By Thomas J. Ryan

President Donald Trump’s move to withdraw from the ambitious, 12-nation Trans-Pacific Partnership (TPP) abruptly ended a U.S. tilt toward multinational trade agreements that defined global economics for decades.

With potential negotiations of the NAFTA and other trade pacts on the table, the move may be the start of more radical shifts ahead for many businesses built for decades on U.S. policy geared toward more open trade.

The TPP, a 12-country deal that sought to liberalize trade between the U.S. and Pacific Rim nations including Japan, Mexico and Singapore, was a signature piece of former President Barack Obama’s attempt to increase American companies’ access to fast-growing Asian markets and contribute to countering the rise of China. Tying together 40 percent of the world’s economy, the agreement was expected to reduce or eliminate tariffs on footwear and apparel while setting common standards for a region reaching from Vietnam to Canada. These included establishing rules for resolving trade disputes, setting patents and protecting intellectual property.

A number of firms in the consumer and retail sectors, including Nike, Walmart and Gap, publicly endorsed the agreement. These parties have cited the TPP’s promise to eliminate more than 18,000 taxes and other trade barriers, strengthen ties among member countries and increase economic growth.

Backers of the pact also included most mainstream Republicans. Indeed, Democrats were more vocal in expressing concern about a potential loss of U.S. jobs if trade barriers in the Asia region were lowered.

Fulfilling a campaign promise to withdraw from TPP as part of his “America First” movement, Trump had asserted easier entry for low-wage countries like Vietnam and Malaysia in U.S. markets would crush U.S. jobs.

“Great thing for the American worker, what we just did,” Trump said on Monday after signing the executive order.

Trump’s decision to pull out of the TPP eliminates potential savings from lower import tariffs for retailers and importers. The cut in import costs would have been $450 million a year, according to the Footwear Distributors and Retailers of America. Under the TPP, for instance, about 85 percent of all footwear products coming into the U.S. would  be immediately duty-free under the deal, according to the Commerce Department. Proponents also expected the agreement to expand access to global markets for U.S. manufacturers, protect innovation on products designed, distributed or manufactured in the U.S., help protect the environment and labor rights in TPP countries and lower prices for U.S. consumers.

Nike Leads Industry’s TPP Lobbying Efforts
The death of TPP is an especially bitter pill for Mark Parker, Nike’s CEO. In May 2015, Parker said the company could bring thousands of jobs back to the U.S. if an Asian-Pacific trade agreement is approved.

“We expect that will actually create more like 40,000 jobs when you look at suppliers, other manufacturers who will be involved, and partners, engineers, construction jobs,” CEO Mark Parker said in an interview on CNBC. “So we think that this footprint will actually grow to a much larger number.”

He also at the time stated that the 12-nation trade pact would help innovation, which in turn will drive manufacturing in the U.S. and create products suited to the individual taste of customers. “We expect to push our customization-personalization agenda, give the customer more choice,” he said.

He spoke on the day former president Obama visited Nike headquarters to press his argument that the trade agreement can create jobs at home, counter China’s economic influence abroad and raise labor and environmental standards by U.S. trading partners.

The pact generally received strong support from the industry’s trade groups. When the pact among the 12 countries was reached in October 2015, Tom Cove, SFIA’s president and CEO, said, “TPP will positively impact job creation and promote growth and innovation for the sporting goods and fitness industries.”

Sarah Thorn, Senior Director, Walmart Federal Government Relations, said after the deal’s was hatched, “TPA is a necessary tool for passing Free Trade Agreements, like the Trans-Pacific Authority Agreement, which will help lower costs and increase choice for our customers.”

In September 2016, a coalition of more than 100 footwear, apparel and travel goods companies – including Target, Gap, Under Armour, Wal-Mart, Dick’s Sporting Goods and The North Face – sent a letter to Congress arguing for a vote on the TPI by the end of this year.

The groups, which include the National Retail Federation, the Retail Industry Leaders Association and the Footwear Distributors and Retailers Association, argued the industry would save more than $1 billion in duties in the first year after TPP’s ratification.

For the U.S., which still face high tariffs and other non-tariff trade barriers across TPP countries, the TPP represents a once-in-a-generation opportunity to reduce costs and open new markets for U.S. brands and retailers,” the letter said.

In May 2016, OIA’s board of directors approved a formal position statement in support of TPP

“TPP is a groundbreaking trade agreement that will help lower costs on outdoor apparel, footwear and equipment, fuel innovation and job growth and create new markets for ‘Made in USA’ products,” said OIA Executive Director Amy Roberts. “Just as important, the TPP requires tough standards and enforcement on labor rights and the environment, a great step forward for U.S. trade policy.”

