Although the United States is advancing without a stake in the Trans-Pacific Partnership (TPP), Washington state’s global trade future is far from over. How the Trump administration approaches the topic, and what Congressmen and U.S. Senators promote in any new trade deal, has implications for trade-dependent states such as Washington. Washington would also be the state most negatively impacted should a trade tariff war break out between the U.S. and China or Mexico.
On the horizon for the United States is expanding the North American Free Trade Agreement (NAFTA), and focusing more on bilateral trade deals between another country, rather than the more-lengthy multilateral negotiations. Washington’s trade sector leaders are recommending the state maintains relationships with Asian markets to prevent losing opportunities to China.
Lori Otto Punke told Lens that “it’s going to be more important than ever that Washington really emphasizes” its Asian “relationships and trading partners.” Punke is the president of the Washington Council on International Trade (WCIT).
Trump Says No To TPP
On January 23, President Trump pulled the U.S. out of the Trans-Pacific Partnership (TPP) in pursuit of bilateral agreements. The partnership would have involved 12 countries bordering the Pacific Ocean, including the U.S., Japan, Australia, Canada, and Mexico. The multilateral free trade deal would have decreased international trade taxes between these countries and streamlined regulations, to promote growth.
As the Puget Sound Business Journal reported last month, Washington in 2014 exported $27 billion to TPP countries. According to a 2016 WCIT report, full implementation of the Trans-Pacific Partnership (TPP) in 2015 would have resulted in a $2 to $8.7 billion increase in Washington exports.
Trump is quick to find a replacement to TPP. Just days after declining to participate, the Trump administration indicated it would work alongside Japanese Prime Minister Shinzo Abe to determine an alternative, in the form of a trade agreement between both countries. Abe is expected to visit the White House this month.
On Thursday, February 2, President Trump told U.S. Senators he would like to expand the NAFTA into the “NAFAFTA” or North American Free and Fair Trade Agreement, with an increased emphasis on fair trade.
As reported by RealClear Politics this week, President Trump said, “We will make great trade deals…I don’t care if it’s a renovation of NAFTA or a brand-new NAFTA. But we do have to make it fair. And it’s very unfair to the American worker and very, very unfair to companies who do business in this country. That’s why they’re leaving; one of the many reasons, including the taxes are too high. We’re going to take care of that also.”
Washington Exporters ‘Forced to the Sidelines’
However, for Washington industries reliant on trade, the current situation is “a step back without TPP,” Punke said. “Washington state exporters are forced on the sidelines when other countries have the advantage to complete agreements without us.” TPP “really streamlined the rules of trade…without it, I worry business will be more expensive and more complex…Washington has to be aggressive about really talking about the investments of trade to our national leaders and continuing to be good ambassadors abroad.”
Mark Powers concurs. He is the Executive Vice President of the Northwest Horticultural Council (NHC), representing growers, packers and shippers of apples, pears and cherries in Washington, Oregon and Idaho.
He told Lens, “We’ve had very good trading relationships…with many Asian countries for decades” and changes will not happen overnight. “The concern is making sure that there is an active presence and that we don’t just lose ground to China. China’s got its own strategic trade interests in Asia and if we are not involved in that region as a government working to facilitate…trade agreements with those countries, then we risk to lose out to China. That’s our concern. Other countries don’t stop negotiating trade agreements if the US isn’t there” and that “will hurt our competitive ability to sell.”
For Washington state trade leaders this means determining which countries would be best to strike a deal with, according to Gary Smith. He is a partner at Smith and Stark, a public affairs and communications firm based in Seattle.
“The form of TPP is surely lost, but the economic and political conditions it was designed to address remain very real,” he added. “Japan wants to keep pushing trade. Washington’s other major Asian trading partner, China, is also the U.S.’s biggest geopolitical competitor in Asia, and the U.S. shouldn’t give up trade as leverage in that competition.”
According to Powers, Washington should emphasize partnerships with Japan and Vietnam, countries that “stood out in the TPP with tariff rate reductions for our industry.” They “may end up being countries where the current administration decides” to strike a bilateral agreement with “and we would suggest that they do that, if that is their focus.”
The Pros and Cons of Bilateral Trade Deals
Large companies are likely to trudge on without TPP, according to Debra Glassman, senior lecturer of business economics at the University of Washington. Smaller businesses are the ones that will see the most impact.
“The agriculture industries in our state may not get market access increased at all,” she added. “I know that the TPP had some significant reductions and barriers to agricultural products that are of interest to the state of Washington whether it’s apples, wheat or cherries, and we’re just not going to see those benefits.”
Despite the loss of trade benefits provided by TPP, there are some advantages to bilateral agreements, said Glassman. “It may be possible to reach an agreement faster. The big multi-country agreements take years and years. The disadvantage is, you don’t have as many chips to trade with.”