Caribbean Trade Law and Development

Tag: TPP

  • Trump Trade Policy ‘Achievements’: The First Month

    Trump Trade Policy ‘Achievements’: The First Month

    Alicia Nicholls

    February 20th marked United States (US) President Donald Trump’s first full month in the Oval Office. And what a month it has been! We have seen a lot of focus by his administration on immigration. But what about trade? Trade occupied a major part of the platform of then US presidential candidate Trump. In his Contract with the American Voter , he had enumerated several trade-related pledges as part of his 100-day action plan to “Make America Great Again”. His first one hundred days are not yet up, but it is worth looking at what have been the achievements towards his “America first” trade policy during his first month in office.

    President Trump’s Trade Promises

    As a reminder, these were the major trade-related promises gleaned from his Contract with the American Voter. He pledged to:

    • Announce his intention to renegotiate the North American Free Trade Agreement (NAFTA) or withdraw from the deal under Article 2205;
    • Announce the US’ withdrawal from the Trans-Pacific Partnership;
    • Direct the Secretary of the Treasury to label China a currency manipulator;
    • Direct the Secretary of Commerce and U.S. Trade Representative to identify all foreign trading abuses that unfairly impact American workers and direct them to use every tool under American and international law to end those abuses immediately;
    • Work with Congress to introduce the “End Offshoring Act” to establish tariffs to discourage US companies from laying off their workers in order to relocate in other countries and ship their products back to the U.S. tax-free.

    Three main reasons possibly explain Mr. Trump’s slow progress on his trade agenda thus far. Firstly, two key members of his trade team  who are needed to help effect his policies are still awaiting Senate confirmation, namely his United States Trade Representative (USTR) pick, noted trade lawyer and former deputy USTR under President Ronald Reagan, Robert Lighthizer, and his commerce secretary nominee, Wilbur Ross, an investor and former banker.

    Secondly and related to the first point,Mr. Trump’s policy inexperience means he will likely be more reliant on the guidance and advice of his yet-to-be confirmed trade team than would other presidents. Thirdly, it is possible that Mr. Trump is realising that there is a wide chasm between presidential campaign rhetoric and how Washington and the role of president actually work, particularly when contrasted with being a CEO of one’s own company.

    What has he achieved so far and what hasn’t he?

    With that in mind, it is not surprising that of his stated promises, his only substantive trade policy achievement thus far has been directing the USTR via a presidential memorandum to withdraw the US from the Trans-Pacific Partnership (TPP). Withdrawal from the TPP was a low-hanging fruit. The US had signed but not yet ratified the Agreement and there was almost bi-partisan criticism of the deal. The acting USTR has since followed up on this memorandum, submitting a withdrawal letter to the TPP depository and TPP partners, and indicating their interest in bilateral trade deals with former TPP partners with which the US does not currently have a trade agreement.

    Further to the latter point, President Trump and his soon-to-be confirmed trade team have been consistent so far on their preference for bilateralism over multilateralism. Trade was one of the hot button topics at his initial meetings with United Kingdom (UK) Prime Minister Theresa May,   Japan’s Shinzo Abe and Canadian Prime Minister, Justin Trudeau.

    In keeping with his campaign promise that post-Brexit UK would not be at the back of queue for a trade deal, Mr. Trump received Prime Minister May as his first foreign head of government. The two have reportedly agreed to establish working groups in regards to a possible post-Brexit US-UK trade deal. Indeed, the UK House of Common’s International Trade Committee has already launched an inquiry on this.  However, formal negotiations on any such deal can only legally begin once the UK concludes its withdrawal agreement with the European Union (EU) pursuant to Article 50 of the Lisbon Treaty.

    More immediately possible, however, may be trade talks between Japan and the US. Despite Mr. Trump’s earlier criticism of former TPP partner Japan’s “unfair trade practices”, the meeting with Mr. Abe went cordially, with agreement in principle for beginning US-Japan trade and investment talks. It should be noted that Japan has a large trade surplus with the US, boosted particularly by automobile exports, which might be a bone of contention in any trade talks between the two countries.

