Jakarta: One year into the Trump presidency, many American allies and partners are asking questions about the sustainability of American leadership. On his path to the White House, Trump made transforming the way the US does trade with the world one of his biggest policy priorities.
Medcom.id had an in-depth discussion with Yose Rizal Damuri, head of economics at the Centre for Strategic and International Studies (CSIS) last week:
How do you see Trump’s trade policy in his first year?
So, during his campaign, he was quite protectionist and anti-trade. However, according to many observers, he is currently more bark than bite. Nevertheless, we should not jump into conclusions. As a matter of fact, he has fulfilled some of his campaign promises.
For example, his decision to pull his country out from the TPP. It indicates that he will fulfill his campaign promises when he has the opportunity. TPP is more beneficial for the US than other TPP countries. The fact is he really pulled his country out from the trade agreement when he had the opportunity. The decision can be taken without approvals from lawmakers or other government elements.
On the other hand, he cannot easily pull his country out from the WTO. He needs approvals from lawmakers. He also needs strong support from the public. It is not as easy as withdrawing from the TPP.
So, Trump probably wants to fulfill all his campaign promises. However, he currently doesn’t have enough power to fulfill all of the campaign promises.
Is there any impact of Trump’s trade policy toward the international trade?
I said that he probably wants to fulfill all his promises, but he still doesn’t have the capabilities. If he is able to fulfill all his campaign promises, it will be harmful for the international trade system.
For example, he may want to force the WTO to follow his country’s interests. He has yet to do that as of now. Another example, he may want to pressure US trade partners to reduce the country’s trade deficits. He has named 16 trade partners as competitors.
There are several indications into that direction. He recently issued several anti-dumping tariffs for Chinese steel imports. He also took various maneuvers at WTO forums.
Recently, in Davos, Trump seemed to take a softer act toward the global trade system, what do you think about that?
I don’t think so. I think there is nothing new from his remark. He has talked about changing the international trade system long before the election campaign. Some analists have studied his past actions. They have confirmed his old views. A significant change in the near future is unlikely.
If his remark was softer at WEF, it was probably aimed to balance China. China has been increasing its strategic presence in global economic stage. The US retreat has created a kind of vacuum in the economic world.
The US has addressed this issue in several ocassions. It has reiterated its continous support for globalization and more integrated global economy. However, it has also underlined its point of view about the current system.
Trump pulled the US out from TPP last year (Photo:AFP/Juan Castro Olivera)
Trump always emphasizes fair trade over free trade. He also talks about bringing jobs back to the US. Do you think he can do that?
That is another issue. He wants to to bring back jobs to US. I know that he always mentions it. However, I don’t think that he really mean it.
Trump is a businessman with many businesses. He has a lot of FDIs in various locations. I think it is only a political jargon. I don’t think he really believes it. This issue is very attractive for the public.
If we want to assess the effectiveness of the goal, we should observe the strategy to achieve the goal. Trump has reduced taxes in order to boost business activities. He wants US economy to become more attractive. However, a lot of American companies move to other countries not only because tax issues. They leave US also because high production costs.
In my opinion, in order to bring back factories, Trump needs to issue extreme policies. For example, He could impose 35 percent tariffs for Chinese products. This kind of policy may signicantly change status quo. However, it is too extreme even for America. Moreover, China will not stay idle with this situation. It may trigger trade wars between the two countries. That is why it is unlikely to happen.
Secondly, eventhough he can bring back factories to US shores, it may not create more jobs for American people. For example, eventhough Apple moves back its production bases to US, the company may not provide more blue collar jobs for the country. Apple may use more robots in their US factories. So, the result could be quite different from the orginal expectation.
Trump is very vocal about NAFTA and TPP renegotiations. How do you think about that?
Nafta is already 25 years old. They have made minor revisions in the past years. They maybe need major revisions after 25 years. I think Mexico and Canada don’t have any choice other than renegotation.
TPP is different. Like I said before, the trade agreement actually is US agenda. So, its withdrawal is its own loss. I don’t think other TPP countries will easily accept the renegotiation offer.
The previous negotiation process was very long and complicated and the previous agreement was very generous to US side. If US wants renegotiation, what more does US want from other TPP countries? So, I think other TPP countries will do it alone for now. They will exclude the US for now. They may accept the renegation offer after acquiring better bargaining positions.
Do you think Trump’s trade policy can alienate US in the global trade stage?
I agree. At first, he created uncertainties in international trade system. However, since the middle of last year, the European Union and Asia-Pacific countries started to take lead to fill the vacuum.
For example, EU and Japan recently completed the substance for the planned free trade agreement. On the other hand, Japan and US don’t have any free trade agreement.
Moreover, 11 TPP countries have established a strong foundation to continue their cooperation. We will see this march. I think the probability is around 80 percent.
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