Trump’s Asia trip shows U.S. at risk of being sidelined in the region’s economic future
For all of President Trump’s efforts to build personal relations with leaders and to reassure allies during his first Asia trip, the most significant thing that has happened may have been what did not happen:
From Tokyo to Seoul to Beijing, the American president has been feted with maximum ceremonial honors — a “state visit-plus,” the Chinese called it. Asian leaders listened politely to his demands that they accept what he considers fairer trade terms and that they buy more American goods.
Nowhere in Trump’s tour, however, have any of those leaders entered into serious negotiations or made significant concessions.
“Quite frankly, in the grand scheme of a $300- to $500-billion trade deficit, the things that have been achieved thus far are pretty small,” Secretary of State Rex Tillerson told reporters in Beijing on Thursday, referring to the U.S. trade deficit with China. “In terms of really getting at some of the fundamental elements behind why this imbalance exists, there’s still a lot more work to do.”
Instead of offering concessions, both the United States’ historical allies, Japan and South Korea, as well as China, its most serious Pacific rival, signaled that they had taken Trump at his word: His “America First” policy means the United States will become less and less a player in the fastest-growing and most dynamic region in the world.
That reality was underscored Thursday when trade ministers from the so-called TPP-11, the signatories to the Trans-Pacific Trade agreement minus the U.S., said at a meeting in Vietnam that they had agreed on how to revise the agreement to proceed without Washington. The Obama administration’s effort to push the agreement through Congress failed last year, and Trump officially withdrew U.S. agreement to the pact shortly after he took office.
“When you sit out the game, the rest of the world moves on,” said Deborah Elms, executive director of Singapore-based Asian Trade Center, a research and consulting firm. Asian nations are enthusiastically cutting trade deals with each other and with European countries, she said.
With Washington abandoning the sweeping Asia-Pacific trade deal and more generally pulling back from the multilateral economic order that it established and nurtured for decades, China is pressing to become the dominant player in the region.
Its small neighbors, among them Malaysia and Singapore, are similarly proceeding to act alone, without the United States, their long-time big brother, at their side.
Japan has moved from its traditionally passive role and has exerted greater leadership on trade. It was Tokyo, for example, that took the lead in pushing forward on the TPP without the United States.
Analysts say Prime Minister Shinzo Abe, who had spent considerable political capital to have TPP approved at home, hopes the U.S. will reenter the agreement someday.
“Everyone talks about a vacuum in leadership and everyone talks about China filling that vacuum,” said Wendy Cutler, a top Obama administration trade negotiator who worked on the TPP. “In this instance, it’s Japan filling that role.”
“You have these multiple paths to establishing the rules of trade and better integration of trade within Asia, and then you have the U.S., the outlier,” said Robert Holleyman, a Washington attorney and former deputy U.S. Trade Representative.
Holleyman was in Vietnam recently for meetings ahead of the Asia-Pacific Economic Cooperation summit Friday in Da Nang, which Trump will be attending. What Holleyman said he kept hearing was a “consistent theme from other APEC economies that said, essentially, ‘Now that the U.S. has left Asia, we need to step forward and do this on our own.’”
“As an American, I hated to hear those comments. They were saying it as a matter of fact,” he said.
An economically sidelined U.S. in Asia would almost certainly weaken American companies and hurt exports, particularly of farm goods, as well as the prospects for returns on the massive investments U.S. firms have made throughout the region over the last 35 years, trade experts say. U.S. firms may face higher duties and other more onerous barriers than they would have if trade agreements that included America were in place.
To be sure, many in Asia as well as America still see the U.S. as an economic superpower in the region, and they may have found some encouragement in the way Trump has toned down his trade rhetoric during his trip thus far.
Asian leaders will be closely listening to the speech Trump is scheduled to give Friday before American business leaders accompanying him on his tour. The president is expected to use the speech to outline U.S. involvement in the Indo-Pacific region, a reference that is meant to include India, the world’s largest democracy.
The U.S. Chamber of Commerce, which has clashed with the Trump administration on the North American Free Trade Agreement, TPP and trade policy more generally, said it took heart from the fact that the president regarded Asia as important enough to make a visit lasting nearly two weeks — the longest of any American president in more than a quarter century.
But chamber officials also worry that Trump has yet to articulate a strategy for commercial engagement in the region. All that he has espoused is a consistent line that the U.S. wants fair and reciprocal trade to reduce America’s large trade deficits with Asian countries and that he prefers negotiating bilateral deals rather than multilateral ones.
But no other country is lining up to sit down and bargain with the U.S. on trade.
Japan’s Abe, for example, regaled Trump by taking him golfing at a swanky country club and treating him to hamburgers. He listened to Trump’s expected criticisms of Japan’s large trade deficit with the U.S. and his calls for Japan to make more cars in America and buy more U.S. military equipment. But Abe took no new actions.
“We had a lot of pronouncements, but there was not a move toward initiating formal bilateral trade negotiations. Prime Minister Abe again deflected, talking about a regional framework being best,” said Mireya Solis, a Japan expert and co-director of the Center for East Asia Policy Studies at the Brookings Institution.
There were a lot of symbolic gestures in China as well. President Xi welcomed Trump by shutting down the Forbidden City to give Trump a private tour and, for the first time for any American president, an official dinner inside the storied palace. As they’ve done in past presidential visits, the Chinese also announced billions of dollars in deals with American companies, including General Electric and Smithfield Foods, a Chinese-owned company based in Virginia.
But some of those deals were already in the pipeline, and Xi did not offer concessions on substantive issues on Trump’s trade agenda, such as Chinese steel production or removal of barriers to U.S. imports to China. Tillerson, in his comments to reporters, said the “Chinese acknowledge much more has to be done. “
Xi, too, will be giving a speech in Vietnam, and could offer a stark competing vision in which the Chinese, not the Americans, will be portrayed as championing economic integration and engagement with the world, something considered unthinkable not long ago.
“I don’t think the Chinese have to do very much. They’re gaining strategic importance and geopolitical influence in the region by virtue of the fact that the United States is perceived, and, to some extent, is withdrawing from the region,” said Nicholas Lardy, a China economy specialist at the Peterson Institute for International Economics.
Trump, he said, “can talk about Indo-Pacific, blah, blah, blah, but we’re not engaged in trade, we’re not negotiating any new trade agreements with any country in the region.”
The big worry for business leaders and trade analysts here and around the world is that Trump will eventually follow through on his threats to take punitive measures against trading partners he believes have acted unfairly.
That could include imposing broad tariffs on Chinese imports, if only to inflict some pain to win concessions.
To date, however, Trump has not matched his tough language with such tough actions.
“So far, although Trump’s rhetoric makes it sound like he has a different kind of trade policy, in fact he’s doing pretty much what his predecessors did,” said Clyde Prestowitz, an Asian economics specialist and former top trade negotiator in the Reagan administration.
Back in the 1980s, he said, the Reagan White House pressed the Japanese to open up markets in certain sectors, and subsequent administrations have followed a similar tack in China and elsewhere in Asia.
“I think it’s more of the same old stuff,” Prestowitz said. “By now, the Asians have figured it out. They’ve realized his bark is worse than his bite.”
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