With the fallout from the recent US election, many are feeling uneasy about the year ahead. Rising nationalism in Europe, along with a growing protectionist trend towards international trade are certainly a cause for concern.
Resistance to multilateral free trade deals has been gaining ground globally, with many advocates of free trade agreements such as Transatlantic Trade and Investment Partnership (TTIP) and the Trans Pacific Partnership (TPP) facing considerable public opposition. However, this strong opposition has now become a deal-breaker, rather than a constructive negotiating mechanism, in the wake of the new US administration.
A (new) era of protectionism?
Dan Ikenson, the director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, remarked on the unusually protectionist agenda of the US president, in a recent article on the Bloomberg website: “Never has the president been the one to initiate protectionism or been so vocal about turning inward.”
He also pointed out that since 1934, US trade policy has been “geared toward liberalization and accommodation and internationalism” on a bipartisan basis. It is worth noting that criticism of his trade policies has also come from both sides of the political spectrum.
Nevertheless, while the US has historically been a very public advocate of free free trade, in practice protectionism is certainly nothing new – especially when a liberal attitude to trade did not lie in it’s favour. According to a report by Credit Suisse on globalisation in 2015, the US has consistently imposed far more protectionist measures than any other state.
For the future of multilateral free trade treaties however, the new stance of the US will remain a significant obstacle. President Donald Trump’s openly hostile policy towards free trade poses problems not only in regards to future negotiations of such deals but also the ratification of existing agreements. The US has already opted out of the TPP deal and has plans to renegotiate NAFTA and TTIP, marking a strong contrast to the policies of former President Barack Obama.
But is walking away from these deals really the best option?
Much like the logic behind the Brexit campaign, the reality of an opt-out is not always as simple as it sounds. In addition, hitting out against trade will likely impact those he is claiming to protect the most.
The future looks bilateral
Trump has made it very clear he is not a fan of multilateral trade. The US has already taken steps to pull out of the TPP, signed by the Obama administration earlier this year, causing the deal to become effectively void.
In the absence of multilateral trade deals, it seems the Trump administration is opting instead for the bilateral alternative – most recently discussing the possibility of a trade deal with the UK, thus sending a strong message to the European Union as a whole. Trump is now also looking to strike a trade deal with Japan, however his strong criticism of both Japan and Germany – whom he accused of “devaluing” their currencies to gain an unfair trading advantage over the US, has created tensions since he took over the presidency.
Some view this almost bizarre approach to global trade taken by the new administration, as a significant threat to the global economic order – as the US president continues to do very little to strengthen ties with his counterparts.
China fills the void
In an article in the Guardian, Harvard University Professor of economics and public policy, Kenneth Rogoff claimed that Trump’s “disorderly retreat from globalisation” will have severe consequences, especially for China, and not in a way that is favourable to the US itself. Rogoff stated that the “US has been duped into enabling China’s ascendency, and one day Americans will come to regret it. We economists tend to view abdication of US world leadership as a historic mistake”.
Indeed, in the wake of the new US administration, it seems China is taking advantage of the new direction of US policy towards free trade. China, which was notably excluded from TPP, has been focusing on the Regional Comprehensive Economic Partnership – an agreement based on existing free trade agreements between the Association of Southeast Asian Nations (ASEAN) and six partner states. These include China, South Korea, Japan, India as well as Australia and New Zealand. So the US’s new policies on trade may be good news for China.
Time to settle
Perhaps there are limits to US protectionism, despite pulling out of TPP and plans to renegotiate NAFTA, Trump has not shown any intention to leave the World Trade Organisation and has not yet moved away from TTIP. In an article in the online magazine The Diplomat, Shen Dingli pointed out that opting out of the WTO “would bring calamity to the United States as the world’s largest trading entity”.
Providing the US remains a member of the WTO, any trade disputes between China and the US can still be addressed using the existing dispute resolution mechanisms within the WTO. With the growing popularity of third-party mediation in resolving international trade disputes, it is unlikely that Trump would give up on ADR, Dingli noted.
There is further reason to believe that arbitration is still in President’s good books, with his Supreme Court nominee, Judge Neil Gorush, having demonstrated a markedly pro-arbitration stance throughout his time on the bench.
Written by Natasha Mellersh.
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Natasha Mellersh is the editor of the GPC Blog. She is currently pursuing an LLM in Public International Law at Leiden University in the Netherlands.