US Could Benefit From FTAs With Japan, Taiwan in Wake of Likely TPP Rejection, According to House Testimony
As the Trans-Pacific Partnership awaits an expected rejection from the U.S., the incoming Trump administration should consider bilateral negotiations with Japan and Taiwan, a top GOP lawmaker and a trade analyst said during a Dec. 6 House hearing. House Foreign Affairs Subcommittee on Asia and the Pacific Chairman Matt Salmon, R-Ariz., said bilateral negotiations with Japan might bring a “core group” of modern economies to the table in a more feasible framework than the TPP. “Without a concerted economic engagement with all parts of Asia, China will fill the void with its willingness to fund much-needed infrastructure without regard to intellectual property, labor and environmental standards,” Salmon said. Negotiating a free trade agreement with Japan is a noble goal, but it would be more complicated and politically difficult than an FTA with Taiwan, American Enterprise Institute resident scholar Derek Scissors said during the hearing.
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Scissors suggested that Taiwan is a relatively stable economy, and said its population of 23 million wouldn’t threaten U.S. jobs. On Dec. 2, President-elect Donald Trump spoke on a phone call with Taiwan's President Tsai Ing-wen, breaking with diplomatic convention. Scissors said he welcomed the call -- for the “very particular economic reason” that it could portend a bilateral FTA. He cautioned against the U.S. negotiating FTAs with rapid-growth countries like India, Indonesia, the Philippines and Vietnam, saying they and the U.S. aren’t ready for a deal, but he noted that improved trade relations would economically help the U.S.
U.S. ratification of the TPP would allow the U.S. to “write the rules for free trade,” but the deal’s impending demise implies that China is now positioned to take that mantle, Salmon said. “This debacle endangers U.S. prestige in Asia, and it didn’t need to happen,” Salmon said. “Our national reputation has taken a hit because the administration tied it to TPP without first establishing a national consensus in addressing deep domestic concerns about the potential impact on our economic viability.”
Scissors voiced concern about protectionist sentiments expressed by the Trump campaign, arguing that the campaign’s notion that the trade deficit costs U.S. jobs doesn’t square with reality. Great Depression trade surpluses and a reduced deficit in 2009 didn’t expand U.S. jobs, he said. “Logically, when we’re rich, we buy more in the way of imports, and when we’re poor, we don’t,” Scissors said. “If you force the trade deficit down … you’re going to hurt America’s rivals -- that’s true. But you’re also going to hurt America’s friends and allies, because we trade with them, and they’re involved in supply chains.” Scissors also downplayed any job impacts that labeling China a currency manipulator -- which Trump has threatened to do -- would have in the U.S., saying China’s currency value has no connection with U.S. jobs. China’s direct and indirect blocking of U.S. exports through protecting state-owned enterprises should draw some sort of reciprocal response from the U.S., but the U.S. should take a measured approach, employing diplomacy before tariffs, he indicated.
During the hearing, New America Open Markets Program Director Barry Lynn decried the U.S. trade deficit with China, connecting it to U.S. debt that has piled up to “dangerous levels” and saying the situation has helped Chinese leaders cash in and expand their nation’s influence. He said the U.S. should study goods made in China and how much of any vital goods is imported from there. Scissors and Salmon also said the U.S. should go after Chinese intellectual property thieves more forcefully.