I was very grateful to the folks at Jurist for their invitation to think about the ramification of President Elect Trump's stated determination to abandon the Trans Pacific Partnership (TPP) at the start of his term as U.S. President, a determination that follows on the current administration's unwillingness to push it through in 2016.
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This post includes the text of my commentary for Jurist--Let's Make a Deal" as Economic Policy; the original can be accessed HERE.
"Let's Make a Deal" as Economic Policy
JURIST Guest Columnist Larry Catá Backer, of Pennsylvania State University discusses consequences of President elect Trump's rejection of the TTP ...
The Trans Pacific Partnership (TPP) and its European twin, the Transatlantic Trade and Investment Partnership (TTIP), mean to provide a basis for the organization and management of global trade that to some extent supplements (and perhaps) supplants the old WTO order. Together they were to preserve the importance of private economic activities grounded in markets and to expand the role of the non-state and supra state sectors in the governance of trade and transnational economic activity.
But they have also been their own worst enemies. Born or nurtured abroad, their negotiation has been shrouded in secrecy. Both appeared to keep civil society at arm's length while embracing the transnational businesses most directly affected by their provisions. Both appeared to move away from a model grounded in state-based regulation through law that is enforced by national courts in favor of new structures of remedies based on transnational standards that appear more impervious to democratic accountability. These common characteristics transformed both into the bête noir of a motley group of civil society, of old fashioned internationalists, of state-privileging constitutionalists and of those who are generally suspicious of governance in societal hybrid (public-private) transnational space. These actors worried, quite loudly, about the way that both TTP and TTIP de-centered individual states from the governance and management of macro-economic policies, set substantive standards in key areas that appeared to some extent beyond the reach of national legislatures and established remedial regimes beyond the reach of national judiciaries and their legal orders. They also decried the way that TPP might weaken labor policy, threaten national environmental and consumer protection ideals and produce a race to the bottom for national health care systems, banking systems and national regimes for individual privacy.
The phlegmatic efforts of the Obama administration, buried among other objectives, and the excruciatingly slow progress toward finalization of both TPP and TTIP, only exacerbated a situation whose threats to adoption were compounded by the unwillingness of a less than loyal opposition (and eventually also the losing Democratic Party nominee for the US Presidency) to put national interest (and their own political ideologies) above what appeared to be cynically driven political strategies of short term partisan advantage. The TPP/TTIP negotiations did have one positive effect—they have served as the nexus points for national conversations, long deferred, about the nature and direction of globalization, of the role of the state, and of the obligation of states and enterprises to "feed" local labor markets, contribute to the domestication of wealth from production derived from multinational production chains and to contribute to the economic, social, cultural, civil and political life of states within a global order which they meant to construct.
The centering of transnational orders, of marginalization of transparency and engagement by states founded on a governing ideology of engagement and transparency, and the construction of governance orders beyond states and their democratic sovereign masses in which states and enterprises would become the major stakeholders enraged many—on both left and right in the United States. Yet both TPP and TTIP were natural extensions, natural deepening of the implications of globalization, which required elaboration around the principles of markets and market integrity, of the differentiation between public and private spheres (relating to activity if not to actors) and of the harmonization of regulatory governance that promised to continue increasing aggregate growth (though in what appeared in certain states to be in an increasingly lopsided way).
It is in this context that one can read and seek to understand the announcement made by the President Elect "that he would issue a notification of intent to withdraw [video URL] from the Trans-Pacific Partnership (TPP) [text] on his first day in office." But Mr. Trump announced more than that. He also signaled his intention to withdraw from multilateral efforts to which several prior Democratic and Republican administrations had expended much effort, in favor of 'negotiating' fair bilateral trade deals that bring jobs and industry back on American 'shores.' Trump also stated that his decision to withdraw from the TPP and all the other announcements made in the video shared Monday are in furtherance of his ambition to facilitate production and innovation within American borders."
About the same time, Mr. Trump announced his choice for Secretary of Commerce, Wilbur Ross. A CNN Report of December 2, 2016 noted that Mr. Ross had been part of an influential group of business leaders seeking the finalization of TPP, including a well circulated 2015 letter to New York's Congressional delegation. Now as Commerce Secretary designate, and apparently without skipping a beat, CNN Reported that Mr. Ross "has emerged as a vocal critic of trade deals, saying as recently as Wednesday that the TPP was a 'horrible deal.'" Mr. Ross might well be forgiven his sudden change of heart in light of his potential appointment to national office. But the embrace of a Let's Make a Deal approach, an odd mix of economic nationalism expressed through aggregating bilateralism as the basis for multilateral trade policy, threatens to destabilize the complex and delicately balanced structures of global trade. One can see the outlines of the consequences of Mr. Trump's threat even months before he can make good on the threat.
1. From Systems to Serendipity. Since the 1940s, the US has sought to construct systems, systems that have framed the structures, normative principles and operations of global trade and investment that also internationalize US normative and legal principles in global interactions. In the process, the US has been among the vanguard in fostering interconnected economic, social and cultural activities now difficult for any state—including the United States—to manage entirely (even within its own territory). Mr. Trump does not appear to want to foster systems. Mr. Trump wants to do "deals." That is, effectively all he knows. That, perhaps, is all he thinks he needs to know. In the process, though, he will create or at least upend systems he cannot avoid—substituting a system that is an aggregation of those "deals" he can make for the older project of public policy that builds systems around markets managed through law and regulatory structures and sustained with the objective of ensuring the legitimacy of the "deals" that can be undertaken within its structures. TTP made an easy target for the businessman hawking "deals" to sell the American people on a new "Let's Make a Deal" international economic policy.
