tag:theconversation.com,2011:/id/topics/multilateral-trade-agreement-34964/articlesmultilateral trade agreement – The Conversation2020-11-16T01:06:50Ztag:theconversation.com,2011:article/1497352020-11-16T01:06:50Z2020-11-16T01:06:50ZWhat a Biden presidency means for world trade and allies like Australia<p>Back in March, <a href="https://www.foreignaffairs.com/articles/united-states/2020-01-23/why-america-must-lead-again">Joe Biden lamented</a> “the international system that the United States so carefully constructed is coming apart at the seams”.</p>
<p>“As president,” he declared, “I will take immediate steps to renew US democracy and alliances, protect the United States’ economic future, and once more have America lead the world.”</p>
<p>Among the closest allies of the US, none arguably has more at stake in Biden making good on his promises than Australia. </p>
<p>The international system Australia wants repaired is one defined by rules and consensus. As a middle-ranking power, it has long recognised its national interests are best protected by international agreements and the rule of law, rather than one in which might makes right. </p>
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Read more:
<a href="https://theconversation.com/why-the-australia-china-relationship-is-unravelling-faster-than-we-could-have-imagined-145836">Why the Australia-China relationship is unravelling faster than we could have imagined</a>
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<p>At the heart of Australia’s desired international trade system are multilateral trade deals, rather than bilateral deals which tend to favour the stronger nation, and a strong international authority – namely the World Trade Organisation – to negotiate rules and adjudicate disputes. </p>
<p>Donald Trump’s presidency undermined both. His “America First”
polices were grounded in grievances about other nations playing the US for “suckers”. He obstructed the WTO, turned his back on multilateral deals and started trade wars. </p>
<p>A Biden presidency promises a return to multilateralism. But it remains to be seen how it approaches the WTO.</p>
<h2>Trump’s war on multilateralism</h2>
<p>As president, Trump rapidly undid decades of mutilateral trade negotiations.</p>
<p>In his first week in office he withdrew the US <a href="https://theconversation.com/can-the-trans-pacific-partnership-survive-after-trump-71821">from the Trans-Pacific Partnership</a>, the multilateral trade deal intended to strengthen economic ties between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Singapore, Peru, Vietnam and the US. (The agreement was modified and signed without the US as the <a href="https://www.dfat.gov.au/trade/agreements/in-force/cptpp/Pages/comprehensive-and-progressive-agreement-for-trans-pacific-partnership">Comprehensive and Progressive Agreement for Trans-Pacific Partnership</a>.)</p>
<p>Trump’s trade war with China was also an exercise in power over principle. Both the escalating tariffs and the truce struck in January, known as the “<a href="https://www.fas.usda.gov/topics/china-phase-one-agreement">Phase One Agreement</a>”, repudiated established free-trade principles.</p>
<p>Along with commitments to reduce “structural barriers”, China is required to buy an extra US$200 billion in specified American goods and services over two years in return for the US cutting tariffs on $US110 billion in Chinese imports. </p>
<p>This worries Australian exporters.</p>
<p>The US shopping list for China includes more American seafood, grain, wine, fruit, meat and energy – all markets in which Australia is a significant exporter to China. As former Australian prime minister Kevin Rudd <a href="https://www.smh.com.au/politics/federal/us-china-trade-deal-threatens-australian-exporters-20200116-p53s2a.html">asked at the time</a> the deal was signed:</p>
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<p>How can the US pursue another $US32 billion of American beef, wheat, cotton and seafood – all listed in the agreement – without Australian exporters becoming collateral damage?</p>
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<p>The deal, as the Minerals Council of Australia rightly noted, undermined “the principles of free trade which have underpinned Australia’s bipartisan approach to trade policy for many decades”.</p>
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Read more:
<a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">Are Trump's tariffs legal under the WTO? It seems not, and they are overturning 70 years of global leadership</a>
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<h2>Blocking the World Trade Organisation</h2>
<p>The Trump administration has also continued the slow <a href="https://theconversation.com/key-trade-rules-will-become-unenforceable-from-midnight-australia-should-be-worried-126768">strangulation of the World Trade Organisation</a>, on the grounds it doesn’t serve American interests.</p>
<p>The US has blocked every recent appointment and reappointment to the WTO’s Appellate Body, which hears appeals to WTO adjudications. Appointments require the agreement of all of the WTO’s 164 member nations, and the Appellate Body requires three judges to hear appeals. US obstruction reduced the number of judges to <a href="https://theconversation.com/key-trade-rules-will-become-unenforceable-from-midnight-australia-should-be-worried-126768">just one by December 2019</a>, meaning it simply cannot function.</p>
<p>It’s important to note that US antagonism to the WTO predated Trump. The Obama administration also blocked <a href="https://worldtradelaw.typepad.com/ielpblog/2016/09/the-obama-administrations-attack-on-appellate-body-independence-shows-the-need-for-reforms-.html">appointments</a> it considered would not sufficiently represent US preferences. But the Trump administration certainly upped the obstructionism.</p>
<p>Indeed, just days before the 2020 election it blocked the appointment of former Nigerian finance minister Dr Ngozi Okonjo-Iweala to head the World Trade Organisation. A highly regarded development economist with a 25-year career at the World Bank, Okonjo-Iweala is widely considered to be an outstanding candidate to lead the WTO. The United States stood alone in objecting to her appointment.</p>
<h2>What will change under Biden?</h2>
<p>Dropping opposition to Okonjo-Iweala and other appointments so the WTO’s processes can function would be an important symbolic and practical first step for Biden. It would reassure Australia and others that global rules still matter.</p>
