ACCORDING to a document crafted by the Trump administration, a model trade agreement has 24 elements. Second on the list is “trade-deficit reduction”, giving a hint as to why Mr Trump wants to review America’s existing agreements. In January Sean Spicer, his press secretary, said the administration would “re-examine all of the current trade deals.” A presidential order to do just that is reported to be in the offing.
America boasts 14 bilateral and regional free-trade agreements (FTAs). Mr Trump seems to blame these agreements for America’s large trade deficit. Most economists disagree, seeing it as reflecting macroeconomic imbalances. The FTAs are in any case with countries representing just two-fifths of America’s two-way trade in goods, and less than 10% of its goods-trade deficit (see chart). Most (77%) of America’s deficit stems from trade with China, the European Union and Japan. None has an American FTA.
A focus on trade deficits means that tiddly deals such as those with Jordan and Oman will not face much heat. NAFTA (an agreement with Mexico and Canada), and KORUS (South Korea), will face more scrutiny because of chunky…Continue reading