By Jeffrey Rothfeder
President Obama has made the first of a series of last-ditch efforts to persuade Congress to approve the Trans-Pacific Partnership—an agreement his Administration spent five years negotiating. Photograph by Paul Taylor / Getty In a speech before the New York Economic Club last week, Donald J. Trump offered up his economic plan for the future. Unsurprisingly, one of the foundations of his plan was ripping up “terrible” trade agreements and, especially, a vow to “keep America out of the Trans-Pacific Partnership.”
Trump isn’t the only one to object to the T.P.P., of course. Bernie Sanders hates it with a passion, and Hillary Clinton, who once favored it, now opposes it. Even Lawrence Summers, the former Treasury Secretary and a free-trade advocate, has argued that any trade gains the T.P.P. produces might not be worth the effort expended to reach an agreement.
But on Friday, President Obama made the first of a series of last-ditch efforts to persuade Congress to approve the T.P.P.—an agreement his Administration spent five years negotiating. He met at the White House with a bipartisan group of business and political leaders, including Ohio’s Governor John Kasich, the Former New York City Mayor Michael Bloomberg, and Louisiana’s Governor John Bel Edwards, to publicize the advantages of the trade pact and plot a lobbying strategy. In a bit of political theatre, Kasich, who pointedly has not endorsed Trump after a bitter primary campaign, took to the White House briefing room following the meeting to simultaneously wave the flag for the T.P.P. and tweak Trump’s unsophisticated trade views. “Blaming somebody’s loss of a job on somebody who came in from Mexico is a simple way to scapegoat,” Kasich told reporters.
The antipathy toward the T.P.P. has come as something of a slow-motion shock to members of the economist class. While the agreement’s opponents have legitimately criticized all trade deals as being imperfect—ultimately benefitting multinationals by opening up new inexpensive labor markets—the T.P.P. provides unprecedented worker and environmental protections. As Mireya Solís, a senior fellow at the Brookings Center for East Asia Policy Studies, told me, “I don’t know how we got to the point that T.P.P. became a pariah; it is the most far-reaching, aggressive, important and advantageous trade pact in two decades.”
Economic orthodoxy suggests that trade agreements lead to more growth. And there is new evidence that seventeen U.S. free-trade agreements got the formula more or less right. A recent study by Third Way, a think tank which describes itself as “moderate,” examined agreements put in place since 2000 with such countries as Australia, Panama, and Singapore. In the years after implementation, the U.S. balance of trade in goods improved an average of $1.8 billion with each of these countries. U.S. exports—things like aircraft, electric machinery, automobiles, and medical instruments—increased by an average of fifty-two per cent annually, while imports rose by only twenty-six per cent. In 2014, the U.S. had a $30.9 billion trade surplus in goods with these countries, compared to a deficit of $2.8 billion in the year before each trade deal was in force. Third Way’s economics vice-president, Gabe Horwitz, told me that he and his colleagues were “astounded by the outcome of this research. Even we were beginning to believe some of the propaganda against trade deals.”
Many of the countries in the T.P.P.—a twelve-nation bloc stretching from Chile and Mexico through Japan and Vietnam to New Zealand and Australia—now levy tariffs on U.S. exports making American agricultural products like cheese and poultry and manufactured goods like car engines, routers, and computers more expensive. While it’s impossible to predict precisely the effect of eliminating or sharply lowering tariffs on the eighteen thousand items included in the T.P.P. agreement, a 2015 report by the economists Peter A. Petri, of the Brandeis International Business School, and Michael G. Plummer, of Johns Hopkins University, forecast that the trade pact will increase exports by nearly ten per cent. Moreover, they estimate that real incomes in the U.S. would rise by a hundred and thirty-one billion dollars annually, or 0.5 percent of G.D.P., primarily because, on average, wages for export-intensive jobs are higher than for other positions.