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Read more:
<a href="https://theconversation.com/arrogance-destroyed-the-world-trade-organisation-what-replaces-it-will-be-even-worse-125321">Arrogance destroyed the World Trade Organisation. What replaces it will be even worse</a>
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<p>How quickly, and on what terms, Biden returns the US to multilateralism remains to be seen. </p>
<p>He has acknowledged the importance of deals like the Trans-Pacific Partnership to ensure an increasingly powerful China “<a href="https://www.cfr.org/article/presidential-candidates-trans-pacific-partnership">doesn’t write the rules of the road for the world</a>”. But he has also pledged to not enter any more international agreements “until we have made major investments in our workers and infrastructure”.</p>
<p>For Australia – and other US allies – it is important that the US return to the multilateral negotiating table sooner rather than later. For global stability, long-term interests need to override the temptation of short-term expediency. </p>
<p>For “<a href="https://www.foreignaffairs.com/articles/united-states/2020-01-23/why-america-must-lead-again">America to lead again</a>” there’s a long and difficult diplomatic road ahead. The international trade system and the WTO are not perfect, but a world without rules would be far worse.</p><img src="https://counter.theconversation.com/content/149735/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Professor Lisa Toohey is a holder of the 2020 Fulbright Professional Scholarship in Australian-American Alliance Studies, funded by the Fulbright Foundation and the Australian Department of Foreign Affairs and Trade. </span></em></p>A Biden presidency promises a return to multilateral trade agreements. But it remains to be seen how it approaches the World Trade Organisation.Lisa Toohey, Professor of Law, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1134402019-04-12T02:06:02Z2019-04-12T02:06:02ZAmerica and the world still need the WTO to keep trade and the global economy humming<figure><img src="https://images.theconversation.com/files/268892/original/file-20190411-44781-1lxc2b4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The WTO's home in Geneva.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/geneva-august-18-world-trade-organization-150489857?src=Ohp3Q9anSM6lue2OrPqqTg-2-68">Martin Good/Shutterstock.com</a></span></figcaption></figure><p>President Donald Trump <a href="https://piie.com/blogs/trade-investment-policy-watch/us-exit-wto-would-unravel-global-trade">has made no secret</a> of his disdain for the World Trade Organization.</p>
<p>Since taking office, the Trump administration <a href="https://www.reuters.com/article/us-usa-trade-wto-judge/world-trades-top-court-close-to-breakdown-as-us-blocks-another-judge-idUSKCN1M621Y">has been blocking the appointment</a> or reappointment of WTO judges – imperiling the essential work of its court in issuing trade rulings. The president has <a href="https://www.bbc.com/news/world-us-canada-45364150">even threatened</a> to leave the global body if it doesn’t “shape up.” </p>
<p>But what exactly is the WTO, why does it matter and should Americans care if the U.S. left it? </p>
<p>As an international trade <a href="https://scholar.google.com/citations?user=yNkGbyQAAAAJ&hl=en&oi=ao">scholar</a>, I believe the WTO matters a great deal. To show why, I’d like to start with the history, which begins long before the agreement establishing the WTO <a href="https://www.wto.org/english/docs_e/legal_e/marrakesh_decl_e.htm">was signed</a> 25 years ago, on April 15, 1994.</p>
<h2>History of the WTO</h2>
<p>The <a href="https://www.wto.org">Geneva-based WTO</a> was the culmination of a <a href="https://theconversation.com/rules-based-trade-made-the-world-rich-trumps-policies-may-make-it-poorer-97896">50-year effort</a> spearheaded by successive U.S. governments to establish and secure a rules-based multilateral trade regime.</p>
<p>Before World War II, European powers imposed harsh trade restrictions against countries outside their empires, which hurt U.S. exporters substantially. This <a href="http://www.press.uchicago.edu/ucp/books/book/chicago/C/bo24475328.html">also contributed</a> to Japan going to war to carve out an “East Asian Co-Prosperity Sphere” and Nazi Germany attacking eastward to obtain “living space” – that is, vassal territories – nearby.</p>
<p>The 1948 <a href="https://www.investopedia.com/terms/g/gatt.asp">General Agreement on Tariffs and Trade</a>, the WTO’s predecessor, was designed to avoid a repeat of the collapse of trade in the 1930s that <a href="https://www.ucpress.edu/book/9780520275850/the-world-in-depression-1929-1939">worsened the Great Depression</a> and to eliminate market access as a reason to go to war. But this agreement applied only to trade in goods, not services. </p>
<p>Efforts to forge a <a href="https://www.wto.org/english/theWTO_e/minist_e/min96_e/chrono.htm">more comprehensive trade treaty</a> didn’t succeed until the 1990s, following the so-called Uruguay Round of trade talks, which ultimately led to the creation of the WTO on Jan. 1, 1995.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=514&fit=crop&dpr=1 754w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=514&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=514&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The WTO’s creation was a significant accomplishment of the Clinton administration.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Watchf-AP-A-DC-USA-APHS352110-President-Bill-Cl-/6b2b47ed07674cd28d0fe9fda02f0b14/9/0">AP Photo/Greg Gibson</a></span>
</figcaption>
</figure>
<h2>A success story</h2>
<p>The result has been spectacularly successful. <a href="https://comtrade.un.org/pb/">Country exports</a> as a share of global output surged from less than 5% in 1948 to over 30% today.</p>
<p>This enabled countries to <a href="https://www.wto.org/english/thewto_e/whatis_e/10thi_e/10thi03_e.htm">grow faster and steadier</a> and brought peace and prosperity to Europe and Japan. </p>
<p>Members of the WTO, which currently number 164, agree to four core principles: </p>
<ol>
<li><p>Nondiscrimination, which means all imports are subject to the same tariff rate, with some exceptions;</p></li>
<li><p>Reciprocity, which balances the reduction of barriers and allows for retaliation; </p></li>
<li><p>Transparency;</p></li>
<li><p>Decision-making by consensus.</p></li>
</ol>
<h2>How it works</h2>
