February 1, 2018 / 8:19 AM / 24 days ago

Commentary: On trade, America can’t be first if it doesn’t compete

Around the world countries are working overtime to get an economic edge by striking new trade deals. The United States, meanwhile, sits on the sidelines. President Donald Trump’s protectionist approach and laser-focus on China may have played well on the stump, but it will leave the American workers who ushered him into office at a disadvantage.

The Trump administration is right to keep an eye on China. In his State of the Union address on Tuesday, Trump again promised “strong enforcement of our trade rules.” But while trade enforcement is important, it’s only one aspect of a robust American trade policy. What the president needs to do now is focus on a new kind of global competition that is undercutting opportunities for America.

Barely over a year ago, the United States was rewriting the rules for the global trading system and pressuring China to play fair or risk being left out. President Barack Obama’s final trade policy agenda outlined the administration’s strategy, which has since become the blueprint for other nations including Canada, Mexico, and the European Union: “If America leads on trade, we can become the world’s production platform of choice: the premier location for investing, doing business and making things to serve both the U.S. market and the rest of the world.”

The logic is simple. By combining a global network of free trade agreements with America’s strengths – a highly-skilled workforce, affordable energy, a stable regulatory framework, and the rule of law – states from Ohio to Oregon could become prime spots for new economic opportunity and investment. The increased investment – and the jobs that followed – would lead to higher wages and sustainable long-term growth.

That strategy was anchored in the TPP and a formalized economic relationship with the European Union, which would improve trade efficiency and remove red tape between the world’s two largest economies. By firmly putting the United States at the center of a web of international trade agreements, American farmers, manufacturers, and service providers would be in a position to seize growth opportunities around the world.

Trump put a stop to that effort in his first week in office, but U.S. neighbors and competitors have spent the past 12 months picking up where Washington left off.

Canada and Mexico are pursuing aggressive trade agendas that could position them to out-compete the United States for the high-paying jobs that have long been the reward of international investment. Additionally, both countries are within the 11-nation Asia-Pacific trade agreement that was concluded this past week, the same agreement the Trump administration withdrew the United States from a year ago.

NAFTA negotiators, from left: Mexico's Ildefonso Guajardo, Canada's Chrystia Freeland and the U.S.'s Robert Lighthizer in Montreal, January 29, 2018. REUTERS/Christinne Muschi

Canada is making forays into China, has expressed an interest in pursuing a regional free trade agreement in Southeast Asia, and recently concluded a comprehensive agreement with the EU. If successful in these endeavors, Canada will have secured or updated trade agreements with more than 40 countries.

Meanwhile, Mexico is pursuing a deal of its own with the EU, and has its eyes on the horizon for other opportunities that will expand their network of trade agreements. The Trump administration’s decision to abdicate America’s leadership role in the global trading system, and its flirtation with NAFTA withdrawal, has pushed Washington’s third-largest trading partner toward China – a move that should concern Americans.

The Majestic Maersk, one of the world's largest container ships, is surrounded by cargo in Shanghai. Chinese President Xi Jinping has said China 'is moving closer to center stage' on trade. REUTERS/Aly Song

EU trade negotiators in Brussels have seized on the opening and are busy updating many existing agreements, while trying to conclude new deals in South America, New Zealand, and Australia. They want to make the EU the center of the largest trade network in the world – an ambition that may sound familiar.

The U.S. is being left behind only because Trump has chosen not to compete.

Washington’s arsenal is not limited to tactical weapons and “red buttons;” in reality, it includes a sweeping array of resources – few of which are more powerful than its economic might. Trade agreements are tools that shape globalization. It is essential for U.S. national and economic security to use these tools and lead globally by setting the rules of the road for international commerce. If it doesn’t, China and others will write the rules for Americans.

President Franklin D. Roosevelt had both economic and military security in mind when he urged the United States to become the “great arsenal of democracy,” and admonished Americans to approach non-combat challenges with “the same sense of urgency, same spirit of patriotism and sacrifice as we would show were we at war.”

America’s post-war leadership role in the world has never been challenged so directly from friends and foes alike. Chinese President Xi Jinping has declared a new era of Chinese ascendance, stating, “It [this] will be an era that sees China moving closer to center stage.”  His timing is calculated, not coincidental.

Trump spent his first year in office turning inward and forfeiting the field. The world is sprinting ahead, while the United States is in reverse. The president would be wise to look outward in his second year, and work with U.S. allies around the world to beat China at this critical game. That reset starts by demonstrating the flexibility and creativity to conclude NAFTA modernization quickly, resuming a leadership posture through agreements like TPP, and addressing structural challenges at the World Trade Organization. That is the only way America finishes first.

About the Author

Trevor Kincaid was the Deputy Assistant U.S. Trade Representative for Public Affairs in the Obama administration and is a member of the Washington International Trade Association; he previously served in the U.S. Senate and House of Representatives. @tkincaid

The views expressed in this article are not those of Reuters News.

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