NAFTA and the Trans Pacific Partnership Essay

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Statement of Issue:

With President Trump upending the Trans-Pacific Partnership, what can be done to move the United States policy on trade towards an open market scenario?

Executive Summary:

The United States economy has made some positive strides with the Trump Administration. However, President Trump’s decision to upend the Trans-Pacific Partnership has caused a setback in the desire for the country to become a global trader. The drive for open markets has created a need within the United States government to adopt policy that will allow for trade to expand over to international waters, thus allowing the United States to grow in terms of becoming the main contender in the global economy.

Without the introduction of policy that can promote open trade, the United States may face increasing competition from other foreign powers like China. It is up to the United States government to choose to continue the progress towards an open market and trade system. Doing so may see great improvements in United States manufacturing and promote the country for foreign investment and trade.

Background:

Home to one of the strongest and richest economies, The United States has taken aim at constructing a truly international trading system that must begin with support for an open market. For the United States to adopt an approach towards global integration there must be changes in how the government sees trading and adoption of an open markets policy. For example, free trade, an open market, allows consumers the best changes and most choices for improving their standard of living.

After World War II, the United States saw a dramatic increase in foreign trade as well as the formation of an international trading framework based on an open economy principle. The United States at the forefront of such changes, needs to take the same position again and open up trade with the world economy. In the past, global trade talks stalled leading to a turn to bilateral and regional free trade agreements.

For instance, Former President Barack Obama won passage of the free trade agreements with three countries: South Korea, Colombia, and Panama, before leaving office. He also negotiated Asia-centered Trans-Pacific Partnership furthering the goal of an open market and open trade. However, the Trans-Pacific Partnership (TPP) was something President Donald J. Trump did not want continued and, so it was upended. The decision to upend the TPP has led to a desire to advocate for a more open market to provide a boost in U.S. manufacturing and make it easier for American businesses to compete in global markets.

But what is the current U.S. trade policy?

After World War II, the institutions of international trade policy evolved, led mainly by Europe and the United States. Twenty-three countries signed the General Agreements on tariffs and Trade (GATT) in October of 1947 and within thirty-nine years it expanded to include one hundred and twenty-three nations. Every country within the agreement remained committed to the principles of open economies, freer trade and lower tariffs.

During those years global tariffs fell from 30 percent to under 5 percent. However, in 1986, President Ronald Reagan helped launch the creation of the World Trade Organization (WTO), via the Uruguay Round of negotiations, that would be finalized under President Bill Clinton in 1994 and aimed to address the GATT system’s perceived limitations like intellectual property, cross-border investment, agriculture, and trade in services. Although development continued even as far into 2001 with the last round of negotiations, there was still problems regarding agriculture policy.

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Meaning, India and China sought retaining flexibility in imposing safeguard duties of import tariffs, while also pushing for less farm subsidies both in Europe and the United States.

Government Interest in the Issue:

With a stalled WTO process, the shift for U.S. policymakers have been to focus on finishing smaller bilateral and regional investment and trade deals. Through the North American Free Trade Agreement enacted in 1994, Canada and Mexico were able to trade freely with the United States. However, with Trump ordering the withdrawal of the TPP deal in January 2017, instead, pushing for an emphasis on bilateral deals, the United States may be largely setback in creating the coveted open market, and globalist trade agreement Trump’s predecessors wanted and worked towards. This then presents the main issue, the withdrawal from the Trans-Pacific Partnership (TPP).

The TPP is the often called a ‘megaregional’ deal because it spans several continents. What began in 2002 and a few Pacific Rim countries culminated in Former President Barack Obamas push towards a trade agreement with Asia-centered negotiations. By 2015, TPP included twelve nations, one of which was Japan. China was not part of the list of participating countries.

TPP countries make up 44 percent of the exports from the United States with a whopping 85 percent total United States agriculture exports. While tariffs for trade were already low, the TPP deal aimed to set up reform to include streamlining regulations and customs, promotions of transparent and competitive business laws, liberalization of protected sectors, reinforcing intellectual property safeguards, and enforcement of environmental and labor standards. The objective was to generate a complete integrated financial region as well as establish ongoing rules for the increasing rise of global investment.

President Trump aimed to remove the United States from TPP as well as renegotiate the terms of NAFTA. In a recent round of NAFTA renegotiations on October 17, 2017, everything ended in a stalemate with Mexico and Canada, the partners in the NAFTA agreement. The Trump Administrations list of demands may hinder any progress and could stall renegotiations through March 2018. These changes in agreements may signal a dramatic shift away from the open markets and trade scenario and put the United States back in relation to becoming the biggest trader in the world. Trump’s January 2017 executive order to renegotiate NAFTA has generated rounds of renegotiations that have led to a waste of resources and time that can affect the American economy in Canada, Mexico, and the United States.

Government’s Previous Policy Decisions/Actions:

Changes that sparked a renegotiation of NAFTA and an upending of TPP started through the Trump Administration. For example, for NAFTA, the Trump Administration wants to lower Mexico and the United States trade deficit. The stats point to American buying climbing to $55.6 billion more for imports from Mexican buying. Canada has a smaller trade deficit with the United States because Canada imports close to as much as the United States. To close the trade deficit with Mexico, the United States under the Trump Administration, wants elimination of unfair subsidies and stronger protection for U.S. intellectual and trade properties. The additional demand of turning Mexico’s state-owned companies like Pemex into private corporations is to keep competition reduced for Mexican products into the United States.

Canada is not excluded from renegotiations. The Commerce Department threatened imposing….....

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