    Outside of withdrawing from the TPP and these preliminary aspirational trade talks, there has been limited progress so far on his specific campaign promise in comparison to the ambitious agenda he proposed. So far he has not labelled China a “currency manipulator”. Indeed, the International Monetary Fund (IMF) had indicated that China’s currency was no longer below value. Nonetheless, Trump’s Secretary of the Treasury, Steve Mnuchin, hesitated in a recent CNBC interview to “pass judgment” on China’s currency practices, stating his preference to go through the US Treasury’s established process on judging whether China (and other countries) was manipulating its currency to boost exports.

    Additionally, President has not yet triggered the 90-day notice period by informing Congress of his intention to renegotiate NAFTA, which he had promised to do “immediately”. While Mr. Trump has criticised the shift of US jobs to Mexico and the US’ large merchandise trade with that NAFTA partner, it is also not clear on what particular provisions of the agreement he wishes to “tweak”.

    What is clear is that Mr. Trump’s main grievance with NAFTA appears to be with Mexico more so than with Canada. Indeed, Mr. Trump took a less protectionist stance towards Canada during his meeting with Prime Minister Trudeau, speaking collectively of keeping jobs and wealth within North America (US and Canada) and not just the US. While reporting on his meeting with Canada’s Prime Trudeau indicates that he would be looking for greater access by American firms to Canadian procurement markets, it is unclear when the NAFTA renegotiation talks will begin.

    With respect to the promise to direct the USTR to identify countries engaging in “unfair trade practices”, his USTR nominee is still awaiting confirming. However, it has been longstanding US policy to challenge nations whose actions are against US economic and trading interests, as evidenced by the large number of disputes brought by the US before the WTO’s dispute settlement body.  Therefore, President Trump will not be doing anything more than what previous US administrations have done in this regard, although we will likely see an even more aggressive stance towards China’s trade practices.

    Mr. Trump has spoken frequently against US companies which offshore production processes (and therefore jobs), as evidenced by his deal with air conditioner maker Carrier. He has promised to, but has not yet proposed, legislation to impose a punitive tax on US companies seeking to offshore may receive stiff opposition from the business community and from Congress.

    He has, however, vacillated in his views on the controversial Border  Adjustment  Tax (BAT) proposal being pushed by Congressional Republicans as part of their tax reform plan. Different from Trump’s border tariff proposal, the GOP BAT Proposal seeks to convert the US corporate income tax from an origin-based to a destination-based tax. It would prevent companies from deducting the costs of their imported goods as an expense, while giving a tax break to companies which export. However, while some business leaders have praised the idea, some economists have argued that it will not boost US exports.

    What next?

    Besides the questions surrounding the renegotiation of NAFTA and which other nations the Administration will earmark for future bilateral deals, it is unclear what will be the Trump administration’s stance on other existing trade agreements, and on the on-going negotiations, including the Trans-Atlantic Trade and Investment Partnership (TTIP) with the EU and on the plurilateral negotiations such as the Trade in Services Agreement (TISA). There is also need for clarity on the Administration’s position on key multilateral trade issues, bearing in mind the WTO’s upcoming 11th Ministerial Conference in Buenos Aires at the end of this year.  Nonetheless, it is early days yet and it is hoped there will be greater policy clarity before the one hundred days have elapsed.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • TPP: Acting USTR Submits Withdrawal Letter

    TPP: Acting USTR Submits Withdrawal Letter

    Alicia Nicholls

    On January 30, 2017, upon the instructions given by President Donald Trump in his January 23rd executive order, the Office of the US Trade Representative (USTR) submitted a letter to the 11 other Trans-Pacific Partnership (TPP) signatories officially withdrawing the US from the Agreement. This is according to a press release on the USTR’s website.

    The letter was also submitted to the TPP Depositary and signed by Acting USTR, Maria Pagan. In addition to indicating the US’ withdrawal, the letter further stated, that “the United States remains committed to taking measures designed to promote more efficient markets and higher levels of economic growth, both in our country and around the world.We look forward to further discussions as to how to achieve these goals.”

    Withdrawal from the TPP, which he had denounced as detrimental to American jobs, had been one of President Trump’s least controversial campaign promises during the election campaign. The US had signed the agreement via executive action on February 4, 2016 by then President Barack Obama but the Agreement had never been ratified.

    The Agreement’s 11 remaining signatories are Australia, New Zealand, Canada, Singapore, Vietnam, Malaysia, Japan, Mexico, Peru, Brunei, and Chile.

