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Free trade with or without the US

Countries in Asia and Europe are defying Trump’s trade tariffs, and building alliances to expand trade by themselves.

President Donald Trump is intent on punishing other nations for “ripping off” the US in trade. Their governments aren’t exactly falling into line. They’re getting on with promoting trade and leaving the US behind.

This week, countries in Asia and Europe showed that they can work to expand trade all by themselves. In Tokyo, leaders from Japan and the European Union signed an agreement to create one of the world’s largest free-trade zones, covering 30% of global output and nearly 40% of global trade. In Bangkok, negotiators from 16 countries including China, Japan, Australia and India resumed talks on the Regional Comprehensive Economic Partnership (RCEP), aiming to have most details ironed out by this fall.

Both agreements gained momentum after Trump’s inauguration and subsequent attacks on the multilateral trading system. Neither includes the US.

Granted, neither pact is very ambitious. These are narrow, old-fashioned free-trade agreements, focused largely on reducing tariffs. The EU’s deal with Japan will take years to phase in. Tariffs are already low, so the benefits won’t be dramatic: One recent study predicted a gain in of 0.2% a year over 10 years in Japan’s gross domestic product, and less than 0.1% for the EU.

Any final RCEP agreement is likely to be even less ambitious, given opposition from India to lower tariffs on goods and from countries in Southeast Asia to liberalising services. Neither pact includes the kind of 21st-century standards set out in the original version of the Trans-Pacific Partnership — whether on labour and environmental conditions, or the data flows that have become critical to modern economies.

Still, modest gains are better than no gains — and better by far than the losses that will result from US moves to curb trade. For particular industries, the benefits will be substantial. European vintners, cheesemakers and pork farmers will see tariffs on their exports slashed; Japanese carmakers will gain new access to European markets. The EU estimates exports of processed food to Japan will swell by 180%; Japan’s government predicts the pact will lead to nearly 300 000 new jobs.

In both deals, simpler rules of origin will make life easier for companies, especially smaller ones, seeking to export goods to multiple markets. Even limited progress in areas such as e-commerce and data protection is valuable, given that global rules governing digital trade have hardly been updated since before the internet was popularised. And every new trade pact preserves momentum toward greater openness globally. The EU is hoping now to strike deals with Australia and New Zealand, as well as countries in Latin America.

As with the TPP, which the other 11 signatories revised and revived after Trump withdrew from the pact, the US loses out when new rules of trade are written without its participation. In the shorter term, higher US tariffs raise costs and put many US producers at a disadvantage. The more US protectionism ramps up, while Asia and Europe lower their barriers to each other’s goods, the less competitive production based in the US will become. This is not a formula for raising American living standards.

European Council President Donald Tusk said the EU-Japan agreement shines “a light in the increasing darkness of international politics.” Once, that would have been hyperbole; no longer. The good news for the rest of the world is that movement toward more liberal trade can proceed with or without the US.

© 2018 Bloomberg


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I dont know why the USA doesnt just withdraw their protection from NATO and Japan. These so called “allies” all charge USA tariff on goods going into their countries, yet are dependant on the US spending billions on their defense. What a strange world we live in! I dont like Trump at all, but I do believe he is airing some extremely poor practices by so called allies. I mean really, how can Germany underspend on NATO, expect USA to honour NATO and spend billions doing so, then go conclude pipeline &oil agreements with their biggest security threat…Russia. What am I missing???

The issue in NATO is not about countries contributing to NATO’s budget – no-one is behind on their payments. The US pays 22.14% of the NATO budget, Germany 14.65%, France 10.63%, UK 9.84%, …

The issue is that each country agreed to spend 2% of their GDP on defense by 2024, and currently countries like Germany and Spain are only at 1.2% and 0.9%. This is money each country is meant to spend on their own military – not pay the US.

The US still has a number of bases in Germany. During the Cold War these were used to provide defense for Western Europe should the Soviets invade, but nowadays also offer support for US actions in Syria, Iraq and Afghanistan.

If the US should pull all troops and equipment out of Europe, it is unlikely that Russia will be able to overrun the combined forces of Western Europe – unless the Russians use their nuclear weapons.

NATO: To keep the Germans down, the Russians out and the US in. It is defunct alliance based on an imperialist notion that the US is a benevolent entity and wants to keep the world ‘safe’.

How safe is the world when Bin Laden and Co. were CIA proxies. They are still in Afghanistan and hold then than 60% of territory. Flint Michigan still out of water but hey, more bases and more military spending is always needed for a fictitious bogeyman

US has the greatest debt in its history and its clout is waning. I smell a dying empire in the making.

All countries should drop the dollar as soon as possible!

Trump is actually pro free-trade. He just want fair treatment. reciprocal trade agreements. nothing more.

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