Who's #WINNING in the Trans Pacific Partnership trade deal?

By: 
October 06, 2015

The Trans-Pacific Partnership (TPP) received a green light on Monday, Oct. 5, and is destined to become what the New York Times called the "largest regional trade accord in history, a potentially precedent-setting model for global commerce and worker standards that would tie together 40% of the world's economy." However, there are some hurdles to cross.

For starters, there's the U.S. Congress, which could spend months debating the TPP before deciding to approve—or not—the pact. Not to mention dozens of organizations from environmental groups to unions to MoveOn.org that formed a coalition to fight the pact. As far back as Feb. 19, 2015, an article in Manufacturing Technology News outlined what these groups feel is wrong about the deal. Many are still stinging over memories of NAFTA, and how that affected the U.S. economy.

Richard McCormack, editor of Manufacturing Technology News, wrote "even the country's largest teachers union is fighting against adoption of Obama's free-trade agenda. Lorretta Johnson, Secretary-Treasurer of the American Federation of Teachers, said, ‘We have seen how bad trade deals have hurt the U.S. economy, and allowing the administration to negotiate a deal in a veil of secrecy sets a bad precedent and begs the question: What is there to hide? And I remember NAFTA and the impact it had on the public-sector unions: Layoffs, furloughs and all the lost jobs in the public sector.' "

Environmental groups such as the Sierra Club are afraid that approving the TPP will result in the trashing of environmental laws. "Clean-air protections and wilderness preservation will not have a chance with the trade deals," stated Debbie Sease, Federal Campaign Director at the Sierra Club.

Low-wage countries in Central America fear that they will no longer be competitive in certain market sectors—particularly textiles—with Asian countries that can produce much more at an even lower wage, McCormack added.

Economist and Research Fellow at the U.S. Business and Industry Council Educational Foundation Alan Tonelson worries that the TPP will subject Mexico's economy and workers to new global pressures and trigger a new surge of economic casualties across the border.
 
"TPP"s overlooked potential to hammer Mexico and spark a new immigration crisis stems from a fundamental mistake made by American leaders and trade diplomats practically since the ink of the NAFTA began drying," writes Tonelson in his blog.
 
"American moves to increase trade with China proved especially damaging to other U.S. third-world trade partners, and Mexico was one of the countries plainly left in the dust. Washington has just agreed at the TPP talks to reduce the non-Mexican, non-North American content of vehicles that Japanese auto-makers can sell to the U.S. without any tariff penalty. Thus, the treaty could well cut the Mexican competitive comeback off at the knees," writes Tonelson.

According to the New York Times article, "Trans-Pacific Partnership Trade Deal is Reached," the TPP "would phase out thousands of import tariffs as well as other barriers to international trade . . . establish uniform rules on corporations' intellectual property, open the Internet even in communist Vietnam and crack down on wildlife trafficking and environmental abuses."

Will phasing out import tariffs really help the average consumer? Has the real cost of getting rid of import tariffs been evaluated yet? What will that mean for U.S. (or Australian or Canadian or Japanese) manufacturing companies that no longer have the protection of tariffs to be able to compete with other Pacific Rim nations?

We should be under no illusion that any of these "partners" will play by the rules. In the April 28 issue of Manufacturing Technology News, McCormack cited a study by Ernest H. Preeg of the Manufacturers Alliance/MAPI, released in April, which notes that the United States must take "a leadership role in addressing the underlying issues of the growing imbalances caused by China gaining an unfair trade advantage by manipulating its currency," something that the United States has always been reluctant to do.

"What worries Preeg is the most recent surge in the U.S. trade deficit in manufactured goods," noted McCormack. "For the five years ending in 2013, the U.S. trade deficit in manufactured goods worsened by $206 billion (from -$321 billion to -$527 billion). China's surplus in manufactured goods increased by $492 billion during that period, from $450 billion to $942 billion, and the EU's surplus increased by $300 billion, from $229 billion to $529 billion."

Preeg writes in his report that given "the manufacturing sector is highly technology-intensive, which is central to a number of national economic strategies, including the objectives of export-oriented growth and a large trade surplus," the United States "has seriously lagged behind" in this process "with an ever-smaller share of global exports and an ever-larger trade deficit."

With surging imports, writes McCormack in the Feb. 19 issue of Manufacturing Technology News, come lost manufacturing jobs—to the tune of more than 400,000. For the year 2014, "the U.S. trade deficit in goods cost the United States more than $2 billion a day and amounted to $2,303 for every American. The deficit caused the loss of hundreds of thousands of U.S. manufacturing jobs."

Will the TPP live up to the hype of the Obama administration and really be good for all countries involved by "leveling" the playing field through a reduction of border restrictions and tighter rules for state-owned enterprises? Or will it result in more lost U.S. manufacturing jobs, a higher cost of goods and IT services, and an increased trade deficit?

When you look at the 11 countries we're in the TPP with, we're already in a free trade agreement with two of the most important ones—Canada and Mexico. We already do a lot of trading with Japan, but given Japan's reluctance to import U.S. goods, the TPP might have some benefits for us with Japan. Australia and New Zealand are good trading partners, too. I'm just guessing from a non-economist perspective but I would doubt that Chile, Peru, Malaysia, Singapore, Vietnam and Brunei are going to buy billions of dollars worth of U.S. goods.

Figures for 2013 show that Singapore is listed as our 17th largest trading partner, with $49 billion in total goods traded (imports and exports) and $31 billion in U.S. exports, giving the U.S. a trade surplus with that country. Malaysia is our 20th largest trading partner, with $40.3 billion in total manufactured goods traded, and U.S. exports totaling $13 billion, giving the U.S. a $14.3 billion deficit.

Vietnam is our 27th largest trading partner, with $29.7 billion in total manufactured goods traded, with U.S. exports totaling $5 billion and imports from Vietnam at $24.6 billion, leaving the United States with a $19.6 trade deficit. Peru and Chile are numbers 32 and 33, respectively: We exported $10.1 billion worth of goods to Peru and imported $8.1 billion in goods; as for Chile, we exported $17.6 billion in goods and imported $10.4 billion.

At the bottom is Brunei, the 121st largest trading partner, with $576 million in total goods traded. Exports to Brunei totaled $559 million and imports accounted for $17 million in 2013, giving the U.S. a $542 million trade surplus.

All-in-all, this whole TPP agreement doesn't exactly feel like #winning! for the United States." In fact it feels like another losing proposition for U.S. manufacturing.

Scott Paul, President of the Alliance for American Manufacturing, pretty much summed up how most of the opponents to this deal feel when he tweeted Monday morning that the TPP agreement contains "no currency manipulation rules, weaker rules of origin and projected manufacturing trade deficits. TPP is not Made-in-America."

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