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Trump’s New Global Trade Order Aims at Ramping Up Pressure on China

2018-10-12 01:07
The Trump administration is set to flex its muscles by convincing trading partners to pressure China. The revamped deal with Canada and Mexico is a clear sign that Washington is willing to isolate Beijing in a new global trade order by edging China out of trade deals with allies. The new United States–Mexico–Canada Agreement (USMCA) contains a clause that aims to contain Beijing. The provision essentially blocks any trade flirtation with China. In an op-ed for The Epoch Times, former Canadian secretary of state for Asia-Pacific, David Kilgour, says that the “poison pill” clause effectively provides the United States with veto power over any free trade deal between the other partners and China. The USMCA replaces the 24-year-old North American Free Trade Agreement (NAFTA) and is the first major trade win for President Donald Trump. Trump also signed a new agreement last month that overhauled the old U.S.–Korea Free Trade Agreement (KORUS). The United States is now in the early stages of negotiations for bilateral free trade with both Japan and the EU. Washington can gain further leverage over Beijing if it convinces partners to sign on to the same type of poison pill that aims at China. It would signal that trading partners are fully aligned with Washington in its efforts to end the unfair economic and trade policies characteristic of Beijing. Beijing has been resorting to various tactics, including currency manipulation, industrial espionage, cybertheft, forced joint ventures in exchange for market access, and acquisition of foreign companies to attain sensitive technologies. The Economic Policy Institute reported that the trade deficit with China led to the loss of more than 3 million jobs between 2001 and 2015. To tackle these problems, trade chiefs of the United States, Japan, and the EU met last month in New York and agreed to push for new rules and enforcement tools to end practices that undermine the global trade system. The trilateral partners also agreed to reform World Trade Organization (WTO) rules that are no longer effective. The Trump administration has been frustrated by the organization, calling its rules outdated and insufficient to constrain China’s market-distorting behavior. Since his election in 2016, Trump has made trade renegotiations and reducing the trade deficit priorities of his administration. To meet his objectives, he started imposing tariffs on steel, aluminum, and Chinese goods. This year, the Trump administration has chosen to take a tougher stance on China’s decades-long protectionist and trade-distorting policies, and instituted a tariff campaign. According to some trade experts, the tariffs and threats—no matter how confrontational and sometimes ugly they can get—are bearing fruit.