Trump's trade approach 'a step back,' AmCham group says

Key Points
  • Trump's shift to a transactional, bilateral approach to trade from the current rules-based, multilateral model is "a step back," said Steve Okun, vice chairman of the Asia Pacific Council of the American Chambers of Commerce.
  • Businesses with global supply chains won't be able to take advantage of bilateral trade deals, Okun said.
  • Okun said he wouldn't be surprised if the renegotiation of rules of origin in Nafta began with the terms negotiated in TPP.
Multilateral vs bilateral trade deals

U.S. President Donald Trump's move to chuck the trade rulebook for a maverick style has been "a step back" for global commerce, said Steve Okun, vice chairman for the Asia Pacific Council of American Chambers of Commerce.

"[For] the four presidents preceding Donald Trump, we had a focus on a multi-lateral system that was rules based, and that evolved over time and it went from FTAs (free-trade agreements) and WTO (World Trade Organization) and up to the TPP (Trans-Pacific Partnership)," Okun told CNBC's "Street Signs" on Friday.

"The Trump administration seems to be shifting that from a multilateral to a bilateral and from a rules-based to a transactional," Okun said. "It is certainly a step back."

As an example, Okun cited Trump's indication that China's help with North Korea would lead to changes to any bilateral investment treaties or trying to use foreign policy over the THAAD missile defense system to pressure South Korea on trade.

Okun compared bilateral trade deals to a spaghetti bowl in their complexity.

"The U.S. has 14 different FTAs right now. The U.S.-Singapore FTA has slightly different provisions than the U.S-Korea FTA, which has slightly different provisions than the U.S.-Australia FTA, but that doesn't include countries like Malaysia and Vietnam," he said.

Shipping containers are offloaded from a cargo ship at Port Everglades in Fort Lauderdale, Florida.
Getty Images

"If you're a business and you have a global supply chain and you trade across borders, how are you going to put all this together to take advantage of those bilaterals? You can't," Okun said. "The multilateral system eliminates the spaghetti bowl problem. And it also brings a set of rules that you can craft your business around and you can craft your supply chain around."

The Trump administration has created an eventful week on the trade front.

Late Thursday, Trump said he will either renegotiate or terminate a "horrible" trade deal with South Korea and he wanted the country to pay for the $1 billion THAAD missile defence system the U.S. deployed there, according to a Reuters report.

Trump also told Reuters on Thursday that he had been "psyched" to terminate the North American Free Trade Agreement, or NAFTA, between the U.S., Mexico and Canada, but that he had reconsidered.

Multiple media reports had circulated Wednesday saying Trump was considering an executive order to remove the U.S. from NAFTA, but later Wednesday evening, Trump agreed in phone calls with the leaders of Mexico and Canada that he wouldn't terminate the treaty and would re-negotiate it instead.

The U.S. Commerce Secretary Wilbur Ross seconded plans to tinker with NAFTA.

Trump gets big E, for Expected, on trade: APCAC

"The rules of origin in NAFTA need some tightening. The rules of origin are what let material outside of NAFTA to come in and benefit from all the taxes and tariff reductions within NAFTA," Ross told CNBC on Thursday.

"It was a silly idea to let a lot of outside stuff in. The whole idea of a trade deal is to build a fence around the participants inside and give them an advantage over the outside. So there's a conceptual flaw in that."

To an extent, Okun agreed that NAFTA needed renegotiation.

"What Secretary Ross was talking about was one of the biggest issues that was negotiated in the TPP," Okun said. "All of that was negotiated at length in that agreement."

Previously, Trump pulled the U.S. out of the Trans-Pacific Partnership, or TPP, a broad 12-nation trade deal, which the U.S. president claimed was a "disaster" that would hurt U.S. manufacturing.

Okun added, "I wouldn't be surprised if the negotiations start with where we were on the TPP on rules of origin and then apply it to NAFTA."