Trading with the US: what might the future hold?
A number of international trade agreements with the US are under review.
The US has been expanding trade and reducing tariff barriers via a series of bilateral agreements since 1934. Shortly after US President Donald Trump’s administration came into power, it said: “For too long, Americans have been forced to accept trade deals that put interests of insiders and the Washington elite over the hard-working men and women in the US.”
Trump intends to pull out of trade agreements that he believes are unfavorable to the US. He has already withdrawn from the Trans-Pacific Partnership (TPP) and is committed to renegotiating the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico. There are also signs that Trump may withdraw from the Paris climate change agreement and undo policies to restrict greenhouse gas emissions.
Shift towards bilateral agreements
Trump has stressed that he is not opposed to all trade agreements, and says he supports new deals, as long as they are negotiated on a bilateral basis.
The UK and the US are currently looking at their trade deal options following Brexit. One such option is agreeing to cut, or even drop, tariffs on items that the UK and the US already export to each other. Stephen Moore, a former economic advisor to the President, said Trump is likely to be looking for a deal similar to the one the US has with Canada.
Although the new administration appears to be focused on the UK, and also on Japan, there are several other potential trade partners including Russia and Vietnam. The Indian Express has cited unnamed sources claiming that the President may offer a bilateral deal to India.
However, some believe that a switch to bilateral negotiations could be risky. Firstly, bilateral negotiations constrain the set of potential agreements, whereas multiparty negotiations allow for coalitional bargaining and a greater range of possible outcomes. Secondly, bilateral agreements are believed to be less efficient in promoting global integration than comparable regional or multilateral treaties, and businesses may find it costly and confusing to keep track of multiple sets of trade regulations.
A beacon of hope for multilateral trading agreements?
The global Trade Facilitation Agreement (TFA) came into force on 22 February 2017 when the World Trade Organization obtained acceptance of the agreement from the necessary two-thirds of its 164 members. The TFA is supposed to reduce the time taken to import and export goods. To date, 114 members have signed up, including the US, which ratified in January 2015.
Given these developments, a multilateral trading system could have a future in the US after all.