In his address to the nation this time around, President Obama gave us “the talk” about the Trans-Pacific Partnership, which he’s repeatedly touted as “the most progressive trade agreement in history.” Now that the U.S. and the eleven other participating Pacific Rim nations (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, but not Chinachinachina) have reached an agreement on the…agreement…after hashing it out for the last five years, he tells us it is “the best possible deal for American workers.”
Those aren’t exactly the most encouraging words, since it could end up meaning the best of the worst possible deals, if we’re lucky. In trying to decipher the details about this agreement, I’ve managed to liberate some excess thoughts through my hunt for information. Hopefully, it’ll make sense without prompting too great of an urge to wander off to chase butterflies or become stabby.
Obama informs us that in 2014, “we set a new record for American exports for the fifth year in a row, selling more than $2 trillion in goods and services.”
He’s correct. According to the U.S. Census, the amount of export payments the United States received last year was $2.34 trillion. However, the amount of import payments we made to other countries was $2.85 trillion. That’s a half a trillion-dollar gap.
Though we came out $233 billion ahead last year with foreign countries wanting our services (especially in the use of our intellectual property and in travel, financial, and transport services), we wanted $741 billion more of their goods than they wanted of ours. And with that overall balance deficit of goods and services being $14 billion greater through August of this year compared to the same time last year, we’re on course to further widen that import-versus-export payment deficit by the end of 2015.
“They want to buy American products,” Obama reassures us. “They want our cars; our music; our food.”
Yes, they want our music and other intellectual property. Yes, they want our cows. But we want their cars more than twice as much as they want ours.
The history of past trade agreements does not make this one look promising. In 1992, the Balance of Payments (BOP) on U.S. imports and exports was nearly even, but with trade enactments such as NAFTA, CAFTA, and the creation of the World Trade Organization since then, the balance deficit substantially increased. Only with the Great Recession of 2008 did things move back toward an equalization. However, the disparity has increased again in the years that have followed, as the chart from the U.S. Census below shows (clicky to enlargy):
Does anyone really think that this trade agreement is going to level that difference?
Obama does.
[With the TPP agreement,] we’re boosting America’s farmers, ranchers, manufacturers, and small business owners — make it easier for them to sell their products abroad.
That’s what it means to level the playing field for American workers and businesses. And when the playing field is level, and the rules are fair, Americans can out-compete anybody in the world.
The One President acknowledges that the U.S. ended up with the short end of the stick with past trade agreements, but he believes “TPP will change that.”
Now, I’m the first person who will say that past trade agreements haven’t always lived up to their promise. Sometimes they’ve been tilted too much in the direction of other countries and we haven’t gotten a fair deal. And that makes folks suspicious of any new trade initiatives. But let’s be clear. Our future depends not on what past trade deals did wrong, but on doing new trade deals right. And that’s what the TPP does.
Obama talks about “holding partner countries to higher standards and raising the wages” of workers in those countries. He says the TPP agreement “includes the strongest labor standards in history, from requiring fair hours to prohibiting child labor and forced labor. It includes the strongest environmental standards in history.”
It may sound nice. It may be the considerate, humanitarian thing to do to try to raise the poverty-level wages and improve the environment for workers abroad who manufacture the clothes we wear, who assemble the computers we use, who make the cars we drive.
But let’s be clearer. Because of the stricter standards on products from the other TPP countries, poor Americans who depend on being able to afford cheap foreign products will be the first to notice the implications of the agreement. The poor will be the first to be affected when they go to the big box stores for their everyday items. The TPP will take more of the bigger-ticket items like new automobiles out of their financial reach.
As for raising environmental standards in foreign workplaces, I’m sure that will go over well with those countries. The additional cost to the companies that try to comply with American-grade eco-standards will affect the prices on consumer goods here, as well.
The Economist-in-Chief reminds us that some countries levy high tariffs on the products we export to them, although he doesn’t call them tariffs. He calls them “foreign taxes.” He suddenly seems to care about American businesses paying taxes now that those taxes could interfere with his own plans. Funny man.
Most people who don’t have dead eyes and drool seeping from the sides of their mouths whenever Obama speaks can probably comprehend that a great deal of the companies in TPP partner nations will not be able to or just won’t comply with these new labor, wage, and environmental standards. So what will those companies do? They could move parts or all of their operations to China to beat the TPP system. The same goes for United States companies looking to manufacture goods that just became more expensive to produce in TPP countries. China could be getting a whole lot of new business in the future.
Obama doesn’t think so. He says that we need this agreement or else “competitors that don’t share our values, like China, will write the rules of the global economy. They’ll keep selling into our markets and try to lure companies over there; meanwhile they’re going to keep their markets closed to us. That’s what’s been going on for the last 20 years. That’s what’s contributed so much to outsourcing. That’s what has made it easier for them to compete against us. And it needs to change.”
While some Chinese businesses have voiced concerns about the consequences of TPP, others believe that any effort to put a dent in China’s bottom line could backfire because Chinese businesses could maneuver to avoid the tariffs they’ll still have by going through other Pacific Rim countries with which they share their own trade agreements. Chinese businesses may not get hurt from this agreement as much as their employees will when the businesses move some of their operations out of the country. And the Chinese could still lure plenty of companies to them with their lower restrictions and wages.
As for “what’s contributed so much to outsourcing,” let’s not bring up the factors right here that have led American companies to source outside the U.S. to save and make more money. Let’s not talk about how domestic policies have enabled China and other countries to compete against us. It couldn’t have anything to do with our own excessive labor standards (i.e., laws, laws, and more laws), forced wage raises (Fight For 15!), or our demanding environmental regulations (inconvenient would be a massive understatement), could it?