<p>The WTO facilitates trade negotiations among member countries to open up markets and <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm">settle disputes</a> that arise. </p>
<p><a href="https://www.wto.org/english/tratop_e/dda_e/dda_e.htm">Subsequent rounds of negotiations</a> have allowed countries to take big steps toward trade liberalization, while balancing concessions with benefits. </p>
<p>When disputes arise, such as the <a href="https://theconversation.com/george-w-bush-tried-steel-tariffs-it-didnt-work-92904">Trump steel tariffs</a>, impartial panels adjudicate using WTO rules and permit injured countries to sanction violators. The U.S. <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm">ranks among the most frequent</a> and successful users of this, which has helped keep markets open for American exporters.</p>
<h2>What would happen if the U.S. left</h2>
<p>If the U.S. were to leave the WTO, other countries could freely raise tariffs against it. And the U.S. would lose access to the dispute settlement mechanism, which would make retaliation the only response available. </p>
<p>This would inevitably raise prices and reduce choice for U.S. consumers, undercutting the competitiveness and profitability of companies that rely on imports and slow economic growth.</p>
<p>The WTO’s demise would also raise the odds of violent conflict among states because it would reduce opportunities for peaceful economic expansion.</p>
<p>I know the WTO is far from perfect. Its reliance on consensus decision-making at times hampers progress on pressing problems, and its dispute settlement process can be slow. </p>
<p>That said, the WTO remains one of today’s most valuable international organizations, and I believe the world would be poorer and less peaceful without it.</p>
<p><em>This is an updated version of an <a href="https://theconversation.com/what-is-the-wto-99274">article</a> originally published on July 3, 2018.</em></p><img src="https://counter.theconversation.com/content/113440/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen J. Silvia does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A quarter-century ago, more than 100 nations agreed to engage in freer trade with one another and signed the declaration that established the World Trade Organization.Stephen J. Silvia, Professor of International Relations, American University School of International ServiceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/992742018-07-03T10:35:45Z2018-07-03T10:35:45ZWhat is the WTO?<p>President Donald Trump has made the World Trade Organization <a href="https://piie.com/blogs/trade-investment-policy-watch/us-exit-wto-would-unravel-global-trade">a frequent target</a>.</p>
<p>Recently, he’s <a href="https://www.axios.com/trump-trade-war-leaked-bill-world-trade-organization-united-states-d51278d2-0516-4def-a4d3-ed676f4e0f83.html">reportedly considering</a> suspending U.S. compliance with the global body – a claim the White House <a href="https://www.reuters.com/article/us-usa-trade-wto/treasury-chief-mnuchin-slams-report-that-trump-wants-to-exit-wto-idUSKBN1JP1EC">quickly denied</a>.</p>
<p>What exactly is the WTO, and would it matter if the U.S. left it? As an international trade <a href="https://scholar.google.com/citations?user=yNkGbyQAAAAJ&hl=en&oi=ao">scholar</a>, I’d like to start with the history.</p>
<h2>History of the WTO</h2>
<p>Creation of the <a href="https://www.wto.org">Geneva-based WTO</a> in 1995 was the culmination of a <a href="https://theconversation.com/rules-based-trade-made-the-world-rich-trumps-policies-may-make-it-poorer-97896">50-year effort</a> spearheaded by successive U.S. governments to establish and secure a rules-based multilateral trade regime.</p>
<p>Before World War II, European powers imposed harsh trade restrictions against countries outside their empires, which hurt U.S. exporters substantially. This <a href="http://www.press.uchicago.edu/ucp/books/book/chicago/C/bo24475328.html">also contributed</a> to Japan going to war to carve out an “East Asian Co-Prosperity Sphere” and Nazi Germany attacking eastward to obtain “living space” – that is, vassal territories – nearby.</p>
<p>The 1948 <a href="https://www.investopedia.com/terms/g/gatt.asp">General Agreement on Tariffs and Trade</a>, the WTO’s predecessor, was designed to avoid a repeat of the collapse of trade in the 1930s that <a href="https://www.ucpress.edu/book/9780520275850/the-world-in-depression-1929-1939">worsened the Great Depression</a> and to eliminate market access as a reason to go to war. </p>
<h2>A success story</h2>
<p>The result has been spectacularly successful. <a href="https://www.statista.com/statistics/264682/worldwide-export-volume-in-the-trade-since-1950/">Country exports</a> as a share of global output surged from less than 5 percent in 1948 to over 30 percent today.</p>
<p>This enabled countries to <a href="https://www.wto.org/english/thewto_e/whatis_e/10thi_e/10thi03_e.htm">grow faster and steadier</a> and brought peace and prosperity to Europe and Japan. </p>
<p>Members of the WTO, which currently number 164, agree to four core principles: </p>
<ul>
<li><p>non-discrimination, which means all imports are subject to the same tariff rate, with some exceptions</p></li>
<li><p>reciprocity, which balances the reduction of barriers and allows for retaliation </p></li>
<li><p>transparency</p></li>
<li><p>decision-making by consensus.</p></li>
</ul>
<h2>How it works</h2>
<p>The WTO facilitates trade negotiations among member countries to open up markets and <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm">settle disputes</a> that arise. </p>
<p><a href="https://www.wto.org/english/tratop_e/dda_e/dda_e.htm">Subsequent rounds of negotiations</a> have allowed countries to take big steps toward trade liberalization, while balancing concessions with benefits. </p>
<p>When disputes arise, such as the <a href="https://theconversation.com/george-w-bush-tried-steel-tariffs-it-didnt-work-92904">Trump steel tariffs</a>, impartial panels adjudicate using WTO rules and permit injured countries to sanction violators. The U.S. <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm">ranks among the most frequent</a> and successful users of this, which has helped keep markets open for American exporters.</p>
<h2>What would happen if the US left</h2>
<p>If the U.S. were to leave the WTO, other countries could freely raise tariffs against it. And the U.S. would lose access to the dispute settlement mechanism, which would make retaliation the only response available. </p>
