Trump Is China’s Chump
These investors, trade experts and government officials are still stunned by an event that got next to no attention in the U.S. but was an earthquake out here — and a gift that will keep on giving America’s allies pain and China gain for years to come. That was Trump’s decision to tear up the 12-nation Trans-Pacific Partnership (TPP) free-trade deal in his first week in office — clearly without having read it or understanding its vast geo-economic implications.
(Trump was so ignorant about TPP that when he was asked about it in a campaign debate in November 2015 he suggested that China was part of it, which it very much is not.)
Trump simply threw away the single most valuable tool America had for shaping the geo-economic future of the region our way and for pressuring China to open its markets. Trump is now trying to negotiate trade openings with China alone — as opposed to negotiating with China as the head of a 12-nation TPP trading bloc that was based on U.S. values and interests and that controlled 40 percent of the global economy.
It is hard to think of anything more stupid. And China’s trade hard-liners are surely laughing in their sleeves.
“When Trump did away with TPP, all your allies’ confidence in the U.S. collapsed,” a senior Hong Kong official told me.
“After America stopped TPP, everyone is now looking to China,” added Jonathan Koon-shum Choi, chairman of the Chinese General Chamber of Commerce, Hong Kong. “But China is very smart — just keeping its mouth shut.”
Beijing is now quietly encouraging everyone in the neighborhood to join the Regional Comprehensive Economic Partnership, China’s free-trade competitor to TPP, which, unlike TPP, lacks environmental or labor standards; China’s Asian Infrastructure Investment Bank; and its One Belt, One Road development project.
Carrie Lam, the new chief executive of Hong Kong, told me that TPP countries like Australia are quickly reaching out to Hong Kong to forge closer and freer trade ties, now that the Americans have pulled TPP down. It’s a “pity” that the Americans are leaving, she said, but “this will give our country this opportunity to lead.” China is not just looking for growth, she added, but also for “influence.”
Just to remind: TPP was a free-trade agreement that the Obama team forged with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
It was not only the largest free-trade agreement in history, it was the best ever for U.S. workers, closing loopholes Nafta had left open. TPP included restrictions on foreign state-owned enterprises that dumped subsidized products into our markets, intellectual property protections for rising U.S. technologies — like free access for all cloud computing services — but also anti-human-trafficking provisions that prohibited turning guest workers into slave labor, a ban on trafficking in endangered wildlife parts, a requirement that signatories permit their workers to form independent trade unions to collectively bargain and the elimination of all child labor practices — all to level the playing field with American workers.
Yes, like any trade deal, TPP would have challenged some U.S. workers, but it would have created opportunities for many others, because big economies like Japan and Vietnam were opening their markets. For decades we had allowed Japan to stay way too closed, because it was an ally in the Cold War, and Vietnam, because it was an enemy. Some 80 percent of the goods from our 11 TPP partners were coming into the U.S. duty-free already, while our goods and services were still being hit with 18,000 tariffs in their countries — which TPP eliminated.
That’s why the Peterson Institute for International Economics estimated that U.S. national income would have grown by some $130 billion a year by 2030 with TPP — not huge, just a nice boost for U.S. workers, businesses and diplomats.
“TPP would have encouraged C.E.O.s, logistics managers and others to place their bets on the world’s single largest trading zone, one that would have been dominated by the U.S., the largest and most developed economy in it,” economics writer Adam Davidson observed in The New Yorker.
Countries like Japan, Vietnam, Malaysia and Singapore made big concessions to the U.S. to be part of TPP — precisely because they wanted America embedded in their own economies, as a hedge against Chinese economic domination. A young Vietnamese businessman I met at a Wharton economic forum in Hong Kong asked me, “Do we have to choose between Russia and China now?”
The other people we disappointed, explained James McGregor, author of “One Billion Customers: Lessons From the Front Lines of Doing Business in China,” are China’s economic reformers: They were hoping that the emergence of TPP “would force China to reform its trade practices more along American lines and to open its markets. … We failed the reformers in China.”
Out here everyone gets it: China has Trump’s number. Its officials were afraid of him at first — with his tough trade talk. But they quickly realized how easy it was to distract him with shiny objects, like promises to defuse the North Korea threat for him or by giving stale sector-specific trade concessions, such as for American beef exports to China — things China has promised multiple presidents before — that Trump could brag about.
Beijing watched Trump threaten to abandon America’s adherence to the one-China policy if he did not get trade concessions — and then just fold the minute China’s president, Xi Jinping, said he would not take a phone call from Trump unless he reaffirmed the “One-China” policy.
And China just invited Ivanka Trump and Jared Kushner on an official visit for early next year, red carpet and all. As my colleague Keith Bradsher reported, China, for the first time, has arrested Chinese labor-rights activists who were working undercover to investigate a Western supply chain — specifically, factories near Hong Kong that made shoes for Ivanka Trump and other brands. Moral of the story: Take care of the emperor’s daughter and everything will be fine.
You have to admire the Chinese combination of toughness, patience and savvy. One day I hope America again will have a president with such attributes — not a sucker for flattery, not an ignorant ideologue who rips up treaties he hasn’t even read, not a made-for-television negotiator who throws his best leverage out the window — the ability to negotiate with China as the head of a trading bloc controlling 40 percent of the world’s economy — before he sits down at the table.
We may call him “Trump” in America, but here it’s pronounced “Chump.”