    The future of the Agreement sans the US remains uncertain. In the wake of the US’ withdrawal, Malaysia has signaled that it will refocus on trade with fellow ASEAN and Asian countries. According to Reuters’ reporting, Chile has indicated its interest in pursuing an FTA with China which is not a TPP party, and has reportedly invited remaining TPP members, China and South Korea to a summit in March on how to proceed. Australia’s Prime Malcolm Turnbull had initially indicated his interest in salvaging the agreement.

    There has also been some speculation that China, which potentially stands to benefit geopolitically from the collapse of the TPP, may accede to the Agreement but Beijing has not confirmed whether it will pursue this option. Alternatively, there are some who argue that the Regional Comprehensive Economic Partnership (RCEP) which involves China provides a realistic alternative to the TPP.

    Further information is available on the USTR’s website here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • A Week of Trumpism in ‘Action’

    A Week of Trumpism in ‘Action’

    Alicia Nicholls

    If President Trump’s cabinet picks were not enough to demonstrate that his campaign promises to shake up the status quo were not mere puffery, his first full week in the Oval Office provides glaring glimpses into Trumpism in ‘action’. During the past week, Mr. Trump has signed several executive actions aimed at effecting some of his most controversial campaign promises, including on trade, climate change and immigration. Many of these executive actions have implications not just for US domestic policy but the world.

    Trumpism

    The corpus of beliefs, of which Trumpism is comprised, remains embryonic and imprecise but at its core, Trumpism is undergirded by the nativist credos of “Make America Great Again” and “America First”. Trumpism is informed by President Trump’s core belief that America is losing its global economic and military hegemony, while at home the average American worker is being disadvantaged by the offshoring of manufacturing jobs due to “horrible trade deals”, “corruption in Washington” and the “uncontrolled” influx of migrants, particularly from Mexico. It also believes that immigration is a threat to US national security and public safety.

    Trumpism, therefore, sees four main constraints on America’s greatness: badly negotiated trade deals, over-regulation, a high tax burden and porous borders. In light of this, Mr. Trump’s anti-establishment campaign platform was particularly anti-trade and anti-immigration. The President’s campaign promises reflected policy proposals which were targeted not just at the not insignificant segment of the US population which shared his beliefs, but were aimed at making America “win” again.

    Withdrawal from TPP

    Although President Trump’s Trade Team nominees foreshadowed the seriousness of his mercantilist predilections, in week 1, we further saw the trade component of Trumpism at work, namely a disavowal of large trade deals in favour of bilateral deals.

    Mr. Trump signed a presidential memorandum instructing the United States Trade Representative (USTR) to “withdraw the United States as a signatory to the Trans-Pacific Partnership (TPP), to permanently withdraw the United States from TPP negotiations, and to begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages.” It should be noted that the TPP had been signed but not been ratified by the US. Although TPP had been championed by former President Obama, US withdrawal from the TPP was also an issue on which there was rare bipartisan consensus.

    In the memorandum the President confirmed that “it is the intention of my Administration to deal directly with individual countries on a one-on-one (or bilateral) basis in negotiating future trade deals”. On the basis of this, it is likely that the Trans-Atlantic Trade and Investment Partnership (TTIP), which was under negotiation with the European Union (EU), may suffer a similar fate.

    Executive Action on Immigration

    Nativism is a central pillar of Trumpism and it is no surprise that immigration was one of the main issues he sought to cover with his executive actions this week. President Trump signed an executive order entitled “Border Security and Immigration Enforcement Improvements” to protect American national security and public safety.

    Among other things, the Order provides for the construction of a border wall along the 1954 mile border between Mexico and the US, it ends the catch and release policy, provides for increased deportation of criminal immigrants, seeks to add an additional 5,000 border patrol agents and pulls funding from Sanctuary Cities. In regards to the latter, the mayors of several Sanctuary Cities have vowed to defy Trump’s immigration order.

    In an ABC interview, the President reiterated that Mexico would be reimbursing the US for the proposed wall and that negotiations will be starting soon. Current Mexican President Enrique Pena Nieto and former Mexican president, Vicente Fox, have both forcefully denied that Mexico would be footing the bill for any such wall.

