There's Still a Chance to Save the Trans-Pacific Partnership
After Trump’s surprise upset victory last week, it is clear that the United States will soon have a president who does not support the Trans-Pacific Partnership (TPP). Unfortunately, the Obama administration recently said that it is giving up on passing TPP in the lame duck session, citing a lack of congressional support. This would be a mistake, and Congress should use the time it has with a pro-TPP president to ratify the trade deal.
Some have argued that no matter what rhetoric a presidential candidate uses on the stump, every president since FDR was forced to bow to the overwhelming consensus among economic experts that trade is good for the economy. While this is cause for optimism, we may not have time to wait for our next president to come around on trade.
A study released by White House economists this month found that Pacific Rim countries are hoping the U.S. decides to pass TPP, but will turn to China as an alternative if it looks like the deal won’t pass. Already, several countries involved in TPP are looking to the Chinese-led Regional Comprehensive Economic Partnership (RCEP), a competing trade deal in the region. While some countries intended to join both, allowing TPP to flounder while the RCEP gains strength could be devastating for U.S. economic and foreign policy goals.
Scuttling TPP could have other negative effects for U.S. economic interests. Pacific Rim countries have warned that U.S. credibility could suffer when it comes to negotiating trade deals if Congress fails to ratify the deal. The president negotiates trade deals through his trade representative, but his credibility is damaged when other countries have no confidence that Congress will ratify any agreement that is made. This could be especially problematic when it comes to other trade deals that will be on the agenda in the near future, such as a deal with a post-Brexit UK.
While TPP is not a perfect deal, it contains more than enough components for all Americans to get behind. Conservative estimates have TPP adding $14 billion a year to the U.S. economy by 2030, with benefits likely to be larger due to improved potential for investment. TPP accomplishes this by eliminating 18,000 tariffs on U.S. goods, adding to the estimated 15.6 million American jobs currently supported by exports to TPP countries.
TPP also makes it possible for the 98 percent of US exporters, small-to-medium sized businesses who are not equipped with armies of lawyers, to navigate complicated regulations and tariff laws by simplifying or cutting red tape. Lastly, TPP protects Internet freedom by preventing countries from erecting Internet firewalls that prevent data from crossing national borders.
While free trade is often derided for killing jobs, especially in the manufacturing sector, the reality is that 88 percent of the decline in manufacturing jobs is attributable to productivity growth — not trade. The “decline” of the U.S. manufacturing industry is likewise a myth; manufacturing exports have quadrupled over the last 25 years as trade has liberalized.
Free trade is also criticized for leaving the little guy behind. But studies, including recent research by UCLA, have shown that cutting all trade agreements would result in an effective tax of 28 percent on the wealthiest 10 percent of Americans and a tax of 63 percent on the poorest 10 percent of Americans.
When Congress meets for the lame-duck session, it should set aside false rhetoric about trade and do what is best for the country’s economy by ratifying TPP. It may be the last chance we have.