Debunking the Administration’s TPP = 18,000 Tax Cuts on U.S. Exports Talking Point
U.S. Sold Nothing in More than 10,600 of Those Categories...
Without compelling jobs or economic growth data to sell the Trans-Pacific Partnership (TPP), the Obama administration is trying to shift focus to an impressive-sounding number with its mantra about TPP delivering “18,000 tax cuts for Made in America exports.”
But that is just the raw number of tariff lines cut by the five TPP nations with which the United States does not already have free trade agreements. The United States only sold goods to those nations in less than 7,500 of the 18,000 categories. Indeed, the United States exports no goods to any nation under some of the touted 18,000 tariff lines.
The 18,000 figure is a misdirect. The relevant question is not the number of tariff cuts other countries listed but whether the TPP would lead to net U.S. job creation, higher wages, an improved trade balance and higher U.S. growth rates.
- The United States exported nothing for more than half of the 18,000 categories to the five relevant nations – Japan, Malaysia, Vietnam, New Zealand and Brunei – in 2014, the last year for which annual data is available. U.S. exporters already have “tax cuts” for their goods under previous trade deals with the other six TPP nations, including Canada and Mexico – our second and third largest trade partners.
- For the nearly 7,500 categories of goods out of the 18,000 for which we sold anything to the five nations without previous FTAs, almost 50 percent of the categories had sales under $500,000. And the TPP is not likely to transform that reality. Brunei (annual GDP $17.1 billion) is a tiny market. New Zealand (annual GDP $200 billion – smaller than San Diego) and Vietnam (annual GDP $186.2 billion – close to that of Denver) are not big markets. And, consumer demand is limited by Vietnam’s extremely low $2,052 per capita income. Malaysia’s per capital income is one fifth of that in the United States and its GDP is $338.1 billion, about the size of Atlanta. Japan is a huge market. But, with the exception of some agricultural goods, tariffs have not been the main barriers to U.S. exports to Japan. (GDP data from the World Bank)
- Almost 2,000 of the tariff reductions in the categories of products the United States does sell won’t be realized for over a decade. This includes some of those, such as beef and pork to Japan, where tariff cuts could make a difference. But because the TPP does not have enforceable disciplines against currency manipulation, by the time these cuts finally go into effect they could effectively have been erased if Japan devalues the yen.
- The administration’s “TPP Guide to 18,000 Tax Cuts” document bizarrely highlights goods TPP nations simply do not buy in volume from anyone. Consider the 34 percent “tax” cut by low-income Vietnam on Alaskan caviar. About $150,000 worth of caviar was imported by Vietnam from anywhere. Or Vietnam’s 5 percent tariff cut on skis. Vietnam only imported about $50,000 in skis in total.
- Many of the tax cuts the administration has touted include those that the administration claims the TPP’s weak environmental chapter would conserve. Among the 18,000 tax cuts are Malaysia’s shark fin tariffs, Vietnam’s whale meat tariffs and Japan’s ivory tariffs.
Indeed, the “tax cut” list is packed with gems. Christmas ornaments and pork for Muslim nations Malaysia and Brunei. Silkworm cocoons for Vietnam and Japan. Ski boots for Brunei. Camels for Vietnam.