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News Blog

Why economists think Trump’s withdrawal of TPP could hurt the Southern California economy

Adrian C.

By From staff and wire reports

FILE - In this Jan. 11, 2017 file photo, President-elect Donald Trump speaks during a news conference in the lobby of Trump Tower in New York. China’s Foreign Ministry has rejected President-elect Donald Trump’s suggestion that he might use support of Taiwan as a bargaining chip in future negotiations between the two sides. (AP Photo/Evan Vucci, File) 

FILE - In this Jan. 11, 2017 file photo, President-elect Donald Trump speaks during a news conference in the lobby of Trump Tower in New York. China’s Foreign Ministry has rejected President-elect Donald Trump’s suggestion that he might use support of Taiwan as a bargaining chip in future negotiations between the two sides. (AP Photo/Evan Vucci, File) 

President Donald Trump pulled the plug Monday on the Trans-Pacific Partnership, his first step in replacing Barack Obama’s globalist trade policy with his protectionist “America First” ideals.

Some economists and analysts fear the move could rattle trade-dependent Southern California industries and the shippers who move the goods around. Still, others hope the tycoon-turned-politician’s multitiered strategy will buoy business here and across the nation.

“Great thing for the American worker that we just did,” said Trump, pausing for comments Monday in the Oval Office.

The president condemns massive free-trade agreements such as NAFTA that he believes have disadvantaged American workers and chased manufacturing and other jobs overseas.

But many in trade-steeped California are fearful.

“We have opened up a gap for another country, another leader to shape what the trade policy of the future is going to look like,” said Stephen Cheung, president of World Trade Center Los Angeles. “It takes us out of the conversation.”

The partnership, hammered out by the Obama administration over the past few years in an attempt to counter China and deepen U.S. ties in Asia, involved 11 other countries that account for about 40 percent of the world’s gross domestic product.

The mood in Washington on trade soured in recent years, however, and Obama never sent the accord to Congress for ratification, making Trump’s actions Monday largely symbolic.

White House spokesman Sean Spicer told reporters Monday that the decision to abandon TPP “ushers in a new era of U.S. trade policy in which the Trump administration will pursue bilateral trade opportunities with allies around the globe.”

The White House has said it believes it is easier to negotiate bilateral agreements on equal terms, instead of a multinational pact such as TPP, in which a group of smaller counties can more easily exert their will.

Experts say the challenge with bilateral trade deals is that the Trump administration would have to complete far more negotiations and the final rules might not be uniform.

Trump’s boosters say such complex negotiations, however, are in the billionaire deal-maker’s wheelhouse.

They are looking at it from a different perspective than Obama,” said Kenneth Wengrod, a member of the Southern California Regional District Export Council, appointed under the Obama administration but supportive of the policy shift.

John Husing, chief economist for the Inland Empire Economic Partnership, said Trump missed the point of TPP, which boosters said would have put the U.S. at the center of international negotiations.

“You pull the U.S. out and the great fear is that China steps into that void and leaves us out,” he said.

Though Obama labored for years to get the pact passed, some members of his own Democratic Party were skeptical of its impact on U.S. jobs, and the former president never sent it to Congress for ratification.

China is America’s largest trading partner, manufacturing everything from furniture to high-tech appliances to clothing. Trump branded the trade relationship lopsided and vowed to launch tariffs as high as 45 percent on the Asian giant.

If the flow of Chinese goods slows, some economists believe that will hurt the logistics industry that ships goods from mammoth ports in Long Beach and Los Angeles to miles of warehouses in the Inland Empire and beyond. The sector employed 650,000 people last year in the counties of Los Angeles, Orange, Riverside and San Bernardino.

“This was a loss of an opportunity in the short term and, in the long term, it opens up the opportunity for China to put together the equivalent of TPP with us left out, which would hurt Southern California,” Husing said.

But some say this move is just the first of many strategic steps Trump will take to defend American jobs.

“The new administration is trying to find ways to address and protect the U.S. manufacturer,” Wengrod said. “Where there is turmoil, there is opportunity.”

TPP was a flawed deal that ignored some key concerns in a complex international economy and would have fallen short for California, Wengrod argued.

“There are a lot of things that TPP didn’t address, like currency manipulation,” he said. ”When you can have people manipulating currency, that doesn’t bring parity to the world.”

Some say Trump’s bold moves have the potential to reshape the world economy and hand the U.S. the steering wheel.

The president met with key business leaders Monday, as well as union leaders.

Elon Musk, who owns major Tesla and SpaceX facilities in Hawthorne, and Marillyn Hewson of Lockheed Martin were among the executives who sat in with the president.

Trade is just part of his formula, he reminded all of his guests. Trump said there will “be advantages” to companies that make their products in the United States and suggested he will impose a “substantial border tax” on foreign goods entering the country.

The president also repeated a campaign promise to cut regulations “by 75 percent, maybe more.”

“I would take the president at his word here,” Dow Chemical Chief Executive Andrew Liveris told the Washington Post. “He’s not going to do anything to harm competitiveness. He’s going to actually make us all more competitive.”

Michael Camuñez, a former assistant secretary of commerce at the International Trade Administration from 2010 and 2013, said he does not believe California will benefit.

“It’s a step backward for California’s interest,” Camunez said. “You are narrowing, not opening up, opportunities for new markets. That’s a setback for our economy.”

Camunez said TPP would have imposed labor standards, environmental rules and intellectual-rights protections that would benefit Southern California’s “Silicon Beach” tech industry, Hollywood’s recording artists and the booming gaming business.

Technological advances — such as automated production lines and streaming delivery of entertainment — have done more to slash jobs than overseas production losses, he argued.

“There is this perception that trade is bad for American workers,” Camunez said. “It’s technology and productivity that account for most of the job losses, not trade.”

He said TPP would have opened up agricultural markets in Central California and helped protect digital rights for Hollywood.

“It would have set a global standard for trade,” he said. “China would have had no choice but to play by the rules we set.”

Jock O’Connell, a trade adviser for Beacon Economics, said Trump’s approach is outdated.

“His trade policies are designed to address the need of manufacturing workers in the upper Midwest,” O’Connell said. “It penalizes the more advanced technology companies like those in California.”

Meanwhile, Trump made it clear he’s only getting started.

“We’re going to start renegotiating on NAFTA, on immigration and on security at the border,” he said. “I think we’re going to have a very good result for Mexico, for the United States, for everybody involved. It’s really very important.”