The Evolution of U.S. Trade Strategy: Causes and Consequences for Asia

The Trump administration has taken U.S. foreign economic policy in directions not seen since the establishment of the postwar liberal regime for international trade.  The US has been unprecedentedly critical of the WTO, sought to replace NAFTA with a new US-Mexico-Canada agreement, and cast the EU as a foe in trade relations while halting progress on the Trans-Atlantic Trade and Investment Partnership. But the most significant trade moves have targeted China and focused on the Asia-Pacific: opting out of the Trans-Pacific Partnership, criticizing Chinese policies and practices as unfair on issues ranging across market access, currency manipulation, coerced or illicit intellectual property transfers, industrial policy, import duties, government subsidies, and Chinese firms’ violations of US sanctions on third countries.  Initial rounds of tariffs from both sides and threats to escalate portended a possible full-blown US-China trade war as negotiations failed to move expeditiously toward a mutually acceptable deal.

The TPP has moved forward without the US, as the CPTPP with Japan in the leading role. The China-led Regional Comprehensive Economic Partnership is emerging, with overlapping membership and less demanding rules. China’s Belt and Road Initiative and the Asian Infrastructure Investment Bank may further change the regional economic and institutional landscape.  Alongside its more confrontational stance on trade, the US has pressed for a “free and open Indo-Pacific.” What have been, and are likely to be, the regional impacts of recent US policy? What are the prospects for multilateral cooperation in the region?  Is the current US approach, associated with President Trump but with some roots in earlier periods, likely to change and, if so, with what effects? Join us for a discussion on the challenges ahead in dealing with the new trade realities and what it means for U.S. relations with Asia in particular.

This event is being presented in partnership with the Foreign Policy Research Institute.

Selected Quotes
 

David Dollar

“Now the rumors are that China is willing to open up financial services, auto, they’re talking about cloud computing, so I think there is potential to have some significant opening. Having said that, I would not expect it to be radical, China does do things gradually. I think they have been gradually opening up the economy, and the best prospect is they accelerate that somewhat, but I think it would be naïve to think that there would be radical change. Any of this opening is going to benefit everybody, you’re not going to open up to American firms, you’re going to open up to foreign firms and imports. So the whole regional economy will benefit and our partners would be very happy to see the U.S. make progress on market access.”

“Probably, this purchase program is not going to reduce the U.S. trade deficit. We can be pretty sure it won’t affect the overall U.S. trade deficit, that’s largely a macro phenomenon, but it probably won’t have the effect on the bilateral trade balance that we think. If you look at the last couple years, our imports from China are up 17% over the last two years. So as long as the U.S. economy is growing well, we Americans, we’re likely to keep importing from China. Unless there is a reactivation of the trade war, we’re going to be importing a lot from China. So even if we sell some tens of billions of dollars of extra products, we’re going to be importing tens of billions of dollars more.” 

Meg Lundsager

“This administration seems in the U.S. to be focused on fair trade and I think that’s something everybody supports… Now what has frustrated me the last couple of years is the U.S. has walked away from the Trans-Pacific Partnership and of course those countries have gone on on their own to form the agreement and we’re already seeing trade expanding among countries in Asia and the U.S. being cut out, so I think that has hurt the U.S. a bit.”

“When I look at the trade issues, the concerns the U.S. has are the same concerns many other countries have, whether in Asia-- Japan, Korea, others, Australia, or in Europe or Canada and we’re not using the WTO. The U.S. is very frustrated with the WTO… but it’s an organization with binding rules in it and mechanisms for pursuing problems. And I think the U.S. should come back and work constructively to make it more effective and then you can use the WTO to band together when you have concerns...”   

Michael Pillsbury

“A lot of administration spokesman have said, quite accurately I believe, that we are 90% of the way there. Then of course, the stock market goes up. Then another commentator will say ‘well, there are a few issues left’ and then the stock market goes down. So our markets are having a difficult time, as are our scholars, knowing what is the essence of this secret deal.”

“If one [a trade agreement] is worked out successfully, if the enforcement mechanism starts to work, then we are looking much more toward a G2 kind of consensus about how U.S.-China relations will work. This has enormous implications for European Union, Southeast Asia, Japan- it’s a nightmare for many countries, India would be a good example. India declined to support the Belt and Road Initiative, they won’t attend the meetings. If they see a U.S.-China condominium for global governance, this leaves India alone and isolated unless it reassesses and changes its policy.” 

Taeho Bark:

“President Trump did not seem to trust regional trade agreements either, you know, that he announced the withdrawal the U.S. from the TPP right after he entered his office. However, President Trump showed his strong preference of using the bilateral approach based on the power of the U.S. economy. In any event, the point I’d like to make here is that a reason behind the U.S. trade conflict with China could be the fact that multilateral trading system of the WTO was not effective in dealing with unfair trade and investment measures.”

“We should remember that WTO is the member-driven organization. Therefore, this time, all members must agree to make a firm agreement for fundamental reforms. Recognizing that not much life is left in the WTO. The minister conference, the highest decision making body of the WTO should find critical ways to achieve fundamental reforms of the WTO.” However, again, we know that agreement should be made by consensus among 164 members, which would be almost impossible. Under these circumstances, forming a coalition of strong supporters of the multilateral trading system would be crucial.”

“As we can see, the world trading system these days, no single system will dominate the global trade environment in the future, which is the reality we must accept. In other words, along with efforts to reform the multilateral trading system, regional, as what as bilateral trade agreements will be simultaneously pursued… It will be important for major countries, developed or developing, should cooperate each other to maintain the stable global trading system through making different approaches complimentary among each other.” 

Bradford Ward

“I think there’s again more recognition that these continuous dialogues of whatever name over many years have produced uneven at best results, no real fundamental changes. So all that’s to say that whether this administration goes on for two or six more years, I would expect trade policy at some point to deviate in tactics but not necessarily in the fundamental concerns that China is a primary economic challenge facing the United States going forward.”

“We’ve been talking about what companies have, how companies react. I think for countries, we’ve got the TPP withdrawal, we’ve got the Iran nuclear agreement, we’ve got other agreements or understandings if you will, in a general sense that the United States is changing its mind about. And I think those have very, very long-term practical implications at the working level with diplomats, with trade people, as to ‘can you convince someone in another country to support your idea, to support your concern with respect to, in this case in particularly, China.”      

AGENDA

11:45Registration and lunch12:10Introduction and opening remarks12:15-1:45Panel I: Regional impact of the “trade war” David Dollar, Senior Fellow, John L Thornton China Center, Brookings Meg Lundsager, Public Policy Fellow, Wilson Center Michael Pillsbury, Senior Fellow and Director for Chinese Strategy, Hudson Institute Bradford Ward, Partner, King and Spalding Jacques deLisle, Director, Center for East Asian Studies and Stephen A Cozen Professor of Law, University of Pennsylvania Law School (moderator)1:45-2:00coffee break2:00-3:15Panel 2: Trade realities and prospects for cooperation Taeho Bark, Professor Emeritus, Graduate School of International Studies, Seoul National University Jacob Schlesinger, Senior Correspondent, Wall Street Journal Washington Bureau Wayne Morrison, Specialist in Asian Trade and FInance, Congressional Research Service Shihoko Goto, Deputy Director for Geoeconomics, Asia Program, Wilson Center (moderator)