TPP: A Lost Opportunity Or Disaster?
Trans-Pacific Partnership: A Lost Opportunity Or Disaster?
For many, the greatest flaw of the TPP was a process with little to no transparency. With such a large impact on our economy -- no matter the outcome -- such secrecy brings with it fears of back door deals that benefit a few at the expense of many. The Trans-Pacific Partnership (TPP) is a trade agreement between the 12 countries of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. These countries, located along the Pacific Ocean rim, collectively account for almost a third of global trade and about 40 percent of global gross domestic product. While the treaty was signed in February of 2016, only Japan has ratified it as of February 2017.
Obama's Security Concerns
Former President Obama pushed for the agreement despite opposition from his own party, because he considered the agreement a way to secure American interests and dominance throughout Asia. He considered that, in the absence of such an agreement and China's refusal to play by the rules of international trade, the Asian Giant would become the economic and trade leader in the region, potentially snowballing into a matter of national security.
However, Trump has been vehement about his opposition to the agreement throughout his campaign. On his first full day in office, President Trump met with domestic manufacturers, then signed an executive order withdrawing the United States from the negotiating process in response to labor groups concerns that TPP would continue the trend of shifting American manufacturing jobs overseas to nations with lower wages and fewer labor protections. Echoing their issues, Scott Paul, President of Alliance for American Manufacturing (AAM) said:
If today is any indication of the Trump administration’s focus on manufacturing, it is an encouraging start. Withdrawing from the TPP is a first step in a long road toward reforming trade policy and we look forward to working with the administration on finding solutions to create trade deals that keep jobs here in America.
AAM highlights facts and findings from many reports that support the theory of loss of U.S. factory jobs if the TPP was signed:
- The TPP would have lowered tariffs and some other non-tariff barriers to trade, but the agreement had no protection from currency manipulation.
- TPP text substantially weakens the rules of origin requirements in the NAFTA agreement. That means that goods from countries like China could have been incorporated in products assembled in the TPP region and thereby enjoy the benefits of tariff-free access to the U.S. market without sharing any of the responsibilities of TPP membership.
- According to the U.S. International Trade Commission (ITC), the United States’ GDP would be about 0.15 percent higher, and could produce roughly 128,000 American jobs in 2032. However, none of those jobs were in manufacturing.
- The same ITC report finds that American manufactured goods exports could be more than $15 billion higher than without the agreement, but that gain would be eclipsed by the $39.2 billion increase in imports.
- The Peterson Institute for International Economics said that 50,000 U.S. workers, most in manufacturing, could be out of a job each year during TPP's implementation, and the Global Development and Environment Institute at Tufts University cites nearly 450,000 lost manufacturing jobs.
US businesses are concerned that they wll lose access to new markets.
- It was estimated that TPP could generate global income benefits of $223 billion a year within a decade, while also increasing annual world exports by $305 billion among the member countries.
- According to the Business Roundtable, the value of goods and services exported to TPP countries from the US, would have been to the tune of $904.8 billion, accounting for 45% of the total exports.
- The TPP would have phased out some 18,000 tariffs that the other 11 countries have on imports from the United States, thus reducing their cost to foreign buyers.
- TPP withdrawal, particularly through the agriculture lens, means significant amount of dollars lost on sales for farmers and ranchers.Farmers were set to see the removal of trade taxes that currently prevent them from selling products overseas, particularly poultry.
- Tech companies would also have gained from reductions in regulations and entry into new geographies.
- Research and Development departments of pharmaceutical companies would have received more years of patent protection that would have in turn lessened the competition from generics in Asia. US automakers hoped to increase exports as a result of slashed tariffs in Asia.
- Other industries have also been affected, including aerospace and apparel.
Most importantly, the TPP addressed a number of critical issues in the modern global economy: financial services, telecom, e-commerce, state-owned enterprises, transparency, government procurement, intellectual property, labor, and the environment. It would have been the exemplar for all future multilateral and regional trade deals.
Not Everyone Wins Or Loses
The realty is that in a global economy, protections, tariffs, currency manipulation, labor rights, taxes and so forth have unintended consequences. The impact of those consequences can take years to become visible, leading to new agreements and regulations designed to correct flaws or increase benefits. As important, what may benefit steel workers can harm tech workers, and what benefits pharmaceutical companies can negatively impact US consumers; such trade-offs lead to impasses as fears grow about damage to one interest or another. The question that will confront this administration is how to negotiate extremely complex trade deals with a clarity that helps Americans understand inevitable trade offs. Especially in the growing Asian economy, we can no longer ignore our impact on them or their impact on us.