The Northern Territory news Wed 1 Feb 2017
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News Corp Australia
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News Corp Australia
32 BUSINESS WEDNESDAY FEBRUARY 1 2017 NTNE01Z01MA - V1 ITS probably a big mistake to think US President Donald Trump will cause global trade to freeze up. (Probably because anything seems to be possible in the US these days, so definite predictions are dangerous.) But whats usually missed, or ignored, about President Trumps January 23 memorandum pulling the US out of the Trans-Pacific Partnership is that it was a surgical withdrawal from one deal only, and that Trump used it to make a generally pro-trade statement. Trade with other nations is, and always will be, of paramount importance to my Administration and to me, as President of the United States, the memorandum says. Its just that he wont do multilateral trade agreements any more, only bilateral ones it is the intention of my Administration to deal directly with individual countries on a one-on-one basis in negotiating future trade deals. This is hardly revolutionary. Ever since the Doha Round of GATT (the General Agreement on Tariffs and Trade) was killed in 2008, mainly by the United States over agriculture and pharmaceuticals, the TPP has been the last hope for multilateral deal-making. business spectator Global trade wont freeze up with Trump decision Now the US has killed that too, but it wasnt just Trump. Both candidates in the US presidential election promised to withdraw the US from the TPP, although Hillary Clinton, as one of the deals architects as Secretary of State, was late to arrive at that point, pushed there by the popularity of Trumps opposition to it. The irony, of course, is that America was not only behind the TPP and multilateral trade in general, as an architect of the WTO and GATT, but has also been the driver and main beneficiary of globalisation. Foreign sales by S & P 500 companies almost reached 50 per cent of their total sales (48.9 per cent) in 2015, although that fell to 44.3 per cent in 2016, largely because of a drop in sales by US firms in Asia and Europe. Globalisation, combined with the US dollar reserve currency status, has ensured Americas economic hegemony is virtually absolute. With the TPP, the US led the negotiations and shaped the deal, so it reflected US priorities on a range of issues. In particular, it gave US firms wide-ranging rights to invest in the countries that signed it, and to sue their governments over any sovereign decisions that cost them money. It is, in short, a pro-American deal. But during the US election, the TPP became a convenient symbol for the supposed role of trade and globalisation in the destruction of US jobs. Which was nonsense: the main culprit has been technology also driven by the United States, as it happens. But trade is easier to hate than technology; in fact, politicians everywhere love being photographed alongside hitech machinery and making speeches about the benefits of innovation, and everyone loves their smartphone and Uber and Airbnb. On the other hand, the notion that a trade deficit is bad and trade surplus is good is relatively easy to get across, even though its stupid. Its like talking about your deficit with the supermarket. So trade it is for US populist scapegoat, and specifically the TPP, even though its clear it would have benefited all of its signatories, including the United States, and cancelling it certainly wont bring back any jobs to America. Those jobs have been destroyed by technology and are never coming back. And anyway, according to that January 23 memorandum, Trump does not want to shut down trade, just the TPP hes simply going to pursue bilateral deals, continuing US policy thats been in place since the GATT collapsed nine years ago. Hundreds of free trade agreements have been signed since then, while the WTO has focused on customs barriers and border controls, through what it called the Trade Facilitation Agreement. And as it happens, a couple of days after Trump pulled the US out of the TPP, the WTO announced its first big success since, well, ever: the TFA has now been ratified and will come into force within two weeks, boosting global trade by US$1 trillion, according to the WTO. The deal needed 110 countries to ratify in order for it to take effect, and that has now been reached. The director-general of the WTO, Roberto Azevedo, told Reuters last week the TFA is the biggest agreement the WTO has ever reached. It will standardise and simplify customs procedures, cutting the time and cost of getting goods across borders waiting times are apparently going to be cut from weeks to days. And by the way, the US and China were among the first countries to ratify the TFA. So theres little reason to think the US and China are about to have a trade war; if anything, given Donald Trumps intention to do bilat eral deals and Chinese President Xi Jinpings rhetoric about global trade at Davos, theres probably more likely to be a free-trade agreement between them than a trade war. Also, by the way, note how limited Trumps suspension of immigration from Muslim countries was: it names seven countries that have not supplied terrorists, but which the US doesnt do much trade with, and leaves out several countries from which terrorists are known to have come, such as Saudi Arabia, UAE and Egypt, that the US has important trade relationships with. Funny that. *This column first appeared in TheAustralian* Employees at work in the Ford automotive plant in Vietnam, which boasts one of Southeast Asia's fastest growing economies driven by exports of cheaply made goods. The progress is forecast to continue, despite Donald Trump abandoning the TPP ALAN KOHLER Imports and exports will remain important under a Donald Trump presidency Picture: AFP PHOTO / ROSLAN RAHMAN