    Mr. Pena Nieto cancelled a meeting with Mr. Trump which had been scheduled for this week to discuss, inter alia, the renegotiation of the North American Free Trade Agreement (NAFTA). When challenged in the same interview on Mexico’s refusal to pay, Mr. Trump noted the US will be reimbursed even if in a “complicated” form. He has since proposed that it will be funded by a tax on Mexican imports, which any student of economics knows would not be a tax on Mexico but on American consumers!

    Visa and Refugee Restrictions

    Perhaps his most controversial executive action is the Protecting the Nation From Foreign Terrorist Entry Into the United States Order which puts a temporary entry ban on all refugees, as well as on nationals, immigrants and refugees from the following countries: Iraq, Syria, Iran, Sudan, Libya, Somalia, and Yemen. US Green card holders from these countries have also been affected. It also suspends the issuance of Visas and Other Immigration Benefits to nationals of those countries and also cancels the visa interview waiver.

    While the President has subsequently claimed it is not a “Muslim” ban, it is quite interesting that all of the countries on the list have majority Muslim populations. It also echoes the statement on preventing Muslim immigration which he had made during the campaign where he had called “a total and complete shutdown of Muslims entering the United States”.

    On Saturday, the detention of 12 refugees at John F. Kennedy Airport in New York, some of whom had provided assistance to the US government, sparked protests at major airports across the US and outrage around the world. Hameed Darwesh and Haider Al shalwi filed an Emergency Motion for Stay of Removal on behalf of themselves and others similarly situated.

    In the ruling on Darweesh v Trump, United States District Judge Ann Donnelly blocked (a) the removal of individuals with refugee applications approved by the U.S. Citizenship and Immigration Services as part of the U.S. Refugee Admissions Program, (b) holders of valid immigrant and non-immigrant visas, and (c) other individuals from the countries mentioned in the Ban which are legally authorized to enter the United States. However, it should be noted that it was not a ruling on the constitutionality of the Ban.

    The Wall Street Journal reports that the 90-day visa moratorium also applies to people who originally come the countries identified but are traveling on a passport issued by any other country.

    Iran has subsequently stated it will be taking ‘reciprocal’ action.

    A new US UN

    In a speech which raised eyebrows around the world, the US’ new United Nations Ambassador, Nikki Haley,threatened America’s allies that if they are not with America, America will be “taking a names”. Ambassador Haley, who is the former Governor of South Carolina, said there will be change in the way the US does business with the UN. She noted that US will show its strength and voice. The video of Ambassador Haley’s speech may be viewed on the New York Times’ online article.

    The Ambassador noted that “our goal with the administration is to show value at the U.N., and the way we’ll show value is to show our strength, show our voice, have the backs of our allies and make sure our allies have our back as well.” Without doubt, there are ways in which the UN’s operations can be improved. However, what this seems to be is a return to US unilateralism as opposed to multilateralism.

    Actions against the Environment

    In keeping with his promise to cut regulations and increase drilling for fossil fuels, Mr. Trump has signed presidential memoranda streamlining, permitting and reducing regulatory burdens for domestic manufacturing and facilitating the construction of the two controversial pipelines (Keystone XL Pipeline and the Dakota Access Pipeline). He also signed an executive order expediting environmental reviews and approvals for high priority infrastructure projects.

    All references to climate change were immediately scrubbed from the Whitehouse.gov website upon his taking office. Perhaps more worryingly are the gag orders on various government agencies, including the Environmental Protection Agency (EPA) which will now be headed by a climate change denier.  A report by the Guardian states that the Trump administration is now requiring studies or data from EPA scientists to undergo review by political appointees before they can be made public. US agencies are among some of the most important sources of climate-related data, which are critical in the fight against climate change.

    President Trump’s denial of climate change science is not outside of the Republican party mainstream, but as a Sierra Club report stated before the election, he would be (and currently is), the only sitting world leader to deny that man-made climate change exists.

    So what does this all mean?

    It has only been a week and we are already seeing the chaotic effects of Trumpism in action. Naturally, many of these executive orders will need the cooperation of Congress and the relevant agencies in order to be implemented. For instance, Congress will need to approve funds for the construction of the US-Mexico border wall, which despite President Trump’s assertions, Mexico will never pay for. The Congress is Republican-controlled but many Republican congressmen/women are self-professed fiscal conservatives who may not be willing to make the US taxpayer, of which they are a part, to  foot the astronomical costs for such a wall.

