Expert Panel Says Trade Outlook in 2018 Is Grim
Withdrawing from the Trans-Pacific Partnership was bad enough, but what could come this year could be far worse, trade scholars said during a Brookings Institution panel reviewing "Trump's Trade Policy in Asia" on Feb. 28. Because President Donald Trump exited the TPP on the third day of his administration, the United States will not be able to lower barriers to beef or pork exports to Japan, and other countries that stayed in the agreement, such as Canada, will move into the gap, said Jeff Schott, a senior fellow on international trade policy at the Peterson Institute for International Economics.
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"The U.S. has already faced export losses, even as the TPP isn't in force," he said. Trump's trade policy in Asia has "been a disaster for the United States of America." When Trump pulled out of the TPP, he said the country would make better, bilateral deals (see 1701230041). Schott scoffed at that claim: "There will be no new bilaterals. We'll be lucky to keep what we have."
Schott is hopeful, however, about the U.S.-Korea Free Trade Agreement, because he thinks the U.S. will only ask for discrete amendments, particularly getting South Korea to accept U.S. safety standards and emissions regulation for U.S.-built cars. He expressed doubt this would make a dent in the $20 billion annual trade deficit on autos between the two countries, but he said South Korea might agree to it because the U.S. is willing to drop the investor-state dispute settlement in KORUS.
The trade community didn't like Trump's rhetoric, but "there was a sense that calmer heads would prevail," said Eswar Prasad, Brookings' new century chair in international trade and economics. But it's starting to look like Trump's "America First" talk is going to translate into actions that could spark a trade war, he said. "All in all, it's not been a good year for trade, and I don't think next year is going to be much better," he said.
Countries around the world are watching Washington with anxiety, panelists said. Meredith Miller, a senior vice president at Albright Stonebridge Group, said she hears the same things in Vietnam, Indonesia, Malaysia and other parts of Southeast Asia: "Will manufacturing relocate to the United States? Will there be a trade war in China?" And, she said, protectionist elements in Southeast Asian countries have been emboldened by Trump's attitude.
Even though all the panelists are free-trade believers, several acknowledged that China has gotten the best of America because China has not honored its World Trade Organization commitments, and because disputes at the WTO have often gone China's way. But there are better ways to convince China to reform its heavy state subsidies of steel and aluminum production, Prasad said. He said the U.S. should join with the European Union and others to pressure China to stop supporting uneconomic foundries and smelters. He said that China's national government wants to scale back on overproduction, but has domestic pressures to keep the foundries open to provide jobs. In some ways, it's surprising that China is treating the Section 232 threat seriously enough to send a top economic official to Washington this week, Prasad said. But it's not just about how tariffs would affect sales of those metals.
"What the U.S. is trying to do is step outside the WTO system" by invoking the 232 national security clause, Prasad said. "It could poison the global trading environment." So, he said, China will try to convince the U.S. to take less drastic action to protect steel and aluminum. "If they cannot be mediated, at least channel them through the multilateral system."