By Richard Manning, ,
Published July 14, 2016
President Obama is attempting to force a vote on his Trans-Pacific Partnership trade deal during the upcoming lame duck session, and under the terms of last year’s fast track trade bill, he just might be able to do it. The law requires Congress to consider any trade deal submitted within a defined time period giving the president significant power to dictate a TPP vote.
Senate Majority Leader Mitch McConnell, who has long advocated considering TPP during the lame duck, has recently changed his tune casting doubt on the lame duck strategy as a way to shield his most vulnerable members from the politically toxic trade vote. The recent primary defeat of long-time Virginia incumbent and TPP supporter Randy Forbes to an ardently anti-TPP primary opponent underlines the political dangers of pushing Obama’s massive trade deal.
Desperate due to concerns over a potential Donald Trump election, or the loss of an effective majority in the Senate in the next Congress, TPP supporters are waging an increasingly desperate campaign designed to convince GOP members who voted to grant Obama fast track trade authority that they cannot credibly turn around and vote against TPP. They are wrong.
Fast track set the rules for a vote, but GOP member after GOP member told opponents of giving the president this power that they would give the TPP a complete and thorough review. They even required that the Obama administration provide an economic analysis of the deal’s impact on the U.S. economy to help with this analysis. While they did so expecting that the report would turbo-charge passage efforts, the actual results are proving to be devastating to supporters.
To help sell the TPP, President Obama has gone to Vietnam and used the cheaper labor provided for Nike and other shoe makers as a key selling point of the deal. Perversely, Obama, speaking beneath a statue of Ho Chi Minh, made the point for the deal’s opponents. Vietnamese textile workers make a mere $100 a month on average to produce shoes for companies like Nike. Their domestic competitor, New Balance, would likely need to close their New England factories to compete, ending the jobs of nine hundred who would not be able to compete with Vietnam’s cheap labor combined with lower tariffs for importing their work.
As bad as this visual of turning clothing production over to virtual slave shops at the expense of American workers, the U.S. International Trade Commission (ITC) report provides all the reason needed for anyone looking to vote against TPP.
In short, the TPP doesn’t really help the U.S. economy much at all. Specifically, the Obama administration report cited paltry fifteen year benefits amounting to a 0.23 percent increase in annual real income, a 0.15 percent increase in GDP or $42.7 billion and a 0.07 percent uptick in employment or just 128,000 jobs.
Remember, that’s over the next decade-and-a-half, this is essentially a rounding error, not an economic benefit.
When those selling the benefits of Obama’s trade deal produce shockingly underwhelming projections for future U.S. economic benefits, the words, “bad, bad deal” seriously understate the disaster that is the TPP.
One can be anti-TPP and pro-free trade, they are not mutually exclusive. In fact, it would be foolish to put the U.S. economy on the chopping block by passing Obama’s trade deal when the president’s regulatory and tax policies are designed to drive businesses to make things elsewhere by providing the added offshoring economic incentives of reduced tariffs to access our markets.
Free trade is not an economic suicide pact, it is an economic concept that should benefit all parties involved. But when done wrong, it is disastrous.
In 1999, the United States entered into a Permanent Normalized Trade Relations (PNTR) agreement with China. The results have been staggering. Since 2000, the U.S. economy has not experienced annual grown of more than 4 percent once, and the past decade has been the worse in terms of economic growth since the Great Depression with not a single year exceeding a meager 3 percent.
PNTR failed for the same reason that TPP will fail, it did not include prohibitions on Chinese currency manipulation against the dollar which allows Chinese produced goods to always be less expensive than American goods in both the U.S. and China. The TPP makes the same mistake, by not addressing Japanese currency manipulation as Japan builds up U.S. dollar denominated assets while lowering their tariffs in the hopes of selling a few more American grown fruits and vegetables to the island nation.
Dr. Art Laffer argued that the impact of currency manipulation is profound in an oped for Forbes writing, “currency manipulation is a potent tool of mercantilists, tempting nations to increase their trade balances and export domestic unemployment to the countries that are not devaluing, a ‘beggar-thy-neighbor’ approach to international economics.”
And that is the final, fatal flaw in the Obama negotiated deal. Obama’s failure to deal with currency in spite of numerous entreaties by Congress that TPP incorporate rules to prevent price manipulation guarantees that the deal will have a lopsided impact against U.S. manufactured goods and should be rejected. What’s more, the TPP will allow China to petition to dock into the agreement at a future date, and without these currency manipulation safeguards, it will lock in these systemic disadvantages with little recourse.
The question for any GOP member who voted in favor of fast track legislation is no longer how to justify voting against TPP after that vote. Instead it is how anyone could vote for TPP now that its real impact is out in the open.
The vote for fast track was about process, the vote on TPP is about substance, and Obama’s trade agreement is the wrong deal at the wrong time and needs to be overwhelmingly repudiated if and when it comes to a vote.