout this region that are thriving, prosperous, and dependent on no one.

President Xi:
We should … fully implement the Beijing Roadmap, move toward the FTAAP and provide an institutional underpinning for growing an open economy in the Asia-Pacific…. We will speed up negotiations with partner countries on the concluding of free trade agreements and investment treaties, … work for the speedy conclusion of RCEP negotiations, and endeavor to establish a global network of free trade areas…. Interconnected development is the best way to achieve mutual benefit and win-win outcome.

President Trump:
We are calling on the World Bank and the Asian Development Bank to direct their efforts toward high-quality infrastructure investment that promotes economic growth…. We are also committed to reforming our development finance institutions so that they better incentivize private sector investment in your economies, and provide strong alternatives to state-directed initiatives that come with many strings attached.

President Xi:
The Belt and Road Initiative… has a clear focus, which is to promote infrastructure construction and connectivity, strengthen coordination on economic policies, enhance complementarity of development strategies and boost interconnected development to achieve common prosperity…. I am confident that the launch of the Belt and Road Initiative will create a broader and more dynamic platform for Asia-Pacific cooperation.

SOURCES:

President Trump at the APEC CEO Summit is a link to the text of this November 10 speech by President Donald Trump as it appears on the  White House website.

President Xi at the APEC CEO Summit is a link to the text of this November 10 speech by President Xi Jinping as it appears on the Xinhua website.

Joanne Thornton is Vice President of the Global Business Dialogue and a Managing Director of  Policy Connections International LLC. 

© 2017, Global Business Dialogue, Inc.

KOREA – A STORY IN LIGHTS

FROM AN ADDRESS TO THE KOREAN NATIONAL ASSEMBLY

A sky-top view of this peninsula shows a nation of dazzling light in the South and a mass of impenetrable darkness in the North.”

Donald Trump
November 7, 2017

CONTEXT

On Tuesday (November 7 ) in Seoul, President Trump addressed the National Assembly of the Republic of Korea. This is what he was talking about:

Photo: NASA Earth Observatory

And this is the rest of the paragraph:

“We seek a future of light, prosperity, and peace. But we are only prepared to discuss this brighter path for North Korea if its leaders cease their threats and dismantle their nuclear program.”

***

President Trump made a brief reference to trade early in his remarks, but this was not a trade speech. This was a speech about the enormous transformation of South Korea in the years following the Korean War, about the alliance between the United States and the Republic of Korea, and about the bitterly disappointing history of the diplomatic efforts to get North Korea to abandon her nuclear ambitions.

For the most part, we shall leave it to you, the interested reader, to discover those elements in the original speech. Some of the facts about South Korea that the President cited are indeed inspiring, and we can’t resist sharing at least few of them. President Trump:

From the Starting Line. “When the Korean War began in 1950, the two Koreas were approximately equal in GDP. … [T]oday the South’s economy is over 40 times larger.”

Economics: “Today your economy is more than 350 times larger than it was in 1960. Trade has increased 1,900 times. Life expectancy has risen from 53 years to more than 82 years.”

Financial Crisis: “When the Republic you won faced financial crisis [in 1997-98], you (citizens of South Korea) lined up by the millions to give your most prized possessions—your wedding rings, heirlooms, and gold ‘lucky keys’—to restore the promise of a better future for your children.”

Intellectual Achievement. Korean authors penned roughly 40,000 books this year. Korean musicians fill concert halls all around the world. Young Korean students graduate from college at the highest rate of any country.”

Golf.   “And you know what I’m going to say – the Women’s U.S. Open was held this year at Trump National Golf Club in Bedminster, New Jersey, and it just happened to be won by a great Korean golfer, Sung-hyun Park. … And the top four golfers … were from Korea.”

Limits.  “The Korean miracle extends exactly as far as the armies of free nations advanced in 1953—24 miles to the north. There, it stops; it all comes to an end. Dead stop. The flourishing ends, and the prison state of North Korea sadly begins.”

COMMENT

As the lawyers say, res ipsa loquitur.

SOURCES & LINKS

At the National Assembly is President Trump’s November 7 speech to Korean legislatures as it appears on the White House website. This was the source for today’s featured quote.

Gold to the Rescue is a 2016 Forbes article on the personal sacrifices made by the people of South Korea in an effort to pay off the IMF loan made necessary by the Asian Financial Crisis.

Originally published on November 8 as TTALK Quote No. 65 of 217.

© 2017, Global Business Dialogue, Inc.

 

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