AD

What is TPP, and why doesn’t Donald Trump like it?

As president-elect Donald Trump continues to outline a plan for his first 100 days in office, the latest policy to feel his wrath is TPP – the Trans-Pacific Partnership.
AD

In his battle with Hilary Clinton to win possession of the Oval Office for the Republications, Trump continually attacked polices, like TPP, put in place by the Democrats – describing NAFTA as the “worst deal ever made”.

NAFTA, the North American Free Trade Agreement, was approved by former president Bill Clinton and was an easy target for Trump. He said: “He [Bill Clinton] approved NAFTA, which is the single worst trade deal ever approved in this country. NAFTA is the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.”

- Advertisement -

Now, having won the general election on 8 November, Trump has made TPP his next target. Involving 12 countries, which collectively cover 40 per cent of the world’s economy, TPP was agreed in principle in 2015, but has yet to be ratified by individual nations.

On his first day in office, Trump claims he will kill TPP – saying it is a “potential disaster” for the US. He’d rather “negotiate fair bilateral trade deals that bring jobs and industry bank”.

Trump has made no secret of his distain for multi-nation trade agreements, believing that the US would be better served by forging individual trade deals with countries. His aim to re-establish the US as a dominant global economic force is hampered by going in on the same terms as weaker countries, he believes.

TPP took seven years of negotiations to get where it is today, and was set to cut tariffs on a wide range of items as well as unifying copyright laws across its member base.

Kamel Mellahi, a professor of strategic management at Warwick Business School, believes the US and Trump will score a “huge own-goal” if the country pulls out of TPP.

“I don’t think the remaining 11 countries are going to go it alone. The US withdrawal from the deal will kill it off. One cannot see the trade deal working without the US,” he explained. “There is no doubt that China would fill this vacuum and strengthen its economic status in the Pacific Rim region. The announced withdrawal has the capacity to do huge damage to the economies of some Pacific Rim countries and one would expect them to move closer to China while reducing their dependence on the US economy.”

Mellahi said the origins of TPP were about reducing the dependency on Pacific Rim countries on China, instead tying each to the US.

It’s hard to tell whether Trump’s aversion to these kind of trade deals is because they were put together by the Democrats, he thinks he can get better deals with individual nations, or if he’s just grandstanding.

What is clear is that the US International Trade Administration is going to have its hand full unpacking deals like TPP and then establishing new and bespoke deals with relevant countries.

Another deal which could be squashed by Trump is one involving the UK – the Transatlantic Trade and Investment Partnership. Another multinational partnership, TTIP was started to tackle trade tariffs and reduce regulatory barriers.

Rather than reduce tariffs, Trump wants to “protect” US workers and consumers by imposing tariffs of up to 45 per cent on Chinese goods.

The global markets will spend the next three months attempting to predict how and when Trump will unpick exiting and planned policy. For now, however, it seems clear it will be done his way.

Share with your network

Follow Real Business:

About Author

Hunter Ruthven

Hunter Ruthven is the editor of Real Business. He is also the editor of Business Advice, a title focused solely on a section of the business community currently underserved – micro companies. Alongside this, he is part of the team that hosts the Growing Business Awards, First Women Awards and Future 50 initiative.

Real Business