The world had one year to get used to Donald Trump’s approach to trade deals: bilateral trade deals rather than plurilateral regional trade deals. Former World Bank official Harry Broadman explains for Forbes why Trump’s approach for international deals is going to fail.
In the year that he’s occupied the Oval Office, President Trump has left many eye-catching imprints on the way he has positioned the U.S. to act unilaterally with the rest of the world’s economies. Perhaps nothing is more notable in this context than the Negotiator-in-Chief’s penchant for championing the negotiation of bilateral trade deals. The May 2017 China-U.S. agreement was his first foray into this practice, which received far more press attention than it merited, and to date has borne little tangible fruit. And, overhanging the current renegotiation of NAFTA—a plurilateral regional trade agreement—is Trump’s threat, which I think of as “Threatenomics”, to simply dissolve the treaty in whole and instead work out two separate bilateral agreements, one with Mexico and one with Canada
Trump has asserted he could potentially envision pursuit of broader multilateral trade deals based on the World Trade Organization’s (WTO) bedrock ‘Most Favored Nation’ (MFN) principle—where all 164 WTO signatories automatically are afforded uniform, non-discriminatory treatment. Such agreements, of course, stand in contrast to bilateral deals, where, by definition, the included parties treat each other on more favorable terms than either extends to all excluded countries. Hence why they are officially referred to as ‘preferential trade agreements’ (PTAs).
But in his heart, Trump sees international trade negotiations as ‘Bilateral Man’—hardly surprising for someone who cut his teeth conducting real estate transactions in New York. Indeed, he’s noted on several occasions recently that he can get a far better bargain taking up trade agreements with other heads of state on a bilateral basis.
Yet in the complex, nuanced world of international trade agreements, it really is not the “either or choice” Trump makes it out to be. The WTO specifically allows for preferential agreements—whether structured on a bilateral or a plurilateral, regional basis– as long as they meet certain criteria specified within the WTO agreement. In fact, with the 2016 bilateral trade agreement between Japan and Myanmar now in place, allWTO members are party to PTA’s in one form or another.
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