Welcome!
2017-07-06 14:22:02
As E.U. and Japan Strengthen Trade Ties, U.S. Risks Losing Its Voice

LONDON — In the master plan advanced by President Trump, an unabashedly aggressive United States is supposed to reclaim its rightful perch as the center of the commercial universe, wielding its economic dominance to dictate the rules of global trade.

As it turns out, the rest of the planet has its own ideas.

Major economies show no inclination to accept American designs on trade — an attitude on display on Thursday as the European Union and Japan agreed to the broad outlines of a free trade deal before a summit meeting of world leaders. If completed, the deal would further the exchange of goods and services between their two markets while, in relative terms, diminishing opportunities for American companies.

These two trading powers, both bedrock American allies, are effectively proceeding with plans to bolster globalization just as the United States is retreating into protectionism. Large areas of the global economy are now on divergent paths, creating more uncertainty for multinational companies.

Last fall, Canada and the European Union struck a mammoth trade deal, establishing the rules for a significant chunk of commerce across the Atlantic. The bloc’s latest deal tethers its fortunes closer to Asia and to Japan, which has the world’s third-largest economy.

Meanwhile, the United States debates the merits of erecting a wall along its southern border, argues about the legality of barring immigrants from several predominantly Muslim nations, and contemplates imposing tariffs on steel imports.

“We were able to demonstrate a strong political will to the effect that Japan and the E.U. will hoist the flag of free trade high amidst protectionist trends,” Prime Minister Shinzo Abe of Japan said at a news conference in Brussels announcing the agreement. “This is an achievement we should be proud of which also sends a strong message to the world.”

The European Union and Japan are placing a bet on global integration as a source of enhanced prosperity — economic ties that come with geopolitical benefits.

For Japan, the deal would strengthen its relationship with Europe and reinforce economic links in an era in which Tokyo is obsessed with adjusting to China’s rise as a global commercial power. Japan is particularly eager to forge stronger alliances as protection against China’s naval-backed territorial claims.

For the European Union, the deal reinforces the power of its single marketplace stretching from Ireland to Greece while delivering proof of its global aspirations. This, just as Europe contends with Britain abandoning the bloc in a step that will diminish its size.

In simple economic terms, the new deal could deliver considerable punch, laying down common rules aimed at promoting Japanese investment in Europe. The pact also explicitly affirms the Paris climate accord, which Mr. Trump recently shunned.

It is expected to bolster sales in Europe for Japanese carmakers like Honda and Toyota, while enabling European agricultural industries to sell more products in Japan. Tokyo is also likely to make it easier for European companies to bid for major government contracts, potentially giving an edge to industrial giants like Siemens of Germany and Alstom of France.

The deal “sends a very powerful signal to the rest of the world that Japan and the E.U. are partners, are friends, are allies and we want to stand up together to defend free and fair and sustainable trade in a climate where that is not taken for granted,” said Cecilia Malmstrom, the European trade commissioner.

As Mr. Trump has pressed his “America First” mantra, he has consistently pointed to trade agreements as supposed proof of his country’s unenviable status as the suckers in the global economy. In this spirit, he pulled the United States out of a sprawling trans-Pacific trade agreement forged by President Barack Obama. He has begun renegotiating the terms of the North American Free Trade Agreement linking the United States, Canada and Mexico. He has even suggested that he might revoke American participation in the World Trade Organization.

This week, Mr. Trump deployed his favorite bully pulpit, Twitter, to issue a broadside against American trade deals.

In the Trump view, the United States is best served by striking bilateral trade arrangements, which are confined to two participants. With the world’s largest economy, the United States owns the advantage in any such deal, enabling Washington to demand favorable terms.

“They see bilateral deals as a way for us to bully other countries,” said Chad P. Bown, a trade expert at the Peterson Institute for International Economics.

In taking this approach, the United States risks having less of a voice in the global trade discussion as other economies take their own paths.

Japan, for example, has long lavished extraordinary protections on its farmers, walling off dairy in particular from international competition.

The Trans-Pacific Partnership — the giant trade deal that Mr. Trump renounced — would have forced Japan to open its market to agricultural imports, probably increasing sales of American goods in Japan. Now, Europe will have the edge, since Japan is expected to lower tariffs on European cheese like Gouda from the Netherlands.

An analysis from the London School of Economics concluded that the United States was in a far stronger position than Europe to exploit the Pacific deal by selling more wares in Japan. The United States has a far more developed commercial relationship with Japan, selling nearly $108 billion worth of goods and services to the Asian nation last year. By contrast, Europe sent goods and services worth 58 billion euros, or about $66 billion, to Japan.

“I’m not sure that they understand that when two other countries have a free-trade agreement and we don’t have one with either country, that’s bad for us,” said Mr. Bown, the trade expert. “Our companies are now discriminated against.”

If Mr. Trump makes good on his protectionist threats, the United States could also find itself on difficult geopolitical ground.

As Europe and Japan were working on their deal, the Trump administration was weighing plans to slap punitive tariffs on imports of steel by citing a threat to national security.

By political designs, that step would seem to be aimed squarely at China, whose prodigious production of steel has flooded global markets with cheap product, bringing howls of protest from competitors around the world.

But much of the steel China sends to the United States is already limited by tariffs and other barriers invoked under W.T.O. rules, which allow countries to protect their industries from a surge of low-cost imports. The real impact of across-the-board tariffs would be likely to hit other nations that export steel, among them Germany, Japan and South Korea.

In citing threats to national security to justify tariffs — widely viewed as a nuclear option within the context of trade — the Trump administration heightens the sense that it does not respect rules or international agreements.

Not that the rest of the world is waiting for Mr. Trump to gain an appreciation for global commerce. Other nations are going about their business to the exclusion of the United States.

In Asia, China is advocating the formation of a regional trade bloc that has been positioned as a competitor to the Trans-Pacific deal. The deal would encompass 16 countries, including Japan, a group accounting for around 40 percent of the world’s population.

In Europe, Chancellor Angela Merkel of Germany appears increasingly receptive to overtures from the new French president, Emmanuel Macron, for coordinated economic policies aimed at accelerating the integration of Europe. This process is gaining momentum as Europe absorbs Mr. Trump’s recasting of American policy with a singular focus on its own interests.

“We, as the European Union, firmly believe in the political purpose of a world which is built on openness, cooperation and trade,” Donald Tusk, the president of the European Council, said on Thursday.