It’s not everyday you see Bernie Sanders and Donald Trump in agreement, but when it comes to the Trans Pacific Partnership (TPP), both are in agreement that they disapprove of this deal. On Senator Sander’s website, he says, “The Trans-Pacific Partnership is a disastrous trade agreement designed to protect the interests of the largest multi-national corporations at the expense of workers, consumers, the environment and the foundations of American democracy.” In an interview with Breitbart news, Donald Trump recently said, “The deal is insanity. That deal should not be supported and it should not be allowed to happen.”
The trade agreement that has these political opponents shaking their heads is an attempt to bring 18 Pacific rim countries together to reduce trade barriers. On October 10th, President Obama gave an address declaring the end of 5 long years of negotiation. In his view, “It includes the strongest labor standards in history, from requiring fair hours to prohibiting child labor and forced labor. It includes the strongest environmental standards in history. All these things level the playing field for us, because if they have to follow these rules, then they can’t undercut us and sell their products cheaper because they’re violating these rules.”
The president has some valid reasons for saying the playing field may be leveled. According to the White House, 18,000 taxes placed on American goods would be eliminated, and lower taxes on exported goods could mean higher paying jobs as exporting companies pay 18% more on average. Overall this is estimated to have a slightly positive effect on the U.S. economy with a .4% cumulative increase to GDP by 2025 according to a Peterson Institute study.
These positive effects sound promising if they turn out to increase jobs and trade. The problem is this trade agreement isn’t a simple unilateral tax cut. The details within this massive 5,544 page text are complex. In general the goal does seem to be trade increases between the participating countries, but the methods being used to increase this trade are not always a net positive.
America may even face some severe wage decreases and job loss. Bernie Sanders points to the estimates of the The Economic Policy Institute. It believes that workers that have not earned a four year college degree could see their wages drop by $1,800 a year. Those combined wage cuts translate to roughly 1% of GDP, and a change that large can have rippling effects in other industries. The working class can’t spend money they don’t have.
These dire predictions are not without precedence. Obama’s previous claims that the KORUS trade agreement would boost 70,000 jobs instead saw a job loss to Korea of 75,000 jobs. When Clinton suggested NAFTA would create 200,000 jobs, we instead saw an estimated loss of 3.2 million jobs to China. Overall, the U.S. has seen roughly 5 million manufacturing jobs eliminated mainly due to trade deficits made possible through bad trade agreements. This agreement does not look like it will be an exception.
To start with, this current agreement makes no attempt to regulate what many regard as the number one obstacle to an internationally equal playing field, currency manipulation. Currency regulations by a country’s central bank can actually increase corporate investment in a country’s industries through mild inflation. This inflation causes large investors to suffer devaluing savings if they don’t invest in productive enterprises, and this incentive to invest helps prevent funding shortages in the companies that keep our economy churning.
This can be good if a country’s looking out for their own internal interests, but problems can arise when external governments try the same procedures at the expense of another country’s economy. As Donald Trump points out, China has bought $1.4 trillion in U.S. debt. To put that in perspective the federal reserve only has $4.5 trillion dollars worth of total liability. Our federal reserve will increase and decrease its assets and liabilities over time to target a low inflation sweet spot, but China can do the same with the U.S. debt under its control. If economic conditions start enticing investors to build factories in the U.S. instead of China, then China can take action. This manipulation can even push us into a GDP damaging deflation, and deflation has been a real problem for the United States with 6 of the last 12 months being deflationary according to the Organization for Economic Co-operation and Development. If we truly want to level the playing field, we have to remove the strings other countries use to manipulate our economy.
The TPP instead removes what we want to keep in place by removing safeguards placed on our food production. The Institute for Agriculture and Trade Policy notes that the TPP allows for multinational food organizations to exploit a lack of international regulations. This gives us access to cheaper food, but it is cheaper because it does not meet the standards we apply to our own country’s food producers. This not only makes it harder for people within our borders to compete, but it also allows the importers to bypass our already stressed food safety agencies. Attempts to pass legislation allowing these agencies to better monitor imports have failed, so there is no capacity to assure foreign producers are doing their fair diligence in protecting our health.
Food is not the only source of health concerns. Doctors Without Borders believes the rules set forth in the TPP will not only dramatically increase patent lengths increasing the cost of drugs, but it will make it easier to enforce monopolies on drugs after the patents expire. On top of this, it takes away a country’s previous abilities to balance the priorities of trade and public health through legislation with trade becoming the new exclusive priority. Developing countries relying more heavily on generic drugs may find it impossible to provide the medication their citizens need at a price they can afford.
Then there are the general provisions for all Intellectual Property (IP) that bring the fears of the Investor-State Dispute Settlement (ISDS) to the forefront, and according to Elizabeth Warren, “ISDS would allow foreign companies to challenge U.S. laws — and potentially to pick up huge payouts from taxpayers.” It may seem reasonable for a company to desire the ability to resolve IP disputes in a uniform process, but these disputes may not be the normal types of infringements protected under existing laws. In a similar trade agreement, Australia faced an ISDS case where their attempt to regulate tobacco packaging to make it less attractive to kids was challenged as an infringement on the trademark rights of Phillip Morris. This threat of monetary losses due to the wrong type of legislation can influence the types of laws our governments pass.
The interests of the public being placed below the priority of corporate trade is a consistent theme. The Electronic Frontier Foundation found that the TPP allows the companies that advertise online and broker in data will be granted the right to write their own regulations. These are regulations on how they handle our personal information collected on the internet and stored in their databases. To make matters worse, the agreement actually attempts to increase the data exchange of these businesses, which makes it even less likely that any one company has a reasonable control over the information they are entrusted with.
These are just a handful of issues facing this agreement. An examination of the links above will reveal that each of these sources have even deeper concerns, and this is by no means a complete list of everyone with complaints. The good news is that this trade agreement was only published to the public on November 5th, and the president can’t sign it for 90 days after that date. Congress gets to have their say before that happens, which means we get to have our say through our representatives. As Obama said in his address, “you don’t have to take my word for it.” Look into the details of this agreement for yourself, and if you feel inspired to tell your representatives your thoughts, you can find them here and here.