mises.org / Carmen Elena Dorobăț / Nov 22, 2016
In his plan for his first day in office, Donald Trump announced that he is ready to withdraw the U.S. from the Trans-Pacific Partnership, which he called a “disaster”. The administrations of TPP partner countries have reacted negatively, arguing that the U.S. is foregoing a strategic opportunity, rendering the agreement “meaningless.”
In spite of the fact that the inter-governmental treaty is said to “deepen economic ties and boost growth, including by reducing tariffs”, Trump’s plan is nonetheless a correct one, all other things equal. The key to understanding why this is so lies in that word, “including”. That is, the TPP will compensate for any reduction in tariffs by an increase in red tape and other regulations, such as “labour and environmental standards, copyrights, patents and other legal protections.” Otherwise put, TPP partner countries have definitely ensured, in drafting the treaty, that special interest groups are protected to the detriment of the consumers and businesses which do not use political channels to make profits.
Is Trump’s decision a definite step toward free trade? Not yet. The President-elect would have to further make good on his promise to cut the regulations now stifling American business, but also follow through with deregulation of foreign business activity in the U.S. Not via complicated multilateral and bilateral treaties, but by simply stepping out of the market and letting profitable commercial relationships develop on their own. As Mises pointed out, trade protection is harmful to any nation, regardless of its size or weight in the international arena: