Update on U.S. Trade Agreements and Their Uncertain Future

Trade Update Map

In the September 2015 issue of the Port Bureau News, we defined trade agreements and outlined the pros and cons of the two major agreements, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), which are still under negotiations. This update provides a follow-up on these trade deals as well as a look at the status of the U.S.’s long-standing involvement in the North American Free Trade Agreement (NAFTA).

The TPP, the TTIP and NAFTA have all been featured heavily in the news the last few weeks because of the hotly contested presidential election cycle. Both major presidential candidates, Donald Trump and Hillary Clinton, have come out against the TPP, and Trump has added his opposition to NAFTA, calling it “one of the worst economic deals ever made by our country,” in his acceptance speech at the Republican National Convention. The TTIP has also come in to question in recent weeks because of the United Kingdom’s decision to leave the European Union in the “Brexit” vote. So where do all of the trade agreements stand now?

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NAFTA
The first major trade agreement was signed by the United States in 1993 by President Bill Clinton. The agreement was a partnership between the three countries of North America: Canada, Mexico and the United States. The agreement was a bipartisan effort that began and was negotiated under President George H.W. Bush. As we reported in September, according to Denise Froning of the Heritage Foundation, by 2000 the U.S. economy experienced a 23 percent increase. Estimates from the State Department show a 200 percent increase in Canada and a 443 percent increase in Mexico of exported goods, as well as a 199 percent increase from Canada and a 603 percent increase from Mexico of imported goods since the agreement was signed.

The agreement has not come without its share of controversy. Complaints about the agreement range from more 18-wheeler traffic on the roads, and factories leaving the U.S. for cheaper rates in Canada and Mexico, to what has become a major talking point in the election cycle: major trade deficits to the countries involved in the agreement. The outcome of the presidential election in November could possibly have considerable ramifications on the future of NAFTA. In a Trump presidency, there is a virtual certainty the current structure of NAFTA will be challenged, if not abolished entirely. In a Clinton presidency, the status of NAFTA is unknown because, unlike TPP, it has not been a major focus of the democratic platform.

TPP
The TPP is a potential agreement involving 12 countries that touch the Pacific Ocean. The countries involved make up 40 percent of the world’s GDP and 12 percent of the population. The goal of the TPP is the removal of tariffs and better regulation of copyright laws and patents. This time a year ago, the TPP looked like an almost certainty to pass through Congress and signed into law by President Obama before he left office. Fast forward a year later, the TPP has become a major flash point in the presidential election. Calls for voting down TPP began when Sen. Bernie Sanders made it a major pillar of his campaign to bring jobs back to the U.S. Trump, soon after, began rallying against it as well. Finally, Clinton, in the process of securing the nomination even though she was supportive of the TPP and was a part of negotiations on behalf of the United States as Secretary of State, called for Congress to vote it down.

TPP has also been losing support in Congress. Senate Majority Leader Mitch McConnell (R-Ky.) told reporters in a press conference on July 12, “The chances are pretty slim that we’d be looking at that this year.” Along with McConnell, Sen. Charles E. Schumer (D-N.Y.), an incoming Democratic leader in the Senate, told the Washington Post, “I think we need to dramatically readdress how we talk about and what we do about trade, OK. It’s not working.” With the loss of the two leaders of the Senate, both major presidential candidates against the agreement, and loud, boisterous chants of “kill the TPP” from the crowd at the Democratic National Convention, passage of the TPP is hanging by a thread.

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TTIP
Lesser known to the public than the TTP, the TTIP has escaped much of the ridicule of the presidential election. The TTIP is the potential trade agreement between the U.S. and the 28-nation European Union for a removal of tariffs and non-tariff barriers on all products between the two entities to increase investment on both sides. While the climate of the presidential election has not caused a direct threat to the TTIP, events in Europe have almost assured the need for revamped negotiations. The United Kingdom’s “Brexit” vote changed the landscape of European politics and called into question the foundation of the European Union. Furtheing questions surrounding the T-TIP, is fallout from a verdict leveled against Apple forcing them to pay over $14 billion in taxes to the European Union. Citing the treatment of American companies in Europe and American demands in trade negotiations, French Foreign Trade Minister Matthias Fekl has told European media a deal is unlikely to happen and demanded the talks cease. French President Francois Hollande has also said he will not support a deal this year Until the fallout of the “Brexit” is complete and commonality can be reached across Europe, the probability of TTIP passage is unlikely.

Uncertainty is always rampant when a new president is elected and new policies are enacted. While the final policy may be haze, one thing is for clear. After the 2016 elections, the United States trade systems, current agreements, and potential future agreements will look vastly different.

  • Date September 13, 2016
  • Tags September 2016