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Why pursue the TPP when we know it won’t work?

The U.S. International Trade Commission (ITC) has just released its Congressionally-mandatedreport detailing the potential economic outcomes of the Trans-Pacific Partnership (TPP).  And while the ITC puts the best possible face on putative gains, it’s clear from the study that the trade deal not only won’t provide any large benefits for the U.S. economy but will also harm our all-important manufacturing sector. 

The model used by the ITC to evaluate trade agreements has proven incredibly deficient in predicting previous results from Permanent Normalized Trade (PNTR) with China and the Korea-U.S. trade deal.  The ITC claimed the results of both would be overwhelmingly positive for the U.S., but that turned out to be incorrect.  Baked into the ITC models are assumptions that unemployment will not increase and that exchange-rate manipulation will be absent.  Reality has proven that such assumptions are invalid.

{mosads}The top lines of the report attempt to put a positive spin on such minimal findings as a 0.23% boost for U.S. annual real income by 2032.  If that’s not encouraging, real GDP is only projected to climb by 0.15% over the next 15 years, with employment soaring by a glorious 0.07% as a result of the TPP.

Since it’s impossible to spin these as major enhancements to the U.S. economy, the ITC also touts the TPP’s potential to “harmonize regulations” and to “protect cross-border data flows.”  Okay…But what about the heart of the matter?  Will this 12-nation agreement really help U.S. manufacturers boost exports and serve millions of new customers?  Unfortunately, the answer is a very quiet “No.”  Good-paying jobs in “manufacturing, natural resources, and energy” (MNRE) are actually projected to fall by 0.2%.  This is not what Main Street America would call “Good News,” particular since U.S. manufacturing has only gained back a fraction of lost jobs since the recovery began in 2009.

Tellingly, the ITC report avoids quantifying the further dismantling of American industry.  While admitting that MNRE jobs will decline, their report states, “The model does not capture the costs associated with employment transition or temporary unemployment.”  Translation: TPP could in fact result in significant American joblessness, but our model doesn’t account for that possibility. 

Yes, the study sees MNRE exports rising by $15.2 billion, but imports in the same category would climb by a far greater $39.2 billion, yielding a trade imbalance of $24 billion.  This isn’t wealth-generation.  And this new $24 billion in trade debt would continue, not reverse, the trade deficits that America has racked up for the last 40 years.  Isn’t the central objective of trade deals to increase national wealth through greater exports, and thus lower trade deficits? 

What’s abundantly clear is that the TPP is simply one more in a long line of failed free-trade agreements.  While NAFTA and ‘normalized’ trade with China were promoted as job-growth packages that would allow America to sell more to a wider overseas market, the opposite has proven true.  For example, since Beijing’s accession to the WTO in 2001, the U.S. bilateral trade deficit with China has jumped from $83 billion in 2002 to a staggering $365 billion in 2015.

The assessments in the ITC report make clear that the TPP is a continuation of the wrong approach, and based on faulty assumptions.  Since manufacturing is the primary wealth-generator for the national economy, it confounds logic to embark on a trade deal that will further erode the nation’s industrial backbone. Troublingly, while even the ITC acknowledges that some manufacturing workers will lose their jobs, they also project that the TPP will only boost employment in the lower paying services sector by a mere 0.1%.

President Obama took six years to formulate the TPP behind closed doors.  Public scrutiny would have halted the deal in its tracks.  Thankfully, the ITC report offers Members of Congress ample reasons to refuse to even consider the TPP in a lame duck session (as President Obama wants), and to demand that the next administration present a new approach to trade that actually benefits the U.S. economy and American workers.

Kevin Kearns is president of the U.S. Business & Industry Council, a national business organization advocating for domestic U.S. manufacturers since 1933.


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