Trans-Pacific trade deal at critical juncture

It’s curious that President Obama chose Nike for a showy event earlier this month to promote the Trans-Pacific Partnership.

A more unimpeachable Northwest model for the benefits of expanded trade would have been found at Boeing in the Puget Sound area. Here, the media would have seen America’s largest exporter at work, with foreign customers helping support nearly 80,000 well-paid jobs statewide.

Microsoft would have been another good location to sell the deal, which involves the United States and 11 other nations. A major promise of the Trans-Pacific Partnership (TPP) is better intellectual-property protection in world markets. Where better to showcase a “21st century trade agreement” than in what is arguably the planet’s leading software center?

Instead, at Nike, the president claimed the company would create as many as 10,000 American jobs if Congress approved TPP.

Perhaps it would. But people paying attention also know Nike gets most of its products from subcontractors overseas. It battled sweatshop accusations for years, finally establishing a code of conduct and audits for these factories.

Nike boasts 8,500 jobs in Oregon, most at its Beaverton headquarters. But according to company data, its 68 supplier factories in the United States employ only 8,400. Astonishingly, none is in the Carolinas, once the epicenter of American apparel manufacturing.

By contrast, nearly 334,000 workers make Nike goods in Vietnam, which would be a TPP member. The company’s contract factories employ more than 1 million workers worldwide.

Such dissonances helped Senate Democrats vote down so-called fast-track authority to conclude the agreement. It was only temporary, however, and after a second vote it appears the trade-authorization authority is moving ahead.

Between the votes, I caught up with Eric Schinfeld, president of the Washington Council on International Trade, as he was waiting for a plane in the Other Washington to come home. He had been there lobbying in support of the agreement.

Backing TPP is easy for the head of a trade association in one of America’s most trade-dependent states.

“In an ideal world, there will be a number of significant gains on lowering tariffs,” he said, particularly in Vietnam. “The majority of benefits will be on competitiveness issues, such as intellectual-property standards, regulating state-owned enterprises and cross-border data flows.”

One big win for Washington farmers would be if Japan lowered barriers to agriculture, a decades-long problem.

He disagrees with critics who claim the agreement is too secretive.

“The Office of the U.S. Trade Representative has given 1,700 briefings to Congress,” he said. “Every member has had a chance to see the entire text. What hasn’t happened is that every single thing has been published in the newspaper. But that’s true of any contract negotiation.”

If the five-year fast-track authorization is approved, the TPP text would eventually be published in its entirety. However, Congress would only be able to give an up-or-down vote, not add amendments.

Schinfeld looks at TPP this way, saying 40 percent of the state’s jobs are somehow tied to international trade. Those jobs tend to pay better than average and large numbers are union positions.

“It opens new markets,” he told me. “That is how we grow jobs. The United States has the most open market in the world, but many other countries don’t. We have to find ways to level the playing field.”

The 11 nations negotiating with the United States for TPP represented more than $40 billion of Washington’s exports in 2014. Total exports last year were $90.6 billion.

However, the United States already has trade agreements with six of them: Australia, Canada, Chile, Mexico, Peru and Singapore.

So just as opponents risk going over the top in TPP’s dangers, supporters are in danger of overselling potential benefits.

There’s no way around the secrecy issue. Members of Congress can read the draft agreement. But they do it in a secure room in the Capitol basement, accompanied by a staffer of the Trade Representative. No electronic devices are allowed. Any notes the members make must be left there. One can be skeptical on how many lawmakers have actually read all of this highly complex document, which runs hundreds of pages.

The White House has published online an extensive report on the benefits of trade to the United States.

But opponents have their own ammunition. Among them is a recent report by the liberal-leaning Economic Policy Institute arguing that TPP will send more American jobs overseas and further depress wages for most workers.

Intellectual-property protections also have a potential downside. Ideally, they expand markets for American IT and pharmaceutical products, keeping pirates from profiting off innovations created here, penalizing American companies, researchers and entrepreneurs.

But, as University of Oregon economist Mark Thoma wrote, “Patents and copyrights create monopolies for a fixed period of time to encourage innovation and creativity. The idea is to protect some firms from both domestic and international competition, the opposite of free trade.”

Critics are especially worried about TPP hurting access to affordable drugs.

Led by Sen. Elizabeth Warren, D-Mass., they also say the deal’s international settlements mechanism could be used to weaken financial regulation. Indeed, The Wall Street Journal reported last week that Canada is using NAFTA to challenge application of the Volcker Rule on risky derivatives. The rule would ban banks from trading Canadian government debt.

Nor would TPP affect currency manipulation, where some countries artificially depress their currencies to gain export advantage.

Finally, the deal does nothing to address the biggest giant sucking sound of American jobs, China.

No doubt Washington state will do well, at least as long as Boeing remains large here. But TPP is new territory. One hopes our elected representatives apply due diligence.