<p>This would inevitably raise prices and reduce choice for U.S. consumers, undercut the competitiveness and profitability of companies that rely on imports and slow economic growth. The WTO’s demise would also raise the odds of violent conflict among states.</p><img src="https://counter.theconversation.com/content/99274/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen J. Silvia does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Trump has often talked about leaving the World Trade Organization. An economist explains what it is and what would happen if the president had his way.Stephen J. Silvia, Professor of International Relations, American University School of International ServiceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/874772017-11-16T01:39:20Z2017-11-16T01:39:20ZTrump’s ‘America first’ trade policy ignores key lesson from Great Depression<figure><img src="https://images.theconversation.com/files/194885/original/file-20171115-19782-b2ncvz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump will soon learn the costs of going it alone on trade.</span> <span class="attribution"><span class="source">AP Photo/Andrew Harnik</span></span></figcaption></figure><p>President Donald Trump <a href="http://abcnews.go.com/International/wireStory/trump-asia-trade-rules-changed-watch-51131335">declared</a> his nearly two-week trip through Asia “tremendously successful,” but economic history should make us more skeptical. </p>
<p>During the trip, the president continued to promote his so-called <a href="https://theconversation.com/what-does-america-first-mean-for-american-economic-interests-71931">“America first” trade policy</a>. He is orienting the country distinctly toward protectionism and claiming that unilateralism in trade is good for America.</p>
<p>Here is the problem: President Trump’s <a href="http://www.businessinsider.com/trump-trade-policy-agenda-2017-3">approach to trade</a> seems to be based on a false understanding of how the global economy works, one that also plagued American policymakers nearly a century ago. The administration has forgotten an important lesson of the Great Depression, and <a href="http://foreignpolicy.com/2017/03/06/economists-take-aim-at-trump-trade-theory-again-peter-navarro-bilateral-multilateral-trade-deals-china-germany-national-security/">virtually all economists</a> <a href="https://www.voanews.com/a/trump-trade-policy-loser-economists-contend/3323997.html">agree</a> that this could have unfortunate consequences for the U.S. and the world. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=507&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=507&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=507&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">If Trump puts ‘America first’ in trade, other countries will follow. And that’s bad news for everyone.</span>
<span class="attribution"><span class="source">Hadrian/Shutterstock.com</span></span>
</figcaption>
</figure>
<h2>America and the global economy</h2>
<p>Trump’s “America first” orientation <a href="http://time.com/4386335/donald-trump-trade-speech-transcript/">assumes</a> that the United States, as the world’s dominant actor, can behave freely and independently in trade. </p>
<p>Unfortunately for the administration, America’s top economic position does not shield it from the dire consequences that unilateral trade policy can provoke. The constraints on U.S. action result from the basic nature of the international economy and from America’s <a href="https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci18-1.pdf">declining dominance</a> of the world trade system. </p>
<p>It is a standard principle of economics that all individual actors exist within a system. Any action taken by one actor will likely result in a response from others. This means that wise governments, in considering which policies to adopt, must make <a href="https://www.economist.com/news/economics-brief/21705308-fifth-our-series-seminal-economic-ideas-looks-nash-equilibrium-prison">difficult calculations</a> about how their actions will interact with those of others.</p>
<p>“America first” fails to make these calculations. It disregards how America’s trading partners will respond to the new U.S. protectionism – which is also what American lawmakers ignored during the Great Depression.</p>
<h2>‘Beggar thy neighbor’</h2>
<p>Before the 1930s, America’s trade policy was generally set unilaterally by Congress – that is, without the international negotiations used today. </p>
<p>Lawmakers, already in a <a href="http://www.nber.org/papers/w2001">protectionist mood</a>, responded to the pain of the Great Depression by passing the infamous <a href="https://www.investopedia.com/terms/s/smoot-hawley-tariff-act.asp">Smoot-Hawley Tariff Act of 1930</a>, which <a href="http://www.economist.com/node/12798595">raised duties on hundreds of imports</a>.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=809&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=809&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=809&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1016&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1016&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1016&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Senator Reed Smoot co-sponsored the famous act that bears his name.</span>
<span class="attribution"><span class="source">Everett Historical/Shutterstock.com</span></span>
</figcaption>
</figure>
<p>Meant in part to ease the effects of the Depression by protecting American industry and agriculture from foreign competition, the act instead helped prolong the downturn. <a href="https://press.princeton.edu/titles/9430.html">Many U.S. trading partners reacted</a> by <a href="http://www.nber.org/chapters/c6899.pdf">raising their own tariffs</a>, which contributed <a href="http://www.mitpressjournals.org/doi/abs/10.1162/003465398557410">significantly</a> to shutting down world trade.</p>
<p>Fortunately, America and the world learned a lesson from this experience. With the <a href="http://www.nber.org/chapters/c6899.pdf">Reciprocal Trade Agreements Act of 1934</a> and its successors, which granted the president authority to reach tariff reduction agreements with foreign governments, U.S. trade policy came to be global and strategic. This new approach was institutionalized at the international level with the creation of the <a href="https://www.wto.org/english/res_e/booksp_e/agrmntseries2_gatt_e.pdf">General Agreement on Tariffs and Trade</a> in 1948 and its successor, the World Trade Organization, in 1995.</p>
