In Defense of the Trans-Pacific Partnership

The fate of the Trans-Pacific Partnership (TPP) is looking bleaker by the day. While President Obama and many Republican members of Congress continue to drum up support for the deal, all three remaining presidential candidates oppose it. Should TPP die, this populist political season will have killed a modest but rewarding economic and geopolitical arrangement for the United States.

TPP is a trade accord between 12 Pacific Rim nations aimed at reducing trade barriers by lowering tariffs, strengthening intellectual-property protections, and allowing investor-state disputes to be resolved through a predictable and transparent legal regime. Signed in Auckland, New Zealand earlier this year, TPP awaits approval by the legislatures of various countries, including the United States.

While TPP’s prospects for Congressional passage once appeared formidable, it now seems to be going nowhere fast. Congressional Republicans are increasingly less willing to cooperate with President Obama on any matter during his last year in office—with the potential Supreme Court confirmation of Judge Merrick Garland as one example.

Many partisans hostile and favorable to TPP are symmetrical in their wrongheaded approach to the trade accord’s magnitude. The issue neither portends an economic doomsday nor a renaissance if it comes to fruition. More likely, it is appropriate to regard it with lukewarm approbation. As Nobel Prize-winning economist Paul Krugman explains:

The first thing you need to know about trade deals in general is that they aren’t what they used to be. The glory days of trade negotiations — the days of deals like the Kennedy Round of the 1960s, which sharply reduced tariffs around the world — are long behind us.

Why? Basically, old-fashioned trade deals are a victim of their own success: there just isn’t much more protectionism to eliminate. Average U.S. tariff rates have fallen by two-thirds since 1960. The most recent report on American import restraints by the International Trade Commission puts their total cost at less than 0.01 percent of G.D.P.

However, despite the exaggerated economic importance placed on TPP by various lobbying efforts, most economists (with Paul Krugman being a notable exception) do support TPP. For example, the nonpartisan Peterson Institute for International Economics (PIIE) contends TPP  “will increase annual real incomes in the United States by $131 billion, or 0.5 percent of GDP” by 2030. These numbers are not a game-changer in the context of an $18 trillion economy, but they are also nothing to scoff at.

This increase in real incomes for U.S. workers, PIIE asserts, will be achieved as a consequence of “increasing annual exports by $357 billion, or 9.1 percent of exports, over baseline projections by 2030.” Additionally, consumers will benefit as they gain access to cheaper imports.

The great fear with TPP, as was the case with the North American Free Trade Agreement (NAFTA) and virtually every other free trade agreement, is that the United States will lose high-paying manufacturing jobs to low-skilled competition in foreign countries. The harsh truth is those jobs will not come back regardless of TPP’s fate. Globalization is on an inexorable trend that will not reverse course. Moreover, advances in technology have meant millions of workers have lost jobs to automation. Last year, U.S. industrial output was at a near record high despite millions of fewer workers in the industry, according to the Bureau of Labor Statistics.

“The great fear with TPP, as was the case with the North American Free Trade Agreement (NAFTA) and virtually every other free trade agreement, is that the United States will lose high-paying manufacturing jobs to low-skilled competition in foreign countries. The harsh truth is those jobs will not come back regardless of TPP’s fate.”

Furthermore, while the wretched reality is that these high-paying manufacturing jobs will not return to the United States, TPP—via worker protections such as unionization—encourages the creation of these jobs in poor countries like Vietnam. According to Eurasia Group, increased trade due to the lowering of import duties in the United States and Japan will increase Vietnam’s GDP by 11 percent over a ten-year window. TPP will be a boon for Vietnamese apparel manufacturers. Also, it will give capitalism—the greatest reducer of poverty and misery in China since Deng Xiaoping’s opening of the country in 1978—a much needed boost in Southeast Asia. Vietnam deserves that opportunity.

From the perspective of the United States, the prospective geopolitical advantages for a successful TPP are also significant. The agreement forges an official economic and implicit political alliance between the United States and all the major players in the Asia-Pacific region except China and South Korea, the latter of which signed a separate bilateral free trade agreement with the United States in 2010. TPP creates another avenue for American values and interests to be served in the Asia-Pacific without granting the United States’ primary competitor, China, the ability to meddle in its arrangements. It also denies China the legitimacy afforded on the international stage by being a party to a multilateral organization requiring competence, efficiency, transparency, accountability, and confidence in a non-corrupt form of rule of law.

President Obama signed and sealed TPP. The United States Congress should deliver it.

Image: Leaders of prospective member states at a TPP summit in 2010. (Gobierno de Chile, Wikimedia commons)


Marco F. Moratilla works for New Magellan Venture Partners, LLC, a venture capital firm. He has experience at the National Security Archive and the U.S. House of Representatives. He holds an M.A. in international affairs from The George Washington University and a B.A. in political science from the University of California, San Diego. His work has appeared in International Affairs Review. A native Californian, he spent his formative years in Madrid, Spain.

 

2 comments

Submit a comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s