    Moreover, some of these actions may be challenged in court, as seen in the case of the Travel Ban. Of course, in light of the opposition to some of these moves it is possible that President Trump may moderate some of his stances. For the Caribbean, whose small island states have felt the ravages of climate change, the greatest worry will be his actions to reverse President Obama’s actions to curb the US’ emissions.

    What is most concerning for the world is that Mr. Trump’s actions evince a return to an inward looking US, a country once regarded as the leader of the “free world”. It prioritises a foreign, immigration and trade policy which places unilateralism over multilateralism, protectionism over fair/free trade and xenophobia over diversity. I would submit that this unfortunate shift not only weakens America’s standing in the world, but promotes increased global uncertainty, instability and perhaps, greater conflict.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • President Trump signs executive order pulling US out of TPP

    President Trump signs executive order pulling US out of TPP

    Alicia Nicholls

    With the stroke of a pen, newly inaugurated United States president, Donald J. Trump, today made good on one of his least controversial campaign promises; withdrawing his country from the 12-country Trans-Pacific Partnership (TPP) agreement via an executive order.

    The Agreement, which was signed by the US and eleven other Pacific-rim participants in February 2016, was intended to be a high standard agreement and was significantly WTO-plus in its provisions. While hailed by big business for its ambitiousness, several aspects made the agreement significantly unpopular with civil society groups and increasingly some politicians which criticised the secrecy under which the negotiations took place, the implications of its intellectual property rights provisions for access to medicines, the choice of the longstanding investor-state dispute settlement mechanism for settlement of investor claims against states, inter alia.

    Another criticism was that in absence of significant progress in the WTO Doha Round (which is now all but declared dead) it would set new standards and rules for 21st century global trade given that the parties account for 40% of the global economy and a third of global trade. It would turn the non members into standard-takers without having the chance to have been at the negotiating table. Mr Trump’s criticism of the agreement,however, was simply that it would kill American jobs.

    Although President Barack Obama had championed the agreement and had pushed unsuccessfully for its ratification by congress, TPP was a rare point on which there was consensus by then candidates Republican, Donald Trump and Democrat, Hillary Clinton who both criticised its possible implications for US manufacturing and jobs. During the campaign, Mr. Trump had likened the agreement to rape of the country. Previously Mrs. Clinton had called it the “gold standard” but later said she was against the final outcome.

    The move is a politically beneficial one for President Trump as it ticks off one of his most popular campaign promises and makes him look like a hero for American workers. It also gets him bipartisan support and will likely improve his approval ratings which have been the lowest for an incoming president.

    Mr. Trump’s move also signals that he aims to stick to his “America first” trade policies. In upcoming days Mr. Trump also signalled his intention to start renegotiation of the North American Free Trade Agreement with partners Canada and Mexico to secure a better deal for American workers. Among other proposals, Mr. Trump has restated his threat to impose a border tax on imports from US companies which outsource jobs overseas. The withdrawal of the US from the TPP also raises questions about the future of yet another mega regional trade agreement, the Trans-Atlantic Trade and Investment Partnership Agreement (TTIP) currently under negotiation between the US and the EU.

    Mr. Trump will be meeting with UK Prime Minister Theresa May on Friday to discuss, inter alia, UK-US post-Brexit trade relations. Unlike his predecessor, President Trump has indicated that the UK will not be at the back of the queue for a free trade agreement with the US. However, in contrast to Mr. Trump’s neo-mercantilist views, Mrs. May has enthusiastically reiterated her support of free trade and free markets, indicating last week her intention for the UK to become a global leader of free trade.

    President Trump has indicated he will seek to negotiate bilateral agreements with those individual TPP countries with which the US does not yet have an FTA. With regard to the future of TPP, the views of the other countries are mixed. Japanese Prime Minister Shinzo Abe previously indicated that TPP without the US was meaningless. Malaysia indicated it would go the bilateral route while Australia indicated it would try to salvage the agreement. A major geopolitical concern raised by foreign policy analysts about the US’ withdrawal is that it misses an opportunity for the US to increase its influence in the Asia-Pacific region, leaving an opening for China which was not a party to TPP. However, negotiations on RCEP, to which China is party and seen as a rival to TPP, have also been slow.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.