Trump Orders U.S. Exit from Pacific Trade Pact and Reset on NAFTA

January 23, 2017 by and

President Donald Trump abruptly ended the decades-old U.S. tilt toward free trade by signing an executive order to withdraw from an Asia-Pacific accord that was never ratified and promising to renegotiate the North American Free Trade Agreement.

“Great thing for the American worker, what we just did,” Trump said on Monday after signing an order withdrawing the U.S. from the Trans-Pacific Partnership accord with 11 other nations. He didn’t sign any actions to direct a renegotiation of the Nafta accord with Mexico and Canada, yet he said on Sunday he would begin talks with the two leaders on modifying the accord.

“We’ve been talking about this a long time,” Trump said.

Trump’s trade focus fulfills a campaign promise to rewrite America’s trade policy during his first days as president. In declaring his determination to renegotiate Nafta, Trump would rework an agreement that has governed commerce in much of the Western hemisphere for 22 years.

By scrapping the Trans-Pacific Partnership accord negotiated by former President Barack Obama, Trump will delight many of his most fervent supporters as well as a good many Democrats, while opening an economic vacuum in Asia that China is eager to fill.

Trump campaigned against the TPP and other trade deals, including Nafta, during his campaign for the White House. In a video released in November, Trump promised to exit TPP “on day one,” calling it “a potential disaster for our country.”

The TPP, a 12-country deal that sought to liberalize trade between the U.S. and Pacific Rim nations including Japan, Mexico and Singapore, was a signature piece of former Obama’s attempt to pivot U.S. global strategy to focus on the fast-growing economies of Asia.

Trump said Sunday that he’ll meet with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto to begin discussing Nafta, which he has routinely blamed for the loss of U.S. jobs. The newly sworn-in president praised Mexico for being “terrific” and signaled that he’s willing to work with the U.S.’s closest neighbors.

“We’re going to start renegotiating on Nafta, on immigration, and on security at the border,” Trump said at the start of a swearing-in ceremony for top White House staff. “I think we’re going to have a very good result for Mexico, for the United States, for everybody involved. It’s really very important.”

Officials in Canada, which is the biggest buyer of U.S. exports, have indicated they want to avoid getting entangled with the Trump administration’s targeting of imports from Mexico and China. The three countries are the biggest trading partners of the U.S.

David MacNaughton, Canada’s ambassador to the U.S., told reporters his focus is on avoiding Canada being “collateral damage” in trade actions.

Trump repeatedly criticized the TPP and Nafta on the campaign trail, saying the U.S. manufacturing sector had been hollowed out by bad trade deals. Trump was meeting with business executives Monday morning and was scheduled to meet later with union leaders on a day the White House cast as focused on trade and job creation. He told the business leaders he intended to impose a “substantial border tax” on companies that move operations out of the U.S.

During his campaign, Trump said he would rework the North American deal in order to improve trade conditions for the U.S. and prevent companies from shipping American jobs abroad. “If our partners refuse a renegotiation that gives American workers a fair deal, then the president will give notice of the United States’ intent to withdraw from Nafta,” according to a statement on the White House website.

After years of negotiations by both Republican and Democratic administrations, Nafta was signed by then-President Bill Clinton in 1993, and went into effect the following year. The pact sought to eliminate trade barriers between the North American countries, as well as protect intellectual property.

As far as the Trans-Pacific deal, despite Congress’s approval of “fast track” authorization for the agreement in 2015, it was never formally authorized by the U.S. Lawmakers from both sides of the aisle said they grew increasingly concerned it would result in a loss of American jobs.

The future of the TPP is now in flux. Japanese Prime Minister Shinzo Abe said in November that TPP without the U.S. would be ” meaningless.” Still, multiple signatory countries including Vietnam and Australia have said they would stick to the deal even without the leading party of the agreement.

Insurers Say Trans-Pacific Pact Important for Industry Growth, Jobs

Trump made trade one of the central issues of his campaign, which found success in the former industrial areas of states such as Wisconsin and Michigan. Both states were often considered strongly Democratic before they flipped to Trump in 2016.

In a June speech in Pittsburgh, Trump attacked the deal, which he said “would be the death blow” for American factories. “It would give up all of our economic leverage to an international commission that would put the interests of foreign countries above our own,” he said.

In the final days of the Obama administration, six U.S. ambassadors in Asia attempted to push for a last-minute vote on the pact, which they said if abandoned would cede international leadership to China, which isn’t a part of the TPP. “Such an outcome would be cause for celebration among those who favor ‘Asia for the Asians’ and state capitalism,” the ambassadors wrote in a letter.

Rather than support wide-ranging regional trade agreements, Trump has proposed negotiating bilateral trade agreements. He has also proposed enacting tariffs on imports to protect domestic manufacturing.

Related:

Popular Today