Fran O'Sullivan: Are the days of free trade over?

Balanced trade will be the new slogan for the incoming administration replacing the trend for pursuing free trade. Photo / AP

The new game in Washington DC will be about "balanced trade", not free trade.

That's the forecast by Clyde Prestowitz who has been involved in shaping several US trade deals including Nafta (North American Free Trade Agreement), the free trade deal that links the United States, Canada and Mexico.

Prestowitz, founder and president of the Economic Strategy Institute, is close to some of the key figures who will shape Trump's new trade agenda such as Peter Navarro, who has been shoulder-tapped to lead a new White House National Council on Trade, and Robert Lighthizer, who is the nominee for United States Trade Representative.

In Washington yesterday he shared some insights into the background to the new thinking on trade.

Prestowitz's contention is that despite the president-elect's less charming qualities, Donald Trump is on the money when it come to the need for the United States to get a better deal out of its trading agreements.

He's in the camp which says the Trans Pacific Partnership (TPP) is dead.

It's a view that is shared by New Zealand businessman Chris Liddell who has been working with the Trump transition team.

Liddell's contention is that the days of unbridled free trade and unbridled free markets are over.

In an interview with TVNZ following Trump's election in November, Liddell said he thought there would be a new, circular trend towards a much more restrained free market. This is clearly a major shift.

The rhetoric in Washington, particularly after Obama picked up and ran with the Bush Administration's TPP, has focused on a new "gold standard" for trade deals. Pare that back and it comes down to "setting the rules of the road" for Asia-Pacific trade. And, said Obama, making sure it was the United States which set those rules. Not China.

But countering voices, of which Prestowitz is one, have come to the fore since trade became a major focus during the presidential campaign.

The United States has forged several agreements with other nations, think Panama for instance, which are more focused on shoring up its strategic interests than increasing its own trade.

In a recent paper Prestowitz argued that Trump had seen that none of the forecasts by Republican or Democratic administrations for new job creation and reduced trade deficits with Japan, China, Korea or other global partners ever came true.

The United States has forged several agreements with other nations, think Panama for instance, which are more focused on shoring up its strategic interests than increasing its own trade.

"For instance, America's US$2 billion [$2.8b] trade surplus with Mexico has turned into a US$50b deficit since the North American Free Trade Agreement went into effect. Instead of shrinking, America's trade deficit with China, which stood at US$80b in 2011, has ballooned to nearly US$400b.

"America's free trade agreement with South Korea has seen US. exports decline, imports double and 11,000 jobs quickly lost."

The analysis is not shared by free trade advocates such as US Trade Representative Mike Froman, who bows out of his role once Trump is inaugurated as president on Saturday.

At a session on global trade at a think-tank last Friday, Froman contended that he had rounded up sufficient support within the Republicans to have ensured that Trans Pacific Partnership would have been ratified.

There is a view that many Republicans still want to ratify TPP.

But without support from Trump that is an extremely long shot.