<p>The basic principle of these agreements is <a href="https://theconversation.com/why-the-wto-still-matters-34624">reciprocity</a> – that each country will agree to liberalize its trade to the extent that other countries liberalize theirs. The approach uses international negotiations to <a href="https://www.jstor.org/stable/2706411?seq=1#page_scan_tab_contents">overcome protectionist political pressures</a> and recognizes that trade is a global phenomenon that generates national interdependence.</p>
<h2>Dangers of ignoring history</h2>
<p>The dangers of ignoring history are only beginning to manifest themselves, but they can be seen in several recent developments that bode ill for us all.</p>
<p>One of the Trump administration’s <a href="https://theconversation.com/how-the-tpps-demise-threatens-us-national-security-and-pax-americana-67514">first actions</a> was to withdraw the United States from the <a href="https://theconversation.com/us/topics/transpacific-partnership-1882">Trans-Pacific Partnership</a>. This agreement, which was a major initiative of the Obama administration, would have created the <a href="https://www.nytimes.com/interactive/2016/business/tpp-explained-what-is-trans-pacific-partnership.html">largest economic bloc</a> in the world by linking America’s economy with those of 11 other Pacific nations. It would also have created an American-led, liberal bulwark in Asia against any Chinese challenge to the regional economic order.</p>
<p>Withdrawing from the agreement denied American exporters enhanced access to foreign markets and was a <a href="https://www.forbes.com/sites/johnbrinkley/2017/01/24/trump-dumps-trans-pacific-partnership-sad/#4543448e75dc">gift</a> to Chinese influence in Asia. But we are only now beginning to see the longer-term repercussions of President Trump’s decision. </p>
<p>During Trump’s trip, the other 11 signatories of the original trade deal, including Japan, Australia, Canada and Mexico, <a href="http://money.cnn.com/2017/11/13/news/economy/tpp-11-without-us-what-next/index.html">agreed to move forward</a> without the U.S. This is a problem for America because it means that these countries will grant preferential market access to one another, making it harder for American companies to compete in their markets.</p>
<p>American companies are already feeling the impact of what happens when they’re left out of a trade deal. A recent <a href="https://www.nytimes.com/2017/11/12/business/trump-trade-lobster-canada.html">New York Times article</a>, for example, highlights the plight of American lobster producers whose prices are being undercut by Canadian producers in the wake of a new <a href="http://ec.europa.eu/trade/policy/in-focus/ceta/">Canada-European Union trade agreement</a>. </p>
<p>If the United States is reluctant to participate in multilateral trade agreements, other countries have every incentive to do deals that exclude and even may hurt the U.S.</p>
<p>Trump’s <a href="https://theconversation.com/trumps-threat-to-withdraw-from-nafta-may-hit-a-hurdle-the-us-constitution-81444">ongoing efforts</a> to renegotiate the North American Free Trade Agreement also pose potential dangers. The administration has a tendency to speak of renegotiation as if it can <a href="http://money.cnn.com/2017/10/11/news/economy/trump-nafta/index.html">dictate the terms</a>. But while Canada and Mexico may be more dependent on the U.S. than the U.S. is on them, an <a href="https://www.cfr.org/backgrounder/naftas-economic-impact">implosion of NAFTA would be devastating</a> for many U.S. industries that rely on North American trade. <a href="https://www.cnbc.com/2017/11/13/the-next-big-worry-for-markets-nafta-fails-and-trade-wars-erupt.html">Markets increasingly worry</a> that NAFTA may not survive the negotiations. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Trade representatives from Canada, the U.S. and Mexico have been meeting to renegotiate NAFTA.</span>
<span class="attribution"><span class="source">AP Photo/Manuel Balce Ceneta</span></span>
</figcaption>
</figure>
<p>In addition to withdrawing from and renegotiating trade agreements, the administration has <a href="https://fivethirtyeight.com/features/trumps-trade-policies-keep-backfiring/">ramped up</a> unilateral efforts to sanction U.S. trading partners for receiving subsidies or for dumping their products on the American market. </p>
<p>Decisions to impose trade penalties risk blowback, as when sanctions on Bombardier drove the Canadian plane manufacturer into the <a href="https://fivethirtyeight.com/features/trumps-trade-policies-keep-backfiring/">arms of Airbus</a>, Boeing’s top foreign rival. The threatened imposition of sanctions on imports of solar panels may have <a href="https://www.politico.com/story/2017/09/22/solar-tariff-trump-china-trade-243021">a similar effect</a>, damaging American panel installers and encouraging foreign retaliation. </p>
<h2>Trade needs a champion</h2>
<p>President Trump assumes the U.S. can act unilaterally without consequences. </p>
<p>Economic history shows this doesn’t work. The world’s economies are far more interdependent than they were during the Great Depression, so the impact of governments all following a “my country first” trade policy – as the president said <a href="http://www.eaglenews.ph/trump-says-us-wont-tolerate-other-countries-unfair-trade-practices-anymore-to-protect-america-first/">he expected world leaders to do</a> – could have disastrous consequences. </p>
<p>Today, the international trade system America helped create, one based on open markets and classically liberal principles, is <a href="https://www.brookings.edu/research/the-twilight-of-the-liberal-world-order/">under threat</a> as never before. Yet President Trump’s “America first” approach is a total abdication of the traditional U.S. role as its defender. And in fact, the president is doing his best to <a href="https://www.nytimes.com/2017/10/31/business/economy/trump-trade.html?_r=0">undermine that system</a>. </p>
<p>In the final analysis, the Trump administration is reverting to a policy that is dangerous for the U.S. economy and for the international system. </p>
