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International relations

Trump's Davos speech signals shift on multilateral trade

President open to group talks with TPP members; warns against 'unfair' trade

DAVOS, Switzerland -- U.S. President Donald Trump hinted Friday that he may be willing to bring America back into the Trans-Pacific Partnership trade agreement in a speech here that also emphasized the need for fair and reciprocal trade.

Trump, the first sitting U.S. president to attend the World Economic Forum since Bill Clinton in 2000, devoted much of his address to trade issues.

"The United States is prepared to negotiate mutually beneficial, bilateral trade agreements with all countries," including the "very important" nations in the TPP, he said. "We have agreements with several of them already. We would consider negotiating with the rest, either individually, or perhaps as a group, if it is in the interests of all."

This represents a pivot for Trump, who ordered the withdrawal of the U.S. from the Pacific Rim trade and investment pact shortly after his inauguration a year ago, instead focusing on bilateral agreements where Washington could better use its leverage. The 11 remaining member countries have since retooled the deal into the Comprehensive and Progressive Trans-Pacific Partnership.

Trump provided no specific timeline for new negotiations.

The president also warned that the U.S. "will no longer turn a blind eye to unfair economic practices" by trade partners, including intellectual property theft and excessive government subsidies. Such behaviors are "distorting the global markets," he said.

The comment was likely meant as a shot across the bow of China, with which the U.S. has a massive trade deficit. Washington is moving to remedy the imbalance with steps including higher tariffs.

"We support free trade, but it needs to be fair and it needs to be reciprocal," Trump said.

Trump essentially offered the prospect of a return to the TPP, first mentioned Thursday in an interview with American broadcaster CNBC, as a gift to Davos attendees worried about the U.S. turning its back on international cooperation.

If America rejoined the pact for which it was once a standard-bearer, the free trade agreement would become the world's largest by far, with members accounting for nearly 40% of global gross domestic product, up from 13% under current membership.

The TPP is a comprehensive framework that includes not just tariff cuts, but also complex international rules governing such areas as intellectual property and e-commerce. It was meant to let the U.S. and Japan set down rules of the road for modern trade as well as curb China's efforts to use its economic heft to build a rival sphere of influence. Trump's criticism of Beijing over violations of intellectual property rights suggests that his administration's stance has moved closer to the ideas behind the TPP.

The pivot also comes amid fretting by American industry about the retooled pact. The new agreement, rebuilt around the hole left by Washington's departure, would let member nations reap the benefits of lower tariffs while leaving the U.S. out in the cold.

Agricultural and other industry trade groups, key support blocs for Trump's Republican Party, have repeatedly lobbied the White House to rejoin the TPP, fearing the prospect of losing ground in Asian markets. With a midterm election coming up in the fall, Trump likely saw this as a necessary concession.

The president said in the CNBC interview that he would only be open to joining a reworked TPP, calling the deal in its previous form "horrible." The administration's top priority is narrowing a trade deficit in goods that exceeds $700 billion annually. Renegotiating the agreement might put pressure on countries to reduce trade imbalances with the U.S., giving an unpopular administration a victory to point to ahead of an election where the Republicans could face big losses.

But this may not prove as much of a change of heart as it seems. The administration has shown little sign that the idea of a return to the TPP has been fully thought through. Other U.S. officials did not seem to be on the same page as Trump at Davos, with Treasury Secretary Steven Mnuchin on Wednesday calling the U.S. "fans of bilateral trade agreements."

Trump campaigned on opposition to the TPP, and the working-class voters who form the core of his support are hostile to free trade agreements, arguing that they have let Asia and Mexico steal jobs. A senior U.S. official stressed that Trump's view of the TPP as a "terrible" deal has not changed, seeking to reassure the president's base ahead of the election.

The Japanese government, which has spearheaded the effort to rework the TPP, intends to continue for now with plans to sign the CPTPP in March while it tries to work out what the White House wants.

"We'll explain the significance of the TPP and confirm Mr. Trump's intentions," Deputy Chief Cabinet Secretary Yasutoshi Nishimura told reporters Friday.

Tokyo is taking seriously what some may dismiss as another off-the-cuff remark by the U.S. president. "He was asked twice about the TPP and gave roughly the same answer," a Japanese negotiator said.

But while Japan welcomes a possible U.S. return to the TPP fold, neither it nor other member countries are interested in renegotiating the deal. The original version, on which a broad agreement was reached in 2015, carefully balanced the interests of each of the 12 nations involved. Revising one part could set off a flurry of demands for more changes, bringing down the fragile edifice.

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