The Atlantic: How the Trans-Pacific Partnership Threatens America's Recent Manufacturing Resurgence
The Atlantic: How the Trans-Pacific Partnership Threatens America's Recent Manufacturing Resurgence
The nitty-gritty details of the TPP are still not public, but it’s known that the agreement seeks to gradually reduce trade barriers such as tariffs among member countries, which include Japan, Vietnam, and Malaysia. It adds intellectual property protections for certain products, including pharmaceuticals. It does not include rules on currency manipulation, which had disappointed some groups, because currency manipulation allows countries such as China to ensure that their goods are cheaper than U.S.-made goods. (Some economists believe that currency-manipulation provisions could make it more difficult for the U.S. to control its own currency and interest rates.) Hillary Clinton, who had formerly supported the TPP, said Wednesday on PBS NewHour that she opposed the pact because of the lack of currency manipulation rules and because of the sweet deal it gives to pharmaceutical companies. The deal also does not include China, the world’s second-largest economy, but is instead meant to increase the U.S.’s clout in Asia and make it easier to compete with China.
But trade agreements, at their heart, create winners and losers, and the TPP will likely create some U.S. manufacturing losers at a time when economists worry that the country is becoming too service-oriented. Fine wines and beef products made in the U.S. that currently have high tariffs in foreign countries might do well under the TPP, but agriculture doesn’t create many good jobs in the U.S. Automakers, on the other hand, could suffer. The TPP could take tariffs off of foreign-made small trucks, which are currently the big profit makers for the domestic automakers, said Art Schwartz, a former GM negotiator who is now president of Labor and Economics Associates. The deal may also make it more difficult for unions—especially the United Auto Workers—who are negotiating contracts with the Big Three: If automakers can say they have to outsource to compete, unions will have less leverage.
Scott, of EPI, worries that the biggest damage from TPP could be to U.S. wages. The trade pact will increase the importation of competing goods, which will drive down the cost of U.S.-made goods, putting downward pressure on wages. It will open up countries such as Malaysia and Vietnam to foreign direct investment. It may be good for certain businesses and holders of intellectual property patents, but that doesn’t mean it’s going to be good for everyone.
“Make no mistake, it’s certainly going to increase income inequality, and it will, in all likelihood, lead to offshoring a job loss,” Scott said.