<p>If the U.S. abdicates, China may be the only country that can take the reins. The question is, what would that mean for the current system of open and free markets?</p><img src="https://counter.theconversation.com/content/87477/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>American lawmakers in the 1930s learned the hard way what happens when a country raises tariffs and makes other unilateral trade decisions.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/776682017-05-15T01:18:39Z2017-05-15T01:18:39ZTrump’s trade policy is unlikely to deliver big wins for US workers<figure><img src="https://images.theconversation.com/files/169235/original/file-20170514-3675-1fnc4bl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Commerce Secretary Wilbur Ross, sitting at the president's right, announced the China trade deal.</span> <span class="attribution"><span class="source">Carolyn Kaster/AP Photo</span></span></figcaption></figure><p>The Trump administration recently notched two wins for its international trade strategy, hailing both as big gains for U.S. workers.</p>
<p>The first was the confirmation of <a href="http://thehill.com/policy/finance/332977-lighthizer-confirmed-as-chief-trade-negotiator">Robert Lighthizer</a> on May 11 as U.S. trade representative (USTR). This was a key step toward President Donald Trump’s vow to renegotiate NAFTA. </p>
<p>That same day, the White House announced progress in <a href="http://abcnews.go.com/Politics/wireStory/china-us-reach-agreement-beef-poultry-natural-gas-47361624">opening up the Chinese market</a> for <a href="http://www.reuters.com/article/us-usa-china-trade-idUSKBN188088">U.S. card payment service companies</a>, such as Visa, as well as American beef producers. </p>
<p>While both of these events represent positive if small steps forward, they also symbolize the administration’s problematic approach to trade: The U.S. will pursue bilateral deals, like the one with China, at the expense of multilateral pacts such as NAFTA. </p>
<p>As an economist studying international trade, I’m skeptical that incremental, bilateral negotiations will reap significant rewards for American workers, particularly the kind <a href="http://money.cnn.com/2017/01/20/news/economy/donald-trump-jobs-wages/">Trump has promised</a>.</p>
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<h2>A push for bilateralism</h2>
<p>One of Lighthizer’s first duties as USTR will be to renegotiate NAFTA with the aim of delivering the president’s <a href="http://www.cnbc.com/2017/04/30/trump-says-hell-kill-nafta-if-hes-not-able-to-renegotiate-a-better-deal.html">“better deal</a>.” </p>
<p>Senators confirmed Lighthizer by an 82-14 vote, suggesting that there is bipartisan support for Trump’s preference for bilateral deals over multilateral ones. And Lighthizer is in many ways the ideal candidate for the job. </p>
<p>As deputy U.S. trade representative under President Ronald Reagan in the 1980s, he helped negotiate <a href="https://crawford.anu.edu.au/pdf/pep/pep-310.pdf">bilateral agreements</a> to restrict Japanese imports and open up their markets to U.S. businesses. These deals were seen at the time as important victories for U.S. manufacturers, demonstrating the value of a USTR committed to bilateral negotiations in order to secure strong protections for American businesses. </p>
<p>Today, China is the new Japan: a rapidly growing, manufacturing-oriented economy that threatens the global economic status quo. As a battle-tested free-trade skeptic, Lighthizer <a href="https://www.bloomberg.com/politics/articles/2017-05-11/lighthizer-approval-as-u-s-trade-chief-clears-way-for-nafta-redo">should be an effective advocate</a> for the protectionist policies that the Trump administration has championed and is likely to do so following the bilateral blueprint he used under Reagan.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=484&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=484&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=484&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=608&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=608&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=608&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Robert Lighthizer, center, easily won Senate confirmation thanks to bipartisan support, including from Republican Orrin Hatch, right, and Democrat Ron Wyden.</span>
<span class="attribution"><span class="source">Manuel Balce Ceneta/AP Photo</span></span>
</figcaption>
</figure>
<h2>Reasons for skepticism</h2>
<p>But whether a revised NAFTA or any new bilateral agreement negotiated by Lighthizer ends up being good for U.S. workers remains to be seen, and we should be skeptical. </p>
<p>The China deal consisted of a reaffirmation of a September agreement to allow U.S. beef producers access to Chinese markets, which Secretary of Commerce Wilbur Ross hailed as “<a href="https://www.nytimes.com/2017/05/11/business/us-china-trade-deals.html">very big news</a>.” </p>
<p>But while the news was big in terms of how much beef may be sold to China in coming years, it is unlikely to do much for U.S. workers. U.S. beef production directly employs <a href="http://siccode.com/en/codes/naics/112111/beef-cattle-ranching-farming">fewer than 4,000</a> workers and indirectly employs perhaps <a href="http://siccode.com/en/naicscodes/1121/cattle-ranching-and-farming">upward of 65,000</a>, numbers so small as to be irrelevant. </p>
<p>In addition, the administration completed a deal that will allow U.S. payment transaction companies to operate in China. But again, these companies employ merely <a href="https://www.census.gov/data/tables/2014/econ/susb/2014-susb-annual.html">130,000 U.S. workers</a>. To put that into perspective, the net number of jobs created every month in the U.S. (the difference between jobs created and jobs destroyed) is <a href="https://www.linkedin.com/pulse/americas-job-churning-machine-andrew-chamberlain">around 200,000</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A new deal will open up China to U.S. beef.</span>
<span class="attribution"><span class="source">Mark Schiefelbein/AP Photo</span></span>
</figcaption>
</figure>
<h2>Not an ideal negotiating strategy</h2>
<p>The irony is that, despite the Trump administration’s focus on the jobs impact of trade agreements, bilateral deals are less likely to have a big impact on workers. This is because these agreements tend to be a boon for some businesses – those for whom the new market is important – while having only indirect effects on others. </p>
<p>As a result, powerful companies with influential lobbying arms are better able to promote their interests within this type of setting, and the limited scale of the negotiations means that these businesses’ interests often come at the expense of others. Thus, less influential industries, and their workers, lose out. For instance, the U.S. still faces <a href="https://ustr.gov/sites/default/files/2013%20NTE%20China%20Final.pdf">high Chinese trade barriers</a> on insurance products, a sector that employs over 2.3 million U.S. workers.</p>
