In Davos, Trump Reopens Door to Pacific Trade Pact He Long Scorned -- Update

By FeaturesDow Jones Newswires

President Donald Trump said Friday his administration was open to joining a new version of the Pacific Rim trade bloc he has long derided as unfair to the U.S.

"We would consider negotiating" with the 11 members of the Trans-Pacific Partnership "either individually or perhaps as a group, if it is in the interests of all," Mr. Trump said in a speech to the World Economic Forum in Davos, Switzerland.

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Even with the conditions and hedges, the statement marks a major change for the president. During the 2016 campaign and throughout the first year of his presidency he regularly blasted TPP specifically and the concept of multilateral trade deals in general. He said his administration would instead focus on bilateral agreements, which he argued could be better adjusted to U.S. interests. On his first workday in office a year ago, Mr. Trump signed an order withdrawing from the TPP, which was negotiated under the Obama administration.

Mr. Trump's comments came three days after the remaining TPP countries reached an agreement in Tokyo to refashion and relaunch the trade pact without the U.S. The pact includes some of America's largest trading partners, such as Japan, Canada, and Mexico, and some of the world's fastest-growing economies, such as Vietnam and Malaysia.

Many U.S. businesses have worried that the creation of a new Pacific trade bloc without the U.S. would cost them sales in everything from beef to autos, as competitors inside the bloc become able to sell to those markets at reduced tariffs and under harmonized rules.

"Our nation's lack of participation in the Trans-Pacific Partnership is a grave mistake that will have consequences diminishing our position as a global economic power," Florida Republican Rep. Carlos Curbelo said earlier this week. "By not participating in such a critical free-trade agreement, the president has missed a huge opportunity to ensure America's interests are advanced."

Mr. Trump had signaled a possible shift on TPP earlier in the week in an interview with CNBC, and reaction to that from trading partners was welcoming -- but cautious.

Toshimitsu Motegi, the Japanese minister handling the pact, said Friday that Japan's first priority was to get TPP-11 up and running, and that Mr. Trump's comments shouldn't be allowed to disrupt the careful negotiations that went into launching that accord.

Asked to explain the apparent policy shift, a top administration official said "several circumstances have changed during 2017 creating an opportunity to see if there's a good deal for American workers." One factor was that "China's economic aggression has intensified globally," said the official, David Malpass, undersecretary of the Treasury for international affairs.

In addition, he said, "the U.S. economy is doing well," which "creates negotiating opportunities." The completion this past week of a new TPP framework, he added, "makes it possible to look at what they put together and think about American workers."

It isn't clear how serious the U.S. is about re-entering TPP negotiations, whether it would be willing to do so with all 11 members of the pact or some different coalition, and what demands the U.S. might make for joining. Diplomats from some of the TPP countries said that they weren't aware of any overtures from the Trump administration about joining the bloc and that the president's remarks seemed to have come out of the blue.

Trading partners have nervously watched the Trump administration launch renegotiations of two existing trade pacts -- the North American Free Trade Agreement with Canada and Mexico, and the U.S.-Korea Free Trade Agreement -- seeking to "rebalance" them more toward American interests. The administration's approach to those talks has made some other countries, notably Japan, reluctant about taking the U.S. up on its offer to launch new bilateral trade deals.

Absent from Mr. Trump's speech Friday was any of the harsh rhetoric he has usually attached to any mention of TPP. During the presidential campaign, Mr. Trump described the pact as "just a continuing rape of our country" and "the greatest danger yet." Over the past year he has regularly described pulling out of TPP as one of his proudest accomplishments as president.

One factor that may be prompting Mr. Trump to soften his tone on TPP is his administration's evolving approach to its "America First" trade policy, which seems increasingly focused on countering China.

In his Davos speech, Mr. Trump didn't mention China by name, but in a thinly veiled reference, he repeated his common criticism of Beijing's economic policies and tried to recruit allies in the campaign to counter them, arguing to his audience that the whole world economic order, not just the U.S., was threatened by policies like those pursued by China.

"The United States will no longer turn a blind eye to unfair economic practices, including massive intellectual property theft, industrial subsidies, and pervasive state-led economic planning," Mr. Trump said. "These and other predatory behaviors are distorting the global markets and harming businesses and workers, not just in the U.S., but around the globe."

TPP advocates say the pact was designed specifically to counter China's economic influence in Asia, by surrounding it with a unified bloc of countries trading on rules set by the U.S., Japan and others. Mr. Malpass said one factor prompting the administration to look again at some form of TPP was "more understanding of the economic aggression from China."

Trump administration officials have also come to embrace many elements of TPP as they renegotiate Nafta, finding that rules in that agreement in areas like digital trade offer a useful template for modernizing the 24-year-old pact.

"This isn't a revolution, but it's an evolution in how the president is messaging about trade, and in particular, on TPP," said Myron Brilliant, the top international-affairs official at the U.S. Chamber of Commerce, which has frequently criticized Mr. Trump's trade policy. "It's important to note."

--Peter Landers in Tokyo contributed to this article.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com

(END) Dow Jones Newswires

January 26, 2018 18:24 ET (23:24 GMT)

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