Trump is right to abandon the TPP – we need real free trade

The first concrete policy announcement form the incoming Trump administration has been the pledge to withdraw the USA from the Trans Pacific Partnership (TPP), the trade agreement covering most Pacific countries, tough notably not China.

As President Elect Trump was vehemently spouting anti-trade rhetoric on the campaign trail, and had already denounced the TPP, the move came a no surprise – and incidentally, a Clinton administration would have done the same. But that hasn’t prevented an outcry from many corners. Most voices bemoan the lost opportunity for tariff-free trade, but the reality is that like all so-called ‘free-trade’ agreements, the TPP is only in some marginal part about true liberalisation of trade. According to Julian Assange of Wikileaks only 5 of 29 chapters are about ‘traditional trade’. In reality the TPP is about trade harmonisation and a host of other only marginally trade related issues, such as regulation of labour markets, the internet, health care and financial services. The deals are meant to protect favoured industries and jobs and secure perceived consumer protection, not letting markets allocate resources in the most efficient way. In effect it is often the imposition of the most powerful countries regulatory systems on the smaller economies. The coming Brexit negotiations will show how gaining access to the EU’s common market will require the UK to adopt a myriad of regulatory standards. In the world of bureaucrats and politicians these deals are about establishing global standards of regulation, subsidies and tariffs. It is government managed, not free, trade. Henry Kissinger called NAFTA ‘a first step towards a new world order’.

No thick document is needed to establish free trade. Bilateral abandonment of all tolls and tariff is all that is needed. Competition between regulatory systems would then steer production towards the least interventionist and therefore most efficient regime and consumers would enjoy cheaper and better products as a result.

Donald Trump should not stop at the TPP. He should proceed with withdrawing the USA from all trade agreements. And who knows, he might. In a much more unlikely move he should then adopt a true free-trade agenda, negotiating removal of actual obstacles to trade and leave the new world order assigned to history.

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