Understanding how the Trans-Pacific Partnership trade deal could affect Americans.
You can be forgiven if you haven’t been particularly riveted by the series of slick parliamentary maneuvers the Obama administration and his congressional Republican allies are using to try to secure support for the trade deal known as the Trans-Pacific Partnership (TPP).
The legislative gamesmanship over securing enhanced trade relations with 11 other nations around the Pacific Rim — which seemed to reach a low for President Obama on Friday when House Democrats rejected his personal appeal — can be entertaining. But for most Americans, the trade deal boils down to how it could affect them. Here’s how to understand that.
The simple case for the TPP
It would make U.S. companies more successful at selling their goods and services in Pacific Rim countries, leading to a stronger economy, more jobs and higher incomes for American workers. When every country focuses on what it is best at, the overall economic pie becomes bigger.
The agreement would also strengthen U.S. diplomatic power in Asia, enabling the United States to be a more effective counterweight to Chinese influence in the region. The deal itself and the soft power that comes with it would help nudge poorer countries such as Malaysia and Vietnam closer to U.S.-style environmental and labor protections.
The simple case against the TPP
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We’ve seen this movie before. Trade deals have been advertised as increasing the size of the economic pie, but the benefits accrue mostly to big companies and their shareholders, while working-class Americans see job losses and income reductions as more of the work they once did moves overseas. Even if estimates of higher economic growth in the event of a deal are correct, many ordinary workers would end up worse off.
The diplomatic arguments the president makes are a fuzzy, noneconomic rationale that is hard to prove or disprove — a shaky basis on which to enter a trade deal.
Winners and losers
Beyond those broad-brush arguments, the deal — like most trade agreements — would create a series of winners and losers.
Winner, U.S. service industries: Say you’re an insurance company that wants to operate in Malaysia or a telecommunications firm looking to expand in Japan or an online retailer having fits trying to get your Peruvian operation up and running. This deal should be good news.
Earlier trade agreements were more heavily tilted toward reducing tariffs on imported goods, and in the United States, at least, tariffs are already quite low. Services, meanwhile, feature more nontariff barriers to international commerce, such as laws restricting the ability of foreign companies to operate.
Peter Petri, a scholar at Brandeis University and the Peterson Institute for International Economics, estimates that, with a deal, service industries would contribute an extra $79 billion to the U.S. economy, more if additional Pacific Rim nations ultimately join the partnership.
Loser, manufacturing workers: The same estimates from Petri that point to higher service-sector activity point to losses from trade in machinery, transport equipment and other manufacturing sectors. Overall, his estimates put the net effect of the trade deal on manufacturing in the United States as a $39 billion loss by 2025.
Manufacturing interests have been major supporters of the trade bill. They appear confident that even if more manufacturing activity moves abroad, U.S. companies will be able to profit from it. But even assuming they’re right, less manufacturing activity in the United States would most likely mean downward pressure on employment and wages in the sector.
There is a longstanding program to try to offset the economic damage done to those who lose out from increased globalization, known as Trade Adjustment Assistance (TAA), which has accompanied past trade deals. The program became a hostage in the congressional debate Friday, as Democrats, normally staunch advocates of the retraining program, voted it down in an effort to stymie the overall push toward the deal.
Winner, owners of intellectual property: If you’re an American who develops products whose value is more abstract than physical — whether a blockbuster blood- pressure medication or a blockbuster Hollywood film — you stand to gain. The deal would put in place stronger protections for intellectual property in countries where infringement of patents and copyrights is commonplace, thus giving U.S. pharmaceutical, software and entertainment companies more ability to extract the maximum value from their creations.
This has potential downsides, too, as the trade deal’s opponents note, particularly in the medical arena, where it would give pharmaceutical firms more leeway to keep prices high.
Close call, agriculture: Petri’s estimates place no net effect on the balance of trade for rice and wheat and a slight positive from other agricultural sectors. In particular, U.S. negotiators want Japan to reduce its protectionism of domestic rice, pork and beef industries, giving Americans better access to that big market.
But the reality is, the deal would shape the outlook for major pieces of America’s agricultural economy in ways that will not become clear until more details become public. Two big ones: sugar and dairy. U.S. dairy farmers want better access to the Canadian and Japanese markets. And U.S. sugar manufacturers want to block additional imports from abroad.
One thing is certain: The debate surrounding the TPP negotiations has been by turns obscure and overheated. Obscure in the sense that someone who doesn’t follow trade issues is likely to have trouble following it at all, overheated in the sense that, well, the Nazi propagandist Joseph Goebbels was used as a reference point in the debate on the House floor Friday.