Insight
The end of the transatlantic trade consensus? by Rem Korteweg 21 February 2017
Trump, Brexit and European scepticism about TTIP spell the end of transatlantic leadership on trade. With America looking inward, and Britain absorbed by Brexit, the EU must act to avoid the collapse of the liberal economic order. It is easy to blame Donald Trump for the stalled talks on the Transatlantic Trade and Investment Partnership (TTIP). Trump’s scepticism about free trade has been on open display ever since he decided to run for the US presidency. One of his first acts after his inauguration was to withdraw the United States from the Trans-Pacific Partnership (TPP), a trade pact with 11 Pacific states negotiated by his predecessor, and announce that he would renegotiate parts of the North American Free Trade Agreement (NAFTA) between the United States, Mexico and Canada. Trump’s objective is to increase US employment and boost the economy, raising new trade barriers in the process. He has threatened punitive tariffs on companies that outsource US jobs, is seeking to force them to repatriate profits and has suggested raising tariffs on Mexican and Chinese imports. He may also adopt a border tax that would impose a levy on corporate imports and exempt export revenues from taxation. The latter measure could fall foul of non-discrimination rules in the World Trade Organisation (WTO). He has hinted that if the WTO takes action against America, he might respond by pulling the US out of this fundamental institution of the liberal rules-based trading order. The ‘Trump doctrine’ sees trade surpluses as good, trade deficits as bad, and trade agreements as zero-sum, transactional deals. Team Trump thinks it is better to leverage US economic muscle in bilateral talks than entangle the country in a multilateral system of trade partnerships. Though he has not explicitly pulled the US out of the TTIP talks, Trump’s economic nationalism dims the prospects for a transatlantic trade deal. It does not help that he has been explicitly hostile to the EU. The US has a substantial trade deficit with the EU, which won’t please Trump: it was €122 billion in goods and €9 billion in services in 2015. Since the EU and the US are almost equal-sized economies,
CER INSIGHT: The end of the transatlantic trade consensus? 22 February 2017
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