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Mil Arcega
Free trade, the notion of international trade with few restrictions and low tariffs, is likely to be among the losers in a Donald Trump administration.
The billionaire businessman won the presidency after a tumultuous and divisive election, partly by blaming what he called bad trade deals for massive job losses in U.S. manufacturing.
As a result, the pending Trans-Pacific Partnership (TPP), a 12-nation free-trade zone that, combined, accounts for nearly 40 percent of the world's economic output, is essentially dead in Congress.
Scrapping TPP may be a missed opportunity for the United States, says Jeff Kingston, director of Asian studies at Temple University in Japan.
"There are already concerns around Asia about the reliability of the United States as an ally," Kingston said. "Clearly, Trump's election will amplify those concerns and anxieties. And I think that this means that there's going to be a significant decline in American influence in Asia."
"If we don't take the lead in writing the rules for the economy of East Asia, the Chinese will, and we are not going to like the outcome," said Bill Galston, a senior fellow at the nonpartisan Brookings Institution, referring to President Barack Obama's argument for creating a level playing field for Pacific trade.
China, the world's second-largest economy, is already capitalizing on the U.S. Congress' failure to vote on a Trans-Pacific trade deal. It has announced plans to propose a rival trade pact at the Asia-Pacific Economic Cooperation CEO Summit in Peru that would create a Beijing-led regional trade zone in Southeast Asia excluding the United States.
Trade war potential
Trump, who once called China "a cheat" and a currency manipulator, has threatened to raise tariffs on Chinese-made goods by 45 percent to correct the trade deficit between the two countries. Beijing responded quickly with its own threats, raising the possibility of an all-out trade war. Galston said the possibility of a damaging trade war has never been higher, and he outlined a number of options China could take.
"To start, they could cancel the orders they placed with Boeing and redirect those orders to Airbus, and that would have a large effect on the economy of the Pacific Northwest," he said.
Beijing could also impose tougher regulations on companies that do business in China, or severely limit iPhone sales, for example, to Chinese customers.
"The idea that this is a one-way street, that we can threaten China and China can't threaten us back, I think, is too simple," Galston said.
If a trade war were to break out, Galston said, there would be no winners. However, given the asymmetry between Chinese exports to the U.S. and American exports to China, Galston said Trump might be gambling that both sides would have enough to lose to come to the table to work things out.
Other trade agreements
Trump has also signaled his intention to renegotiate what he called "the worst trade deal ever," NAFTA, the 1994 North American Free Trade Agreement with Canada and Mexico. Analysts say such a move is unlikely to create new jobs. Despite its flaws, Galston credits NAFTA for helping to create a continental supply chain that has made the U.S. auto industry among the most competitive in the world.
"If that relationship were to be disrupted, then it could have serious consequences. And it's not clear to me that it would have the effect of bringing auto jobs back to the United States," he said.
Given Trump's protectionist rhetoric, European Union Trade Commissioner Cecilia Malmstrom thinks a pending U.S. free-trade deal with Europe — TTIP, the Transatlantic Trade and Investment Partnership — is probably not moving forward anytime soon.
"There is strong reason to believe that there would be a pause in TTIP, that this might not be the biggest priority for the new administration," Malmstrom said.
Labor unions have been among the most vocal critics of free trade. The AFL-CIO blames NAFTA for the loss of nearly a million jobs and claims those who manage to find new jobs earn on average about 23 percent less than they used to. Labor groups insist any future free-trade agreements must include protections and a larger retraining budget for laid-off American workers.
This story first appeared on Voice of America & is reposted here with permission.