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Why Obama Is Still Trying to Pass the T.P.P.

Sep 27 2016
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, progressive, 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.”)

By Jeffrey Rothfeder via The New Yorker

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