The short answer is politics not economics. Trump likes to apply leverage when conducting negotiations about any issue specifically for negotiating bilateral trade agreements where the US economy towers any country’s GDP and it can exercise its weight. In multilateral trade agreement the US is one of many countries entering the agreement and its GDP can be dwarfed by the cumulative GDP’s of the countries entering the agreement, therefore, little leverage can be exercise which was the case of TPP.
In order to understand the overall picture of how international trade affects the economies of participating countries it is necessary to start with the basics.
By definition: Bilateral trade agreements are between two nations which gives them favored trading status with each other. The goal is to increase each country's economic growth.
Bilateral agreements are made in order to cover five general areas where they standardize business operations, to level the playing field. That keeps one country from copying the other's innovative products, dumping products, or using unfair subsidies.
Additionally, these agreements also standardize regulations, labor standards and environmental protections. A prime issue of the agreement is the elimination of tariffs and other trade taxes. This gives companies within both countries a price advantage.
Advantages of bilateral trade Agreements
These agreements are easier to negotiate than multilateral trade agreements, because they only involve two countries, meaning they can go into effect faster and securing trade benefits promptly.
It is easier to negotiate bilateral agreements since there are only two parties and it is easier to withdraw from it.
Neither the North America Free Trade Agreement (NAFTA), nor the TPP require any kind of international agreement for withdrawal. Consistent with authorizing US law, TPP’s Article 30.6 and NAFTA’s Article 2205 provide that a withdrawal is effective after six months’ notice.
Disadvantages of Bilateral Trade Agreements
They can more often than not trigger competing bilateral agreements between other countries. This can carve away the advantages the FTA had provided between the original two nations. The distinction between bilateral and multilateral agreements is not as crispy clear as we would like it to be.
A Good Example
The Transatlantic Trade and Investment Partnership is set to remove current barriers to trade between the United States and the European Union and If it passes it would be the largest agreement so far, even than NAFTA. It is currently under arbitration and considering that the EU consists of many member countries, it can negotiate as one entity. It can also be said that this makes the TTIP a bilateral trade agreement.
Advantages of Multilateral Agreements
Multilateral agreements can promote international standards as well as generate the efficiency's gained by a bigger market. Tariffs on merchandise are relatively low across most product-categories and non-tariff barriers for both goods and services which have now become key issues of trade negotiations. Additionally, there is international rivalry for standard setting, with the competition playing out across fields in areas such as energy, environmental rules, and information and communication technologies. When countries agree on common standards and rules, they can create scale and competitive advantages for their products.
An important benefit of multilateral trade agreements, for exporters, is accumulation, also known as “cumulation.” For example, TPP allowed accumulation of rules of origin making it easier for businesses to establish supply chains with hassle-free country of origin restrictions. The TPP allows components from TPP countries to be combined into a finished product with simplified origin rules.
According to the European Union (EU) it has developed the “pan-Euro Mediterranean “ cumulation,” which is a diagonal accumulation of origin regime. The system allows for the accumulation between the EU members, European Free Trade Association (EFTA) states, Turkey, countries that signed the Barcelona Declaration, the Western Balkans and the Faroe Islands. The parties include a network of free trade agreements with similar origin rules. This system allows these countries to accumulate components from other pan-Euro Mediterranean countries.”
Enlarged General Production
The purpose of trade is to deliver access to a greater variety of merchandises and services. According to the Heritage Foundation, free trade fosters competition, spurring companies to innovate and develop better products
Economic Development of Disadvantage Areas
Free trade compensates risk-taking through increased sales and market share of a given product. When a large country like the United States take advantage of free trade, its economy as a whole benefits. Economic growth spills over into smaller countries that are economically disadvantage or stalled in poverty but are open to trade and international Cooperation.
Free trade forces companies to support and maintain the rule of law. The World Trade Organization requires members to honor all agreements and abide by all WTO judgments. Countries that do not abide the rules lose business and investors move their money away to countries that play by the rules.
Market Allocation of Resources
Free trade improves the allocation of global resources. When countries or people can trade for the articles they need, they can focus on making the ones they can make best and thus, acquiring competitive advantage. Imports tend to placate inflation, as each product or service flows from the most competitive supply source to the lowest.
Incentives for Business and Individuals
Trade agreements open markets and offer business incentives and protections. This includes obligations to protect intellectual property rights labor standards and open new markets to competition. Also, it oversees environmental standards and improves customs simplification. Lastly, global investment allows for greater diversification and risk sharing of financial markets.
Increase in U.S. Exports in Millions of U.S. dollars Since Entering FTA Agreements.
Source: U.S. Department of Commerce
According to the International Affairs of the US Chamber of Commerce the Country has benefited from international Trade for the past 4 decades.
“The study employed a computable general equilibrium economic model used by economists worldwide known as the Global Trade Analysis Project (GTAP). This model, developed in the early 1990's is now maintained—and constantly enhanced—by a consortium of 31 U.S. and international organizations, including the U.S. International Trade Commission, the WTO, the World Bank, and half a dozen U.S. government agencies. The results of this comprehensive study are impressive. The increased trade brought about by these FTAs boosted U.S. output by more than $300 billion and in turn supported 5.4 million U.S. jobs. No other budget neutral initiative undertaken by the U.S. government has generated jobs on a scale comparable to these FTA's, with the exception of the multilateral trade liberalization begun in 1947.”
The broad historical context for U.S. manufacturers in assessing value-added in manufacturing—this approach avoids double counting that can result along manufacturing supply chains—U.S. manufacturing value-added rose by 58% between 1993 and 2013 in real terms, according to the U.S. Department of Commerce.
The long trend has been that U.S. manufacturing value-added has grown eight-fold since 1947 in real terms. Contrary to popular fallacy, the U.S. share of world manufacturing output, on a value-added basis, has remained fairly steady at approximately 20% in four decades. American manufacturers were hurt by the painful 2007–2009 recession. However, in the previous two decades, U.S. manufacturers established new records for output, revenues, profits, profit rates, and return on investment.
