Trump eyes transatlantic deals

Trump eyes transatlantic deals

President Trump’s “America First” approach to trade, as with other issues of foreign policy, has been punctuated by promises to impose punishing tariffs on Chinese and Mexican goods and to levy a border tax on products made by US companies that shift their operations abroad. He has expressed disdain for multilateral and regional trade agreements claiming, typically with limited explanation or economic justification, that these do not serve American interests, but rather operate as cover to protectionist policies in Asia.

During his election campaign Trump even declared that the US would pull out of the World Trade Organization (WTO) if it got in the way of the US’s retaliation against what he referred to as unfair trade practices, particularly by countries such as China, which he alleged manipulates its currency and dumps cheap goods into US markets.

His chief trade advisors, Robert Lighthizer and Peter Navarro, are outspoken critics of both China and the WTO, including the latter’s well-regarded and highly successful dispute-settlement system. Mr Trump’s opening salvo of presidential edicts during his first few weeks in office, including the dramatic withdrawal from the Trans-Pacific Partnership, show that he is not prone to making idle threats. When it comes to trade, he is quite ready to put his money where his mouth is. 

Still, the UK should not be unduly worried about Trump’s supposed penchant for trade protectionism nor his aversion to the global institutions that characterised the liberal world order business-as-usual of recent times. First, as was often pointed out during the Brexit debates and subsequent discussions in parliament and elsewhere, the UK is already a member of the WTO and will benefit from its low tariff, non-discrimination and other safeguards against unfair trade practices, were they ever to be indulged in by countries like the US.

The WTO courts are there to enforce these rules and do so effectively, regardless of the offending country’s size. This means that should Trump choose to target the UK for unfair trade practices, which is unlikely since there is no indication that British goods are unfairly subsidised or priced, we will have the WTO court system to rely on if any such US retaliation is unjustified or excessive.

While Trump was able to take the US out of the Trans-Pacific Partnership with the stroke of a pen because it had not yet been ratified, withdrawal from the WTO would not be as easy. The US was a founding member of the WTO and the system’s rules are enacted into its domestic statutes. It would take the support from both houses of congress and many decades before the US could effectively unbind itself from its WTO obligations.

Moreover, while the president remains highly suspicious of the WTO, Mr Trump’s trade team has indicated that it will pursue WTO remedies to fight unfair trade practices that harm American workers. We can expect a flurry of anti-dumping and possibly subsidies claims brought against China, Mr Trump's affable phone call with Chinese President Xi Jinping notwithstanding. Far from leaving it, the US stands to be one of the biggest users of the WTO in the years to come.

Secondly, unbridled by the Lisbon Convention’s requirement for European Union-instigated trade and investment treaty negotiation, after Brexit is finalised the UK will be free to deal with the US on a bilateral basis. Mr Trump has consistently praised bilateral trade deals, possibly because he is more familiar with one-to-one buy and sell transactions from his years as a real estate tycoon.