<p>In fact, this is <a href="https://theconversation.com/multilateral-regional-bilateral-which-agreement-is-best-19664">one of the primary arguments</a> for wide-ranging, multilateral trade negotiations of the type that the Trump administration <a href="http://www.reuters.com/article/us-usa-trump-wto-idUSKBN16832U">dislikes</a>. Though such negotiations also have downsides, when deal-making involves multiple countries and many industries, it becomes less likely that any single interest group will prevail at the expense of others. </p>
<p>In other words, agreements such as those that led to the World Trade Organization, which Trump derides, were <a href="https://www.wto.org/english/thewto_e/whatis_e/tif_e/understanding_e.pdf">specifically designed</a> to overcome this kind of corruption of the political process that allows narrow, powerful corporate interests to buy their way into the negotiation process.</p>
<h2>Eye on the ball</h2>
<p>There is also a large cost to abandoning or significantly revising multilateral trade accords like NAFTA. </p>
<p>While NAFTA has undoubtedly led to the <a href="http://knowledge.wharton.upenn.edu/article/naftas-impact-u-s-economy-facts/">availability of cheaper products</a> for U.S. consumers, it has simultaneously been <a href="https://www.news.virginia.edu/content/qa-uva-economists-study-identifies-naftas-winners-and-losers">bad for many U.S. workers</a>. However, in this case the harm has already been done and any significant disruption of the existing agreement would be costly, both economically and politically. </p>
<p>For instance, about <a href="https://www.rita.dot.gov/bts/press_releases/bts020_13">60 percent</a> of NAFTA trade goes by truck, a sector that employs <a href="http://www.alltrucking.com/faq/truck-drivers-in-the-usa/">3.5 million</a> U.S. workers. So a disruption to NAFTA supply chains would clearly have severe economic consequences for truck drivers. </p>
<p>It is undeniably good for the U.S. to sell more beef and payment transaction services to the Chinese. And renegotiating NAFTA could be welfare improving for all involved if done right. But attempts to negotiate specific deals that impact narrow interest groups rarely lead to large overall gains for workers. </p>
<p>The key will be whether this populist president can keep his eye on the ball and what really matters – the American worker – and not get distracted by the lure of corporate rent-seekers.</p><img src="https://counter.theconversation.com/content/77668/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Greg Wright does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Trump administration’s new deal with China, which won’t benefit many workers, shows the pitfalls of pursuing bilateral agreements at the expense of multilateral ones like NAFTA.Greg Wright, Assistant Professor of Economics, University of California, MercedLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/713302017-01-17T04:59:30Z2017-01-17T04:59:30ZBrexit, Trump and the TPP mean Australia should pursue more bilateral trade agreements<p>Brexit, Trump’s protectionist agenda and the debacle of getting everyone to ratify the unpopular Trans-Pacific Partnership (TPP) are all a global trend towards bilateral trade agreements.</p>
<p>This is good news for Australia. With its <a href="http://dfat.gov.au/trade/agreements/Pages/status-of-fta-negotiations.aspx">manifold set of strong free trade agreements</a>, Australia is geared up to reap the early gains of this new trend. </p>
<p>The domestic squabble between Prime Minister Malcolm Turnbull and Opposition Leader Bill Shorten on whether the “<a href="http://www.sbs.com.au/news/article/2017/01/16/tpp-dead-water-shorten">the TPP is dead in the water</a>” meant that Turnbull’s ongoing support for the Regional Comprehensive Economic Partnership (RCEP) went unnoticed. This signals that, unlike the TPP, the Chinese-led trade deal RCEP is alive and well, and that both sides of Australian politics support it. </p>
<p>Considering the existing spaghetti bowl of international economic partnerships, Australia is already in the fast lane of bilateral trade agreements with the US and China. In fact, Australia is the second largest economy and trading partner of the only six countries that have in place free trade agreements with both <a href="http://trade.gov/fta/">the US</a> and <a href="http://fta.mofcom.gov.cn/english/index.shtml">China</a>. The group includes South Korea, Singapore, Chile, Peru’ and Costa Rica.</p>
<p>If Australia quickly wraps free trade agreements with Canada, the European Union and the United Kingdom, Australia will be the only major trading link among these countries, with evident growth opportunities on favourable terms. </p>
<p>When it comes to trade deals already in force, Australia’s trade portfolio includes many bilateral agreements, but only one regional trade agreement (with the Association of Southeast Asian Nations). </p>
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<span class="attribution"><a class="source" href="http://dfat.gov.au/trade/agreements/Pages/status-of-fta-negotiations.aspx#negotiation">Department of Foreign Affairs and Trade/The Conversation</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<h2>Trade deals with multiple countries are dead</h2>
<p>Promoting international trade has always been important to <a href="http://dfat.gov.au/trade/economic-diplomacy/Pages/economic-diplomacy.aspx">Australia’s economy</a>, to encourage growth, attract investment and support business. For the past two decades Australia has been <a href="http://www.abs.gov.au/ausstats/abs@.nsf/0/9CDC187A7F76FB53CA25773700169C4B?opendocument">expanding its trade policy agenda</a> with multilateral, regional and bilateral trade agreements.</p>
<p>There are only two multilateral trade agreements under negotiation which involve Australia. One is under the World Trade Organisation (WTO) umbrella (the Environmental Goods Negotiations) and the other is in competition with the WTO system (the <a href="https://theconversation.com/wikileaks-reveals-the-tisa-agreement-could-cost-australian-services-63199">Trade in Services Agreement – TiSA</a>).</p>
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<p>The tumultuous political events of 2016 in the US and Europe confirm Kevin Rudd’s remark that “the West has turned inward”, while the Asia Pacific region is emerging as the <a href="http://www.internationalaffairs.org.au/australian_outlook/china-and-asean-torchbearers-for-free-trade/">torchbearer for free trade and economic integration</a>.</p>
