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COMMENTARY

As the world moves forward on trade, US policy stagnates

"THE growing wave of populism globally means that Singapore has to work with like-minded partners - including Europe, Japan, Asean and China," Singapore's Prime Minister Lee Hsien Loong said. On the front page of The Sunday Times. Wow.

Less than two years ago, that statement would have been mind-boggling. Today, not so much.

From Reuters in July 2016: "During a visit from Singapore's prime minister on Tuesday, President Barack Obama will extol the Trans-Pacific Partnership (TPP) trade deal and commit to getting the deal done ..."

The TPP debate under President Obama and a Republican-controlled Congress was contentious, but one which focused on the merits of the deal.

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The debate on the merits of the TPP ended. The US withdrew. Indeed, the US acts as if it no longer exists.

Today, the United States is waging a war against the global trading system as well as its former TPP members, some directly such as Canada and Mexico, and others indirectly, such as Singapore.

Just a short time ago, I never thought Singapore's list of like-minded countries on trade would exclude the United States of America.

Yet, it does - and rightly so.

Now, I argue that China does not belong on the list of Singapore's like-minded partners such as the EU, Japan and Asean.

President Donald Trump is correct that China competes unfairly, especially when it comes to intellectual property, such as through foreign ownership restrictions and licencing and approvals linked to technology transfers.

But unilateral tariffs are not the means to change the global trading system to address unfair trading practices and the needs of businesses in the 21st century. And withdrawing from multilateral frameworks is not the way either.

One would think that when a respected global leader such as Mr Lee makes the statement he did in Paris over the weekend, it would be noticed by government leaders in the United States.

Sadly, this will not be the case.

Why? Because of omphaloskepsis.

"Omphaloskepsis" - the contemplation of one's navel from the ancient Greek meditative practice - best describes the Trump administration's understanding of the Asia-Pacific trade landscape.

In today's world, if we draw the parallel that Washington is equivalent to ancient Greece (at least in terms of being a superpower), then, Washington is the navel of the world. In other words, to those controlling US trade policy, what happens in DC is all that matters.

Twenty years ago, the US still accounted for nearly 30 per cent of global GDP. Japan, the nearest rival, was less than half that size. The US could dictate the underlying framework for the global trading system.

Today, the US accounts for less than a quarter of global GDP while China is growing much more rapidly.

But Mr Trump's trade policy still presumes the US can dictate the terms of trade.

He has been waging war against the global trading system since before he entered office. He truly believes other trading partners will bend to American will and the trade balance between two countries is all that matters.

In a recent meeting with a US government official, when I brought up the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP, comprising the 11 remaining members) and how this will impact US business in the region, this person told me we lived "in a post-TPP world".

In other words, with the US out of the TPP, the CPTPP does not matter.

TRADE REFORM

While the US navel gazes on trade and implements unilateral tariffs, American companies such as Mid Continent Nail Corporation announce job losses, and Harley-Davidson moves some manufacturing outside the United States.

Meanwhile, trade liberalisation continues - just not involving the US government.

In a sign of long-term optimism for creating a sustainable trade architecture that meets all of society's needs, Mr Trump may achieve the nearly unthinkable - bringing together the EU, Japan, India, Asean and China on various fronts to discuss reforming and liberalising global trade. And, if the CPTPP serves as the foundation, it'd also be one that addresses labour and the environment.

In fact, Mr Trump's trade agenda could be the catalyst to bring real liberalisation to global trade - it is just that US-located companies will not be part of it and the US government will not be one of the architecture's drafters.

The CPTPP continues to gain momentum. Mexico and Japan have ratified the pact, New Zealand is gearing up to do so. Canada seems much more inclined post-G7 summit. And Singapore and Brunei could do so quickly. Once six countries have ratified, the CPTPP goes into effect in 60 days.

And CPTPP chief negotiators are already thinking expansion, such as with Indonesia, South Korea, Thailand and the UK.

A broader though not as comprehensive trade agreement - the Regional Comprehensive Economic Partnership, or RCEP, which includes all of Asean plus Australia, China, India, Japan, South Korea and New Zealand - looks set to successfully conclude negotiations by the end of the year.

I am highly sceptical that China and India can agree on trade, but if anyone can make it happen, it's Mr Trump.

As Japan's Minister for Trade Hiroshige Seko said earlier this month, echoing the same sentiment as Mr Lee: "As protectionism concerns increase globally, it's important that the Asian region flies the flag of free trade."

One day, US trade policy will wake up to that.

  • The writer is senior adviser at McLarty Associates, an international strategic advisory firm.