(Photo: Ron Sachs, Pool/European Pressphoto Agency)
President Trump’s order to scrap U.S. participation in the 12-nation Trans-Pacific Partnership agreement reverses decades of pro-trade policies pursued by his predecessors.
Trump isn’t entirely opposed to trade deals. But as a real estate developer accustomed to prolonged negotiations, he sees the the multilateral treaty as a pact filled with superfluous concessions to other nations. Wilbur Ross, his Commerce secretary nominee, told lawmakers during a confirmation hearing last week that he will sell the idea to Trump that the U.S. should seek more agreements between the United States and one other country, which are “easier and quicker to negotiate” than those involving multiple nations.
ARGUMENT AGAINST TPP
In opposing the deal, labor unions are primarily concerned that the TPP inhibits domestic investment, particularly in manufacturing, by offering benefits to U.S. companies that relocate operations and jobs abroad. They say it also loosens restrictions on foreign companies that export to the U.S., hurting domestic competitors.
For example, the agreement with South Korea requires that only 35% of the parts of products coming into the U.S. duty-free originate in Korea, which means the rest could come from parts made in China or other places, according to the Communications Workers of America. The TPP could be used as a “backdoor” for Chinese products to come into the U.S. duty-free and hurt domestic competitors, it said.
Critics also say the TPP would be the latest in a string of failed trade policies that have contributed to wage stagnation in the U.S. Working-class Americans already lose about $1,800 annually because wages have been depressed by companies choosing to operate in countries with lower wages, according to the left-leaning Economic Policy Institute. “It’s a race to the bottom on wages,” said Robert E. Scott, senior economist for the Economic Policy Institute.
A NEUTRAL ASSESSMENT
In a report last year, the U.S. International Trade Commission, a nonpartisan federal agency, had a more optimistic outlook, saying the agreement would result in a net increase of 128,000 full-time jobs in 15 years. But the agency estimated that the TTP would boost U.S. gross domestic product only by a modest 0.15%, or $42.7 billion, by 2032.
Output in manufacturing, natural resources, and energy would drop of 0.1%, with the TPP agreement in place, the agency predicted. In 15 years, output would grow 0.5% in the agriculture industry and 0.1% in the services sector, the ITC said.
The ITC concluded that the TPP would contribute to modest growth in American companies’ business abroad. U.S. exports and U.S. imports are projected to grow by 1% and 1.1%, respectively, in 15 years as a result of the TPP.
ARGUMENT FOR TPP
Former president Barack Obama said the TPP’s benefits would touch many sectors of the U.S. economy. “Building walls to isolate ourselves from the global economy would only isolate us from the incredible opportunities it provides,” he said.
“Although it is correct that TPP goes beyond previous trade agreements, it also reduces traditional tariffs and quotas,” Jeffrey Frankel, professor of capital formation and growth at Harvard Kennedy School, said in an editorial for TheBoston Globe. “It is true that the United States will not be lowering many such import barriers under TPP, because we don’t have many. But other members around the Pacific Rim have lots. TPP will lower their trade barriers.”
The ITC said some details of the agreement — such as rules for protecting data flows and establishing standards for customs, sanitary conditions and intellectual property rights — would be more difficult to quantify but be just as beneficial to U.S. exporters. “TPP would generally establish trade-related disciplines that strengthen and harmonize regulations, increase certainty, and decrease trade costs for firms that trade and invest in the TPP region,” the ITC said.
Contributing: Brent Snavely and Chrissie Thompson, USA TODAY Network
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