TPP troubling for American workers and businesses

In the form of incomplete and leaked information, rather than complete text, the details of the newly agreed-to Trans Pacific Partnership (TPP) are slowly emerging. While Congress has not been provided a full copy of the agreement, the information that has been released so far is troubling for American workers, businesses and the U.S. economy.

Specifically, the “rules of origin” provisions for automobiles appear to be particularly concerning – even more so than past trade agreements like NAFTA.

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Rules of origin in free trade agreements define the percentage of a product that must be derived from a specific nation in order to qualify as a product made in that country. Rules of origin are important because if enough of the product is made domestically, then it is eligible for export to other trading partners under significantly reduced tariffs. In NAFTA, for example, the rules of origin for the automobile sector range from 60 to 62.5 percent, depending on the type of vehicle.

In TPP, however, the language we have seen regarding required rules of origin for vehicles is just 35 to 45 percent. Thus, an automobile could have nearly two-thirds of its parts manufactured in a country like China, who is not a part of TPP and not subject to any of the deal’s labor, environmental, or human rights standards, and still be exempt from tariffs under the deal.

This will undoubtedly hurt the competitiveness of American manufacturers, particularly the American auto industry. Additionally, there is no upside for American suppliers – instead of the 25 year tariff phase-out that the automobile manufacturers will receive, most of the tariffs for the automobile supply chain are removed immediately.

In addition to rules of origin provisions, this trade agreement fails to include strong, enforceable currency provisions.

Countries like Japan have a history of manipulating the value of their currency to tilt their markets against U.S. goods, especially automobiles. Currently, for every car we export to Japan, it exports between 100 and 200 vehicles here. Japan is the most closed auto market in the world, and currency manipulation only further stacks the deck against American workers and automobiles.

Currency manipulation has already cost the U.S. between one and five million jobs and led to a $500 billion a year trade deficit. Without strong and enforceable currency manipulation provisions, we will continue to see the loss of American manufacturing jobs and a greater trade deficit.

American workers are rightfully skeptical of this new trade agreement. Past trade deals like NAFTA have hollowed out America’s manufacturing base and shipped thousands of American jobs out of the United States. Unfortunately, in that way, TPP may be no different.

We live in a global economy, and I support increased trade around the world. In fact, I serve on the President’s Export Council, the principal advisory committee on international trade. I want to increase U.S. manufacturing exports and promote American businesses around the globe. But we have to do it right, and trade has to be fair.

Unfortunately, what we have seen so far of TPP is that it falls short of that standard.

Look no further than my hometown of Flint, Michigan for the consequences of bad trade deals: at our peak – long before NAFTA – we had nearly 80,000 automotive jobs. Today, there are less than 10,000. NAFTA was not the sole cause of the job losses, but it cost thousands of Flint families their livelihood and their future. There are many cities like Flint around the country that have seen the devastating impact that unfair trade deals can have on our economy, our communities and our people.

Past promises of ‘free trade’ deals – new jobs, new investments – have proven untrue. Instead, we’ve seen the opposite – American factories shuttered and tens of thousands of good-paying jobs lost, either over the border or overseas. Though we are still waiting to read the text of the agreement, what we have seen isn’t encouraging.

I simply cannot support another trade deal that contributes to this economic race to the bottom for American workers and the communities they call home.

Kildee has represented Michigan’s 5th Congressional District since 2013. He sits on the Financial Services Committee.

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