TPP: Unfair to American workers, consumers, and companies
By Curt Clawson and Dr. Peter Morici
Proponents of the 12-nation Trans-Pacific Partnership (TPP) agreement assert it will open new markets for U.S. goods and services, and help the American worker. We conclude the opposite: It's a bad deal for America and should be rejected by Congress.
This deal benefits multinational corporations producing in Asia, and clearly helps the Asian workers at the expense of American jobs. Also, Americans will pay higher prices for some products.
Nike is a big TPP supporter, not because it will help the shoemaker create more jobs in America, but because its production in Asia will benefit, where it enjoys tax benefits and cheap, non-union labor. The Obama Administration says it opposes outsourcing; so this makes no sense at all.
The TPP hurts American competitiveness in a number of industries –automotive parts, metals, consumer electronics, software, light manufacturing, pharmaceuticals, tobacco, and others. Our world-leading service sector, including internet and credit card transactions, will suffer increased outsourcing to nations with lower wages and taxes.
All this because the U.S. Executive Branch negotiators decided winners and losers – another example of crony capitalism, favoritism, and the corruptive power of the lobbyists.
Meanwhile, Congress was totally kept out-of-the loop, because of the TPA passed in June. Congressional members are now saying "we'll have to read the deal to see what's in it" (sound familiar?) – confirming that the TPP, like the Iran Deal, was done without consulting the elected representatives of "we-the-people."
In pharmaceuticals, some noble goals are met. The TPP will help reduce prices for medicines in rural areas of Asia – and assist the work of "Doctors without Borders." But some of this is at the expense of American Drug companies – and, by extension, American consumers.
The Pharmaceutical Research Manufacturers of America (PhRMA) had sought 12-year protection of intellectual property on new innovations – to allow U.S. companies to maintain market exclusivity and fairly recoup R&D investments on genetically-engineered and next-generation biologic drugs. Instead, U.S. negotiators caved to pressure from TPP participants and those protections will expire in as little as 5 years.
U.S. pharmaceutical companies will be forced to charge Americans higher prices to recoup R&D investments – placing heavy burdens on American senior citizens (higher priced Medicare prescription drugs) and on taxpayers (increased Medicaid subsidies). Millions of other Americans will be unable to afford the new prescription drugs.
U.S. tobacco companies also became losers, when U.S. negotiators caved and removed language that would have allowed them an "investor state dispute settlement" mechanism, by which to sue governments directly. Philip Morris International says the TPP "undermines the core principle of equality" in trade.
Another problem is that 40% to 45% automotive domestic content requirements, to qualify for tariff free movement of automotive products, are significantly lower than the 60% to 62.5% under NAFTA. This will move jobs out of the United States, Mexico, and Canada by permitting Japanese manufacturers to source more auto parts in China.
In light manufacturing, TPP will add about $23 billion to America's trade deficit. This translates into a loss of about 180,000 direct jobs plus another 110,000 from lost spending by those workers.
Then there's the elephant in the room – currency manipulation – historically causing more American job losses than all other unfair trade practices combined. Devaluation, especially by China and Japan, has artificially reduced prices of Asian products, while artificially raising the export prices of U.S. products. This practice, which slams American competitiveness, has already killed at least 4 million U.S. jobs, many in our manufacturing sectors – hollowing out our middle class, as world class plants closed and world class workers were forced into lower-paying jobs or left unemployed.
With bipartisan support, both houses of Congress requested that the TPP include enforceable currency manipulation restrictions. Ford Motor Company and the UAW, not always aligned, also made strong appeals. Sadly, these pleas fell on deaf ears.
The omission of meaningful currency manipulation language signals to TPP participants, like Japan, Malaysia, and Singapore, that if they choose to continue this unfair, anti-competitive trade practice – they can do so without consequences. China and South Korea, outside the TPP, are free to continue as well. The U.S. will be impotent in seeking any redress.
This sets a terrible precedent for the upcoming Trans-Atlantic Trade and Investment Partnership (TTIP) trade deal. Those European nations that manipulate their currencies for trade advantages will know that they too can continue this practice.
We have trade deficits not because our American workers are not competitive – but because of bad trade deals and the other guys cheating. The TPP does not represent free and fair trade. It's more like government-managed trade. If the goal was to hurt American competitiveness, we've achieved success. If the goal was to create more high-paying American jobs, we've failed. If the goal was to address China's ambitious march toward economic supremacy, we might as well sign articles of surrender tomorrow – along with the TPP.
Congressman Clawson has represented Florida's 19th Congressional District since 2014 and is the former CEO of Hayes Lemmerz International, an automotive wheel manufacturer. Professor Morici is an economist and business professor at the University of Maryland and a national columnist.