Getting back to the tariff issue, lowering tariffs on foreign imports could affect jobs here. For instance, the TPP would do away with the tariffs the US imposes on shoe imports, but the tariff has protected 1,400 American jobs for the last major American athletic shoe manufacturer, New Balance. About a quarter of the shoes the company produces for U.S. consumers are manufactured in the U.S. As with the other major shoe manufacturers like Nike and Adidas, the rest of New Balance’s shoes are made in China–where workers might be paid as low as $1.50 an hour–or they’re made in countries that are part of the TPP. With the costs of U.S.-bound products likely to rise in foreign TPP countries, the big shoe companies could consider moving all of their manufacturing operations to China. It will probably depend on whether the labor and operational costs exceed the cost of tariffs on Chinese-made products.
However, New Balance seems to have worked out a compromise in which the phasing out of shoe import tariffs will be more gradual so that New Balance has time to adjust. But it could just mean a slower death for those 1,400 jobs as New Balance adapts to the change by moving its remaining American manufacturing work to other countries.
“[U]nlike past trade agreements,” Obama claims, “these standards are actually enforceable.”
Hah! Yeah, sure. I would bet that the architects of those past trade agreements thought the same thing.
Obama is counting on TPP partner countries to enforce these new labor and environmental laws, but who’s going to make them enforce those laws? Us? How much is that going to cost us? What guarantees are there that these countries will comply? What sort of consequences will they face if they don’t? The president promises that this agreement won’t suffer from the same failures that other trade agreements did, but what assurances do we have of that?
Nobody knows, since the public has yet to see the finalized agreement. Obama says the public will get to see it in the coming weeks and months. Why not just release it all to the public now? Wikileaks allegedly got its hands on a section of the agreement having to do with intellectual property and released it online. Wikileaks states that the agreement will put lives at stake by changing patent rules that could make generic drugs more expensive.
There’s also concern about a provision in the agreement involving an international tribunal made up of participating private interests represented by gaggles of attorneys who would be able to make changes to the enacted agreement against the behest of affected nations. Republican Senator Jeff Sessions has read a draft of the TPP agreement and spoke out against this apparent tribunal. In writing about Sessions’ protestation, a blogger for the American Thinker noted that the TPP agreement looks like a you-scratch-my-back-and-I’ll-scratch-yours situation between Obama and the Grand Same-Old Party:
Apparently, there is an implicit agreement between the Republican establishment and President Obama. The Republicans get to regulate intellectual property rights around the world. Obama gets to regulate environment laws, labor laws, and immigration laws around the world, and in the United States.
Senator and presidential candidate Ted Cruz has said he’s also read the agreement and insists that his colleague’s concerns are unfounded. Cruz asserts that no changes to the agreement could be made without approval by Congress. For the sake of his campaign, he’d better be right about that.
Earlier this year, the Washington Post’s “Fact-Checkers” looked into administration claims that this agreement will “support an additional 650,000 jobs” and “provide $77 billion a year in real income,” but they found that the amount of new jobs will be zero because “imports would increase by virtually the same amount as exports.” All the TPP would do is shift jobs from one area to another, which would help some workers in certain fields but hurt many others in different fields.
Also, if the cost of labor and environmental regulations rise in the other TPP countries, so will the cost of the products made in those countries. American companies have been moving their manufacturing to other parts of the world because the costs of making their products here has gotten too expensive. Now businesses will move their manufacturing operations to countries outside of the TPP. That would make this deal a bust for a whole lot of people.
Regulations have become onerous enough at home. Imagine how foreign nations will take to those sort of regulations in their countries. Odds are…they won’t.
Obama repeats the refrain of “leveling the playing field” for Americans a couple of times in his address, and he expects the other countries will play along. “[I]f they have to follow these rules, then they can’t undercut us and sell their products cheaper because they’re violating these rules,” Obama says.
This is another part of his plan to “save” America–by making lives harder for workers in other countries, just like he’s done with ours. That’s leveling the playing field, all right. It’s our key to prosperity in his fantasy one-world utopia. All for the expectation of gaining $77.5 billion in domestic income, which is the amount that Secretary of State John Kerry has given. As WaPo pointed out, that amounts to 0.4 percent of U.S. gross domestic product.
0.4 percent. Whoopty-ding.
Why should we believe this agreement would have a different effect than previous agreements? Because Obama says so? Not even far-left progs like Elizabeth Warren, Bernie Sanders, or Ralph Nader believe that. Hillary Clinton, once involved in the TPP negotiations, has jumped on the bandwagon in opposing the TPP agreement, but a whole lot of people have doubts about her sincerity–even her admirers.
Obama lets us know that the U.S. is the boss in all this:
With this Trans-Pacific Partnership, we are writing the rules for the global economy. America is leading in the 21st century. Our workers will be the ones who get ahead. Our businesses will get a fair deal. And those who oppose passing this new trade deal are really just accepting a status quo that everyone knows puts us at a disadvantage.
The way that Obama puts it, America only stands to win in this deal, as if there are no drawbacks for us. But when looking into what little we know about the Trans-Pacific Partnership so far, it’s very possible that everyone could lose a lot more than we gain.
Except maybe China.
Obama accuses those opposing TPP of accepting the status quo, but the status quo on previous trade agreements hasn’t benefited us as we were promised. There’s no reason to think the TPP would be any different, especially when very few have been allowed to read the text of the final agreement.
This is obviously a complex issue with a broad range of effects if the agreement comes to pass. Simply accepting Obama at his word would be a foolish dismissal not just of trade agreement history, but of Obama’s history, as well.
“Look, you don’t have to take my word for it,” Barry says.
I can’t think of a time when we should.