However, four of OIA’s 16 board members voted against the statement and opposed TPP, including Patagonia, highlighting some of the concerns around one the most far-reaching free-trade agreements in history.

New Balance, Patagonia Oppose Pact
In a statement in November 2015, Patagonia had said it opposed the agreement due to “serious” social and environmental concerns.

“The proposed trade agreement between the U.S. and 11 other Pacific Rim nations, crafted behind closed doors over a five-year period, may indeed cut tariffs, increase trade and build closer economic and regulatory relationships among its signatories, as its proponents say,” wrote Rose Marcario, Patagonia’s CEO, at the time. “But it will also weaken worldwide labor standards, harm the global environment, diminish regulatory safeguards and enable corporations and individuals that already have far too much influence gain even more at the expense of everyone else.”

New Balance, the largest domestic athletic-shoe manufacturer, had long been neutral on the controversial trade deal for years. In April 2016, however, New Balance came out loudly against the trade accord, arguing that the phase-out of tariffs on footwear made overseas, particularly in Vietnam, would happen too quickly and put New Balance’s domestic manufacturing at a competitive disadvantage.

New Balance said it had only kept quiet over the years because federal officials told the company that if it did so, the company would get a shot at a military contract for athletic sneakers that never arrived.

The Obama administration negotiated the trade pact for nearly eight years. Speaker Paul Ryan and other congressional Republicans worked with Obama to pass legislation granting so-called fast-track authority to negotiate it over Democratic objections. But with skepticism continuing within Obama’s own Democratic Party and the pact turning into a campaign issue, the former president never sent it to Congress for ratification.

Democrats and labor groups praised Trump’s move.

Senator Bernie Sanders, who campaigned hard against the TPP in last year’s Democratic presidential primaries, said in a statement, “I am glad the Trans-Pacific Partnership is dead and gone. For the last 30 years, we have had a series of trade deals — including the North American Free Trade Agreement, permanent normal trade relations with China and others — which have cost us millions of decent-paying jobs and caused a ‘race to the bottom’ which has lowered wages for American workers. Now is the time to develop a new trade policy that helps working families, not just multinational corporations.”

Said Teamsters Union President James Hoffa said in a statement, “With this decision, the president has taken the first step toward fixing 30 years of bad trade policies that have cost working Americans millions of good paying jobs.”

Without the U.S., the future TPP is now in flux. Trump may replace TPP with other, narrower trade deals. Bilateral trade agreements with individual countries could give the U.S. more bargaining power than being part of larger group.

China Seen By Some As Winner
To some, China will wind up the big winner as the deal was expected to help America better compete in the Pacific Rim.

“Abandoning TPP is the wrong decision,” said John McCain, the Republican senator from Arizona, said in a statement. “Moving forward, it is imperative that America advances a positive trade agenda in the Asia-Pacific that will keep American workers and companies competitive in one of the most economically vibrant and fastest-growing regions in the world.”

Tom Linebarger, CEO of Cummins Inc. and chair of the Business Roundtable International Engagement Committee, which supported the agreement, added in a statement, “The fact that our major foreign competitors — China and the European Union — are moving forward with their own trade agreements in the Asia-Pacific will make it even more difficult for the United States to compete.”

Matt Priest, president and CEO, FDRA, said, “While not a surprise, we are extremely disappointed that the U.S. has withdrawn from the Trans-Pacific Partnership (TPP) because of the significant lost opportunity for American footwear consumers and businesses. This 12-nation agreement involved key markets for the U.S. footwear industry, including Vietnam and Japan, and would have saved U.S. footwear companies and consumers more than half a billion dollars a year. FDRA will continue to support efforts for U.S. bilateral free trade agreements with these nations, and we stand ready to work with the President on trade agreements that will deliver real value for American footwear consumers and strengthen U.S. footwear companies.”

Trump has also signaled plans for the renegotiation of NAFTA, the free trade agreement between the U.S., Mexico and Canada. The deal was intended to eliminate most trade tariffs between the three nations, increase investment and tighten protection and enforcement of intellectual property. Drafted by previous Republican administrations including President George H. W. Bush, NAFTA was signed by President Bill Clinton in 1994. The deal has long been divisive, with critics blaming it for lost jobs and lower wages. On the updated White House website, the Trump administration has vowed to withdraw from NAFTA “if our partners refuse a renegotiation that gives American workers a fair deal.”

Trump is expected to soon meet with the leaders of Canada and Mexico to explore some changes.

“We’re going to start renegotiating on NAFTA, on immigration, and on security at the border,” Trump said at the start of a swearing-in ceremony for top White House staff. “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.”

Image courtesy International Trade Administration