Trump calls time on America's trade deals - what does it all mean?

It's a bonfire of the acronyms as Trump prepares to torch Nafta, the TTP and the TTIP

Donald Trump played on popular dislike of free trade deals during his campaign. Pictured: anti Nafta protesters in Oklahoma in 2007
Donald Trump played on popular dislike of free trade deals during his campaign. Pictured: anti Nafta protesters in Oklahoma in 2007

Well that didn’t take long.

On Monday, US President Donald Trump signed an executive order withdrawing the US from the proposed Trans-Pacific Partnership trade deal--a major reversal of Barack Obama's trade efforts.

The President strongly opposed the 12-country trade pact – a signature theme of his campaign – but the agreement had not yet received Senate approval, so the executive order was more of a formality.

Here's a look at what all the acronyms mean and what you need to know.

First things first. What's the difference between the TTIP and the TPP?

In simple terms, the TTIP, or Transatlantic Trade and Investment Partnership, involves the US and the EU, while the TPP, or Trans-Pacific Partnership, binds the US, Canada, Mexico and several pacific rim states (including Japan, Malaysia, Singpore, Vitenam) into a free trading pact. In practice, they are regarded as sister agreements ensuring easier trade, but the TPP is further ahead in the negotiating process than the TTIP. It just hasn’t been ratified and it now looks as if it will not be ratified. To all intents and purposes both the TTIP and the TPP you can argue that both are doomed.

Even back in November, shortly after Mr Trump’s election victory, Bernd Lange, chair of the European Parliament's Committee on International Trade, told German online magazine that "TTIP is history".

What will be the economic impact of Mr Trump withdrawing from TPP or TTIP?

Hard to say. You can easily find people who will say that the scrapping of these agreements will cost billions in terms of lost trade and jobs. You can just as easily find people to say that such claims are over stated and that the cost of such deals are under stated. And there are just as many opponents on the left as there are on the right. Issues raised by the former include, for example, the secrecy with which negotiations have been conducted, not to mention the Investor State Dispute Settlement apparatus, which has proved to be a major bugbear. The TUC describes it as “unacceptable in TTIP and any trade deal” because it gives foreign investors the right to a special international court system to sue countries for compensation if they believe public policy would endanger future profits. “ISDS has been used on numerous occasions to overturn legitimate public policy,” says the TUC.

What about the geopolitical impact?

That’s where it gets interesting as regards the TPP. This might yet be the most important and negative (for the US at least) consequence of Mr Trump’s approach. The point about these deals is that the agenda has been set by the US, and the US is the driving force behind them. The TPP, in particular, exports the US version of free trade into one of the world’s most important and economically dynamic regions, with all those involved signing up to a peaceful trading pact. While Trump will likley now seek to do individual deals with at least some of the countries involved, there might very well be an opportunity for China to attempt to fill in the gap that has been created.

And how does Nafta differ from these two?

The final important acronym in the trio is Nafta, or the North American Free Trade Agreement. It came into effect in 1994 under President Bill Clinton as a deal between the US, Canada and Mexico. It ensured that most tariff barriers between the three countries were scrapped and resulted in the creation of one of the world’s biggest free trade areas. On Sunday, Mr Trump (perhaps unsurprisingly) took aim at it and said that he would renegotiate the agreement with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto.

Quitting Nafta altogether would in theory be quite straightforward. The President in his speech last week actually cited Nafta’s Article 2205, a super short article which very simply states: “A Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties". Naturally, however, pulling out of Nafta would likely raise a slew of questions, especially considering that the US has not withdrawn from a major trade agreement in around 20 years.

So how might Nafta be reformed?

Nobody is really very sure. Beyond stopping the export of blue collar jobs to Mexico, Mr Trump has really given very little indication of what he wants to see, beyond threatening potentially punitive tariffs on imports to the US from Mexico. That would effectively scupper Nafta given that its aim is tariff free trade. Critics say tariffs would not necessarily protect jobs anyway. The Michigan based Center for Automative Research has argued that they could instead lead to the loss of more than 30,000 automative jobs, with the impact disproportionately falling on blue collar workers. Why? Many of the parts, and much of the engineering work for Mexico's car plants comes from the US, and the centre of the country's auto industry Michigan in particular. Canada is, in many respects, a spectator while all this is going on.

And finally, what does all this it mean for Britain?

Well, so much for the Brexiteers’ fond notions of a Britain outside the EU joining Nafta. There may not be a Nafta to join after Mr Trump is finished, although if the US and Canada continue to trade on similar terms to those established by the agreement the UK could, in theory, try and join that party. The end of the TTIP negotiations also won’t have much impact on the UK because a UK outside of the EU won’t be part of it anyway.

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