<p>For the past few years there’s been disagreement on which type of agreement is best for Australia’s trade policy: <a href="https://theconversation.com/multilateral-regional-bilateral-which-agreement-is-best-19664">multilateral, regional or bilateral</a>.</p>
<p>The <a href="https://www.nytimes.com/2016/01/01/opinion/global-trade-after-the-failure-of-the-doha-round.html">failure of the WTO’s Doha round</a> of trade negotiations has undermined the credibility of the multilateral trading system. With the US and Japan denying China the <a href="http://www.wsj.com/articles/u-s-wont-grant-china-market-economy-status-u-s-senior-official-says-1481318577">market economy status</a> sanctioned by its WTO accession, multilateralism is further out of question. </p>
<p>When a country grants China market economy status, it can no longer impose punitive <a href="https://www.euractiv.com/section/trade-society/news/china-starts-trade-battle-over-market-economy-status/">anti-dumping tariffs on Chinese-made goods</a>. More than ten years ago, Australia was fast to <a href="http://dfat.gov.au/trade/agreements/chafta/Documents/mou_aust-china_fta.pdf">recognise China’s full market economy status</a> as a precondition of the China-Australia Free Trade Agreement (ChAFTA), which <a href="http://dfat.gov.au/trade/agreements/chafta/news/Pages/ChAFTA-in-force-now.aspx">entered into force on 20 December 2015</a>.</p>
<p>If multilateralism is dead, regional trade agreements are also not looking so good outside of Asia. <a href="http://www.bilaterals.org/?eu-sees-pause-in-talks-on-free">With the rise of Trump and anti-EU sentiment</a>, the Transatlantic Trade and Investment Partnership (TTIP) <a href="https://theconversation.com/the-ttip-trade-deal-is-lost-at-sea-60132">is lost at sea</a>, and so is the EU-Canada <a href="http://www.euractiv.com/section/trade-society/news/parliament-committee-gives-ceta-thumbs-down/">Comprehensive Economic and Trade Agreement (CETA)</a>. </p>
<h2>The benefits of bilateralism</h2>
<p>Australia has a once-in-a-generation economic opportunity to exploit the cracks opened in the international trading system by the stark return to bilateral agreements. Australia is already poised to negotiate two such agreements <a href="http://dfat.gov.au/geo/canada/Pages/canada-country-brief.aspx">with Canada</a> and <a href="http://dfat.gov.au/trade/agreements/aeufta/Pages/aeufta.aspx">the EU</a>.</p>
<p>Brexit is creating further ripples in the economic diplomacy waters. For example, in Canberra there are loud voices calling for <a href="http://www.abc.net.au/news/2017-01-10/brexit-abbott-calls-on-uk-to-prioritise-fta-with-australia/8173082">“absolutely free” trade between Australia and the UK</a>. According to some, a full-blown China-US trade war fought on currency manipulation is the <a href="http://www.abc.net.au/news/2017-01-11/trade-war-between-us-and-china-a-major-threat-to-australia/8172562">single biggest economic threat to Australia</a>. A falling Chinese currency in combination with US protectionist measures would dampen the Chinese economy by way of reduced volumes of exports and higher interest rates spreading across the Asia Pacific and pushing down the price of commodities. </p>
<p>However, it’s highly unlikely that monetary dynamics alone will damage Australia’s “rocks and crops” economy. The growing productivity of the <a href="https://www.oecd.org/tad/events/Mr.%20Merrilees_Agricultural%20productivity%20growth%20reforms%20opportunities.pdf">agricultural</a> and <a href="https://industry.gov.au/Office-of-the-Chief-Economist/Publications/Documents/presentations/australian-mining-productivity-201310.pdf">mining sectors</a> is strong enough to rise above global tensions and falling commodity prices. Australia’s <a href="http://www.lngworldnews.com/australia-lng-exports-to-rise-40-percent-in-2016-17/">export volumes in key markets are poised to further rise</a> in a situation where trading partners will already be warring for the best market and investment opportunities. </p>
<p>A protectionist western economy across the Atlantic will further swing the global pendulum of economic growth to Asia. It will also amplify the positive effects of further economic integration in that region for Australia.</p>
<p>When the RCEP comes into force, Australia will have privileged access to China’s One Belt One Road (OBOR) initiative, the so called <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/ChinasRoad">new Silk Road</a>. This development will lead to massive infrastructure investment and trade opportunities for Australia, even more so as it has the comparative advantage of being a highly developed economy with privileged access to Western know-how. </p>
<p>As cynical as it may sound, at present Australia’s economic fortunes depend on juggling free trade with both a commanding Asian region and a disunited west. Essentially, if Australia manages to keep a trade policy that is geopolitically neutral, its economy will thrive on unsavoury developments.</p>
<p>Some of these include the success of Trump’s protectionist agenda, which may <a href="https://www.theguardian.com/us-news/2017/jan/16/europes-fate-is-in-our-hands-angela-merkels-defiant-reply-to-trump">deteriorate the US relations with NATO and the EU</a>, to the point of fuelling European nationalism and disintegration.</p>
<p>Another questionable development, yet positive for Australia, is <a href="https://intpolicydigest.org/2015/03/04/the-re-militarization-of-japan/">Japan’s re-militarisation</a> to contain China’s rise. The preservation of the postwar institutional framework that guarantees economic openness and the prospect of economic and political security in the the Asia Pacific region may soon require <a href="http://www.internationalaffairs.org.au/australian_outlook/tough-choices-for-australia-and-japan/">tough choices for Australia and Japan</a>.</p>
<p>With Japan standing in for the US security role in East Asia, Australia would take a sweet deal to become the neutral and peace-monger Switzerland of Asia.</p><img src="https://counter.theconversation.com/content/71330/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Giovanni Di Lieto is affiliated with the Australian Institute of International Affairs (AIIA), with the Contemporary European Studies Association of Australia (CESAA), and with NOMIT Inc (Network of Italians in Melbourne. </span></em></p>It seems in the current global turbulence multilateral trade deals are dead, long live bilateral agreements.Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.