Category Archives: Transpacific Partnership

TPP – Yesterday, the Negatives – Today, the Positives

Trade agreements, and in particular the TPP have not been topics that I have researched in any great detail. But I am an American citizen and I feel that I really should investigate the topic before deciding whether to favor the TPP or not. So I will take you along with me into the surprisingly unanswerable question of whether globalization or trade agreements or both caused the flight of our factories and the loss of valuable American jobs.

It seems as difficult to tell if globalization or trade agreements or both caused manufacturers to leave us in the 80’s and the 90’s as it is to answer that old question of which came first, the chicken or the egg. The two things were kind of concurrent events which makes it hard to separate and assign causality. The flight of our factories to nations with large supplies of workers who were happy to work for very low wages may have started with just a few companies, experts say, and then snowballed as companies learned they could not stay in America and compete with low cost production values and cheap imports. Most sources I looked at agreed that trade agreements played a role in factory flight, but were not necessarily advantageous to the nations on the other side of the agreements either. CAFTA and NAFTA definitely did not prove efficacious for American and our trade imbalances increased.

Sources make the point, however, that factory flight has already happened and that most of those manufacturers will not be returning to the US. Even though there has been some movement in certain sectors (like textiles) to return to America, machines do most of the work on the factory floor and factories will probably never again employ Americans in the numbers they once did. So the TPP is not likely to hurt our manufacturing employment numbers in the 21st century the way trade agreements added to our woes in the 20th century.

Some of the most recent articles mention several positive reasons to make this trade agreement with the Pacific Rim nations (so far, excluding China). One reason they mention is that we already have very low tariffs for some of these nations and no tariffs for about half of the nine nations.

When our factories left our intellectual properties went with them. Nations sometimes have legal access to technical specifications and sometimes they steal or hack them. We have not developed an effective strategy for either keeping our patented information secret, for charging fees to those who use our patented information, or for prosecuting those who break our patents. TPP is supposed to address this intellectual sinkhole and allow us to retain the profits that should accrue to us from our innovations. There was one article that I found especially cogent. Here are the authors of this very informative article speaking for themselves:

Opponents of giving President Obama fast-track authority to negotiate the Trans-Pacific Partnership (TPP) — the pending trade pact between the United States and 11 countries in Asia and the Americas — cite the job-killing impacts of globalization as a prime reason for their objection. The free-trade agreement would lower tariffs and remove other barriers to imports from member countries, which opponents fear would create steep competition for U.S. industries domestically.

Still, we believe blocking the TPP on fears of globalization would be a mistake.

There are several reasons to support the TPP despite globalization concerns. First, the TPP — which seeks to govern exchange of not only traditional goods and services, but also intellectual property and foreign investment — would promote trade in knowledge-intensive services in which U.S. companies exert a strong comparative advantage. Second, killing the TPP would do little to bring factory work back to America. Third, and perhaps most important, although China is not part of the TPP, enacting the agreement would raise regulatory rules and standards for several of China’s key trading partners. That would pressure China to meet some of those standards and cease its attempts to game global trade to impede foreign multinational companies.

Our research indicates that rising import competition from China accounted for 21 percent of the overall decline in U.S. employment in manufacturing industries during the 1990s and 2000s. The wave of automation that replaced middle-class jobs available to workers without a college education added to those losses. We sympathize with the regions and families that suffered, but halting TPP would not assist U.S. manufacturing or benefit U.S. workers. The reality is that the globalization of manufacturing is a fait accompli. Those manufacturing jobs are not coming back.

But if the TPP has little downside for the U.S., what’s the upside? Why bother with the deal at all? The reason is that the TPP is about much more than manufacturing. Most notably, it promises to liberalize trade in services and in agriculture, sectors in which the United States runs large trade surpluses, but which the World Trade Organization, despite 20 years of trying, has failed to pry open internationally.

It also requires protecting patents against infringement and safeguarding business assets and revenues against expropriation by foreign governments. To the extent that Obama succeeds in enshrining these guarantees in the TPP, the agreement would give a substantial boost to U.S. trade.

Expanding global trade has remade manufacturing, forcing workers, businesses, and entire regions to endure often painful adjustments. However, much as we might like to return to 1970 when manufacturing comprised a quarter of U.S. nonfarm employment, that’s impossible without massive protectionist barriers that would isolate the U.S. economy and lower U.S. living standards. Blocking the TPP because of justified unhappiness over manufacturing’s lost glory would amount to refighting the last trade war — beggaring the future as retribution for the past. A responsible trade agenda should instead seek to provide the supporting policy structure – protections for intellectual property and freedom from confiscatory regulations – that allows U.S. companies to excel in the sectors where they are strong.

This article had the clearest and most complete analysis, but the author is obviously for the TPP. I did not find many articles that are against it given our current economic climate. Here is a list of other sources I looked at:

If you really want to form your own opinion do some reading. The truth is that there are times when it is difficult to foresee all the future effects of current decisions. The big problem that I was left with after reading these articles is that almost no matter what America did our trade deficits increased. Perhaps right now it is impossible to reverse our trade losses and only by helping trade equalize worldwide will we eventually see the situation improve. I might be starting to favor the TPP, just because it is a small agreement and most of the damage has already been done, and the possibility of protecting our intellectual properties is appealing. Elizabeth Warren has found a rather glaring omission from the agreement which has to do with protections from the courts which needs to be taken into account, but perhaps that can be dealt with by an addition to the agreement. People mention that it will raise the cost of our medications, will affect the internet badly, and will cause massive genetic modification of food making our food supplies insecure. These problems also need to be addressed. I have not made my final decision on this issue and what I think about it has no real import in the grand scheme of things, but knowing something feels far better than knowing nothing.

By Nancy Brisson