2. Enter China. Mr. Trump's tilt toward "Let's Make a Deal" may well drive leadership of global trade policy from the US and Europe to Asian states (and principally China). There is irony here. President Obama's "pivot to Asia" has now, under President Elect Trump's leadership, pivoted not just focus but policy and power to China and its vision for a new global order through layered regional agreements cemented together through its one belt one road (OBOR) framework. Even as the United States moves toward game show economics, the Chinese are paying us the most extraordinary complement of mimicking our methods in the service of its own mission. The South China Morning Post reports: "At a time when established world powers are struggling with domestic problems, Xi sees a chance to push ahead with his oddly worded brainchild, a geopolitical push to extend Beijing's influence to remote corners of the globe. The belt and road initiative encompasses 65 countries including China, stretching through Southeast, South, Central and West Asia to the Middle East, Africa and East and Central Europe."
3. The US Congress as Wild Card. It is always a mistake to assume that the President is free to assert his will unimpeded. Congress may serve either to block or to mitigate the "Let's Make a Deal" policy initiative of the President Elect. Already states most affected by global trade have begun to make moves to protect the existing multilateral frameworks, starting with NAFTA, the North American Free Trade Area. It was recently reported, for example, that the "Senate has unanimously passed a bill to improve trade flows along the Texas-Mexico border, sponsored by Sen. John Cornyn." Much may happen between December 2016 and the middle of January 2017.
4. The US Trade Partners Will Make Facts Around "Let's Make a Deal." Asian states have been quick to act in the face of an anticipated American repudiation of the TTP. They have sought to lobby the incoming administration, sending who they believed to be their most persuasive advocate, with little apparent public effect. They might also consider TTP without the United States—returning to where TTP was at its inception. On the heels of Mr. Trump's declaration, "Peru is proposing to create an analogue of the Trans-Pacific Partnership (TTP) free trade agreement between the countries of Asia-Pacific without participation of the United States." In addition, the other TPP states have also sought to look up to China as the next best actor. It has been reported that in response to the potential rejection of TPP "Asian nations are pinning their hopes on the China-endorsed RCEP (Regional Comprehensive Economic Partnership) agreement." Asian states might well shift in this direction, even if the result is less advantageous to global trade than TPP on the theory, recently suggested, that the transaction costs of modifying a bad deal is smaller than of negotiating a deal from scratch.
5. Strategic considerations and "Let's Make a Deal." There is a certain aura of pragmatism in the President Elect's "Let's Make a Deal" strategy. But it is a false pragmatism that belies the implied criticism of the misdirected ambitions of TPP. Let's Make a Deal presumes that multilateral structures are inherently disadvantageous for the US, and that the cost of modification post adoption is greater than the value of participation or of renegotiation before adoption. Rejection and renegotiation threats will scatter the TPP partners to the next best available center of ordering power. The pragmatic consequences of such abandonment will be significantly adverse to those business interests Mr. Trump's Let's Make a Deal purports to defend. Without TPP US enterprises may again face the spectre of unequal competition with state owned enterprises that almost invariably will be a disaster for the US, one with respect to which there is already friction with China and of which China is acutely aware. Moreover, in August 2016 "Mr. Obama and visiting Singaporean Prime Minister Lee Hsien Loong warned . . . China would step in, Mr. Obama said, and Beijing is 'not worried about labor standards or environmental standards or human trafficking or anti-corruption measures' incorporated into the agreement."
6. The Other Shoe Dropping; Protectionism in the guise of Bilateralism. There is a worry that Let's Make a Deal is a clever way of bootstrapping nationalist protectionism back into mainstream policy in the US. Discredited since its last disastrous reign as the crown jewel of global economic policies in the 1930s, nationalist protectionism may now be insinuated into the heart of the principal winning campaign promise of Mr. Trump—the rebuilding of walls in every place and for every circumstance, abstract and concrete—by an odd combination of nationalists, civil society statists, corporate crony capitalists and others now allied with the President Elect. That will permit us to hide from our problems. But we will not be able to avoid them for long. TPP, in this sense, is an extension of the conversation that produced walls against migration and cultural protection walls as well. That the US mimics the worst elements of global misbehaviors elsewhere does not make this any less disastrous for a nation that has ridden to glory on open borders and global system building.
Professor Larry Backer researches globalization, especially as it relates to the emergence of ways of understanding constitutional and enterprise law. His most recent work touches on the regulation of multinational corporations, sovereign wealth funds, transnational constitutionalism and the convergence of public and private law. He researches issues of governments as private actors in global markets, the development of law and social norm systems to regulate business and human rights.
Suggested citation: Larry C. Backer, "Let's Make a Deal" as Economic Policy, JURIST - Academic Commentary, Dec. 29, 2016, http://jurist.org/forum/2016/12/Backer-lets-make-a-deal.php
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