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World prepares to move on without U.S. on trade

Here’s what happens when the U.S. pulls out of a major trade deal: New Zealand seizes the opportunity to send more of its milk and cheese to China. Japanese consumers pay less for Australian beef than for American meat. Canadians talk about sending everything from farm products to banking services to Japan and India.

President Donald Trump dumped the 12-nation TPP right after he took office, saying it was a “horrible” deal and blaming it for sucking American jobs abroad. But now other countries are ready to rush into the vacuum the U.S. is leaving behind, negotiating tariff-cutting deals that could eliminate any competitive advantage for U.S. goods.

That phenomenon is on stark display this week in Chile, where more than a dozen Pacific Rim countries are meeting in a beachside hotel to talk about moving on in the post-TPP era. China, not one of the original signers of the TPP, is here looking to cut deals. So are Canada and Mexico. And while the U.S. would normally send a high-ranking trade official to this kind of gathering, the Trump administration, is just sending an envoy from the embassy in Santiago.

Competitors say they have no choice but to take the money U.S. businesses would have earned otherwise.

“We are not trying to take market share from the U.S. It’s more like you are putting money on the table and pushing it towards us,” said Carlo Dade, director of trade and investment policy for the Canada West Foundation, a Calgary-based think tank.

In the long run, U.S. companies could move jobs and factories abroad to take advantage of trade deals that make it cheaper to produce goods in other counties. And U.S. industries, particularly agriculture, could lose billions of dollars a year in export sales.

The White House said its message in Chile this week “will be to underscore the commitment of the Trump administration to engaging actively with all our Asia-Pacific partners and our intention to remain a key member of the Asia-Pacific community.” The Trump White House this week could feel out other countries’ appetites for the bilateral trade deals it wants to pursue instead of multi-country pacts.

But that could backfire.

The meeting could instead bring other countries closer to the idea of pursuing an 11-nation deal excluding the U.S. And additional nations could sign on. In addition to China, representatives from South Korea and Colombia, also not TPP members, will be here.

If there is a new deal, U.S. companies eager to take advantage of the potential trading bloc could move operations to Canada, Mexico or other TPP countries, said Dade, who helped write a recent analysis showing that U.S. losses from TPP are everyone else’s gains.

China could also use the meeting this week to further sideline the TPP in favor of its own agreement, the 16-nation Regional Comprehensive Economic Partnership, and solidify its newly self-assumed role as the guardian of regional economic integration. But Beijing may have to find a way to to push its own deal while upholding some of the high-standards TPP rules other countries spent so long negotiating.

Meanwhile, U.S. agricultural exporters are already starting to see threats to their global market share.

America’s farm economy is suffering from dropping commodity prices and ballooning supply costs. The TPP represented a major opportunity for cattle ranchers, grain growers and wine producers to get more of their product to Asian markets hungry for well-marbled Texas beef or prized California chardonnay. The American Farm Bureau Federation estimated the deal would have boosted annual net farm income by $ 4.4 billion.

Dairy exporting powerhouse New Zealand by 2020 is already expecting to have entirely free trade on dairy products with a bloc of 10 Southeast Asian nations, creating an obstacle for U.S. producers to get into those markets.

“We’re still paying 10 percent tariffs and their demand for dairy is really taking off,” said Darci Vetter, who served as President Barack Obama’s chief agricultural trade negotiator. “You want to have the best level of access at the time they start forming relationships with buyers and so the timing on this is critical and we’re going to be way behind New Zealand.”

New Zealand is also looking to revamp its deal with China and last week set up initial talks for a trade deal with the European Union. Canada, a major exporter of farm commodities and banking and insurance services, this month formally launched consultations on a trade deal with China and has ambitions of doing deals with Japan and India. Australia, a major beef exporter, is poised this year to further push a 10 percent tariff advantage over U.S. beef in Japan as it ramps up a free trade deal with Tokyo.

“This is a competitive game and of course we aren’t going to sit in a hole and do nothing on these non-TPP fronts because everybody is in this game and if you fall behind you are in a competitive disadvantage,” said Tim Groser, New Zealand’s ambassador to the U.S. and the country’s former trade minister.

But even as the political landscape may change across the Asia-Pacific, proponents of a high-standard regional trade deal hope this week will cement some of the trading rules that would have been in the TPP.

The Obama administration made a point of touting the TPP’s labor rules and mandatory environmental protections. The deal was also the first to tackle unfair competition from state-owned enterprises and rules governing digital trade and data flows.

Indeed, a primary goal of the TPP was to force countries with low standards to operate on a level similar to the U.S., which would create less of a competitive disadvantage for U.S. workers and companies.

New Zealand’s Groser, who helped shape the TPP from its infancy, said he didn’t expect this week to produce any dramatic decisions. Countries will still want to give the U.S. “a lot of political space here and a lot of time to reflect on its trade agenda,” he said.

Still, he added, every country will be looking to press its own advantage.

“At the end of the day we’re all economic nationalists,” he said. “Our responsibility is to look after our own country’s economic interests.”

by Adam Behsudi at Politico

Source: ONTD_Political

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