The most persistent—and resonant—charge levelled against the T.P.P. is that it will destroy American jobs. When this argument is made, the first piece of evidence raised is almost always the North American Free Trade Agreement, which the U.S. entered into with Mexico and Canada, and which is blamed for siphoning off millions of manufacturing jobs. But the facts are inconvenient: in the eight years after NAFTA was approved, in 1993, American manufacturing jobs expanded and researchers who have studied NAFTA—including the nonpartisan Congressional Research Service—believe that, over all, the agreement has had little impact on U.S. employment. (The C.R.S. also undermined the argument that NAFTA was a huge hit, saying its effect on the U.S. economy was minimal: “In reality, NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters.”)
Of course, the benefits that economists find in trade deals—the trade surpluses and income gains—amount to a small proportion of the eighteen-trillion-dollar U.S. economy. And while the pact would provide more trade channels for the U.S., it would do the same for the other countries in the partnership. As a result, lower-tier jobs—such as less skilled manufacturing positions—could be lost to low-wage nations. And that would further exacerbate a chronic issue for those in the American working class who are excluded from employment because they lack the technical know-how for modernized American plants.
This is, obviously, a huge problem, but it would probably exist without trade agreements. Most economists maintain that the loss of five million American manufacturing jobs since 2000, including those affected by China’s growth as an economic force, was inevitable, the victim of globalization and extraordinary technology gains that allow producers to make things with cheaper or fewer workers. Also important to consider is the fact that the U.S. has added a million generally high-paying and high-skilled manufacturing jobs during Obama’s time in office, in part because of trade pacts.
The elimination of U.S. import tariffs in the T.P.P., while certainly providing a huge market for foreign goods, benefits U.S. consumers as well. More than sixty per cent of imports are parts and components that go into U.S. products, and a large portion of the rest are staple items to which people on limited budgets are particularly price sensitive. The shoe industry has taken up this point recently by arguing that, under the T.P.P., the removal of American import taxes (as high as sixty per cent for some shoes) would provide six billion dollars in savings for U.S. footwear consumers and companies over a decade. Cheaper shoes from abroad might threaten what’s left of the domestic shoe industry, but the savings from the less expensive imported shoe parts could also help it, allowing some of the savings to be plowed back into advanced manufacturing facilities in the U.S.
One particularly vibrant criticism of previous trade agreements is that they didn’t include strong labor standards for workers abroad, allowing multinationals to move jobs to countries where workers toil under harsh conditions for little pay. Existing trade agreements like NAFTA often give lip service to improving worker compensation, benefits, and the factory environment, but they are unenforceable.
The Obama Administration tried to address those previous deficiencies in the T.P.P. Many experts believe that, as Third Way’s Horwitz told me, “T.P.P. has the highest labor standards of any trade agreement,” including the right to unionize and collective bargaining, minimum-wage tiers, and child-labor restrictions. Unlike prior pacts, the T.P.P. creates a process in which member countries that fail to meet these standards can be taken before mediation panels and, if found culpable, fined and stripped of their trade benefits. It’s also worth noting that the T.P.P. supplants and upgrades worker standards in free-trade pacts previously signed by the U.S. with Australia, Singapore, Canada, Mexico, Chile, and Peru.
China was invited to be part of the T.P.P. pact but declined. The fact that China was not a participant in the negotiations probably made including tougher labor and environmental rules a bit easier. And, just as important, the White House views the T.P.P. as a critical leg in refocussing American global strategy toward the Pacific, where much of the economic development in the world is occurring. By expanding U.S. influence over the region, the T.P.P. could serve as a bulwark against China’s outsized shadow.
That strategy is now in some peril, as both U.S. Presidential candidates campaign against the trade accord. Sensing anxiety about U.S. intentions among T.P.P. nations, China has stepped up efforts to negotiate its own Asian trade pact that comprises T.P.P. countries plus India and South Korea, known as the Regional Comprehensive Economic Partnership. Not surprisingly, R.C.E.P., which would be the world’s largest free-trade bloc, is far less ambitious than the T.P.P., but it would satisfy the region’s primary desire to lower the obstacles to trade between nations. And, from an American perspective, R.C.E.P. would effectively curtail U.S. influence in the Pacific while severely diminishing the U.S.’s global stature, trade experts believe. As Brookings’s Solis told me, “The countries in the region want America to lead, but if the U.S. is so politically tied up in knots to not follow through on its promises then countries will have to turn elsewhere. And the U.S. role in the world will never be the same.”
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