The long-discussed and long-negotiated Trans-Pacific Partnership free trade agreement has encountered major hurdles in Congress, putting one of President Barack Obama’s top second-term priorities in doubt — and for good reason.
The U.S. has spent nearly six years hashing out the sweeping trade agreement with 11 other nations. Together, the would-be 12-nation trade bloc accounts for nearly 40 percent of global economic activity and about one-third of global trade. The Obama administration says a freer flow of goods among the U.S. and participating nations would boost U.S. exports to growing economies in Asia and Latin America, contributing to the creation of high-paying U.S. jobs.
That’s the primary rationale the Obama administration has offered to skeptical politicians in the Democratic Party. But there’s good reason that enticing promise hasn’t worked.
To start, it relies exclusively on the benefits of free trade to make the argument for the TPP. But the movement toward free trade — reducing and eliminating tariffs on imported goods — is nothing new for the U.S. The U.S. already has free trade agreements in effect with six of the agreement’s 11 partner nations. Two of those nations, Canada and Mexico, are the United States’ first and third largest trading partners respectively, accounting for 30 percent of U.S. trade.
If free trade is already in effect for the U.S. and some of its largest trading partners, how could a new free trade agreement including those partners — on its own — have such a drastic, positive effect on the U.S. economy? It probably wouldn’t.
The two-decade-old North American Free Trade Agreement, for example, broke down trade barriers among the U.S., Canada and Mexico. At best, its overall economic effect was small — though it probably had a hand in accelerating, though not causing, an erosion of the U.S. manufacturing base. A 2003 analysis by the Congressional Budget Office concluded the agreement “very slightly” expanded U.S. gross domestic product. U.S. exports to Mexico increased after NAFTA took effect, but the increase — and employment effects, by extension — attributable to NAFTA was “small,” according to the CBO.
Almost by design, the way Obama has sold the trade pact has illustrated its potential to have only a small impact on U.S. economic growth. In May, the president visited Nike’s Oregon headquarters to push for the trade agreement. The top athletic footwear manufacturer — which assembles none of its footwear in the U.S. — says eliminating tariffs on sneakers imported from Vietnam would allow it to reinvest the savings into creating up to 10,000 U.S. manufacturing and engineering jobs.
But the trade agreement, for all footwear manufacturers, would wipe out only up to $460 million in athletic footwear tariffs, according to the Footwear Distributors and Retailers of America. That’s just a fraction of Nike’s $2.7 billion in profits last year.
When visiting Nike, Obama also touted the TPP’s potential to elevate labor standards in places such as Vietnam. And that gets to the meat of the TPP: Its more meaningful provisions lie with its non-trade aspects.
Those elements have been negotiated entirely in secret, leaving members of the public only to guess or to rely on the occasional leaked TPP chapter. The provisions that have been leaked offer plenty of reasons for Americans to be wary and point to a number of instances in which TPP provisions could supersede and conflict with U.S. laws — from allowing foreign firms to sue U.S. states outside of U.S. courts to invalidating “Buy American” regulations designed to benefit U.S. manufacturers to providing pharmaceutical companies stronger patent protections that delay cheaper, generic versions of their drugs.
For Congress to relinquish its authority to amend worrying portions of an expansive trade agreement further removes an opaque agreement from the democratic process. The four members of Maine’s congressional delegation were right to oppose “fast track” authority for Obama to seal the deal on the TPP.
As congressional leaders maneuver to keep fast track authority alive after last week’s failed House vote, Maine’s representatives in Congress shouldn’t budge.
