In the coming days, the U.S. Trade Representative (USTR) will release its annual report on the Obama administration’s trade policy agenda. We know that you can’t wait to see what it will say.
Good news. You don’t have to. Below we present the world’s first look at the report’s contents.
How do we know in advance what the annual trade report will say? No, we don’t have a mole at USTR (though if any of our USTR readers would like to volunteer…).
We have a pretty good idea of the report’s contents, given that these reports tend to recycle the same old sales pitches that the administration has been disseminating ad nauseam (figuratively and, sometimes, literally).
Since the status quo trade platitudes have become predictable, we thought we might as well predict them.
So, you heard it here first – below are some of the administration's standard TPP-related talking points likely to be rehashed in USTR’s forthcoming report, followed by an explanation of why they do not bear repeating:
95 percent of the world’s consumers live outside our borders.
[But our trade pacts have not helped us reach them.]
Yes, this statistic shows a basic understanding of geography and population. But it shows little else. The official government trade data reveal that past trade deals have not been successful in helping U.S. firms reach consumers who live abroad. In fact, U.S. goods exports to our “free trade” agreement (FTA) partners have grown 20 percent slower than U.S. exports to the rest of the world over the last decade.
The TPP would grant U.S. firms greater access to the world's fastest-growing region.
[But the relevant TPP countries have been growing one-fourth as fast as that region.]
The United States already has FTAs with six of the 11 TPP negotiating partners. The combined GDP of the other five countries (the ones that could offer “greater access”) has been growing at a paltry 1 percent annually over the last decade – one fourth of the growth rate of the Asia-Pacific region overall. Yes, the region has been growing quickly. That just happens not to be relevant to the TPP.
Exporters tend to pay their workers higher wages.
[But jobs displaced by imports pay even higher.]
What this talking point fails to mention is that jobs lost to imports under unfair trade deals tend to pay even higher wages than jobs in exporting industries, according to new data unveiled by the Economic Policy Institute (EPI). If a manufacturing worker making $1,020 per week loses her job to imports under a raw trade deal and gets re-hired in an exporting firm where she gets paid less than $870 per week (the actual numbers from EPI’s analysis), it’s probably small consolation that she could be making even less in a non-traded sector like restaurants. But that is the very argument – that exporting industries pay more than non-traded industries – that the administration has been using to push for the TPP’s expansion of the trade status quo.
Their pitch omits the fact that far more jobs have been lost in the higher-paying import-competing industries than have been gained in exporting sectors under existing trade deals, judging by the burgeoning U.S. trade deficit with FTA partners, which has grown 427 percent since the deals took effect. It also does not mention that most trade-displaced workers do not actually get rehired in exporting industries, but in non-traded sectors, spelling an even bigger pay cut than the example given above.
China wants to write the rules for commerce in Asia. Instead, we should write the rules.
[We didn’t write the TPP’s rules – multinational corporations did. The TPP would hurt our national interests while failing, like past FTAs, to affect China’s influence.]
Ah yes, the boogeyman tactic. When the economic sales pitch for a controversial new FTA falters on the existing FTA record of lost jobs, lower wages and increased trade deficits, FTA proponents frequently resort to raising the specter that without the controversial pact, the influence of a foreign opponent will rise further. But the notion that the establishment – or not – of any specific U.S. trade agreement would affect China’s rising influence is contradicted by the record. Proponents of the North American Free Trade Agreement (NAFTA) and NAFTA expansion pacts similarly warned that those deals were necessary to prevent rising foreign influence in Latin America. But in the first 20 years of NAFTA, the share of Mexico’s imported goods coming from China increased from 1 to 16 percent, while the U.S. share dropped from 69 percent to 49 percent. And from 2000 to 2011, a period in which U.S. FTAs with eight Latin American countries took effect, the share of Latin America’s imported goods coming from China increased from 1 percent to 7 percent, while the U.S. share fell from 25 percent to 16 percent. Why should we believe the recycled pitch that another FTA would keep China’s economic influence in check?
And the attempt to paint the TPP as a battle between “our rules” and China’s rules is absurd. “We” did not write these rules. The draft TPP text was crafted in a closed-door process that granted privileged access to more than 500 official U.S. trade advisors, nine out of ten of them explicitly representing corporations. It is little surprise then that leaked TPP terms include new monopoly patent rights for pharmaceutical companies that would increase healthcare costs, limits on efforts to reregulate Wall Street, a deregulation of U.S. gas exports that could increase domestic energy prices, maximalist copyright terms that could thwart innovation and restrict Internet freedom, and new investor protections that incentivize offshoring. Good luck selling that as advancing U.S. interests.
The TPP is a 21st-century agreement with strong labor and environmental standards.
[Government reports show that those standards have proven ineffective.]
The vaunted inclusion in the TPP of labor and environmental provisions that were hatched in a May 10, 2007 deal is nothing new. These provisions have been included in existing FTAs, but have proven ineffective. The George W. Bush administration, for example, included "May 10" terms in the FTA with Colombia, where anti-union violence and repression remain rampant. Indeed, a U.S. Government Accountability Office report released in November 2014 found broad labor rights violations across five surveyed FTA partner countries, regardless of whether or not the FTA included the “May 10” labor provisions. As for environmental standards, the TPP would empower foreign corporations (e.g. oil/gas companies) to demand taxpayer compensation before extrajudicial tribunals for new environmental protections in TPP countries (e.g. rejection of a proposed controversial pipeline).
And despite recent claims to the contrary, the evidence shows no correlation between an FTA’s inclusion of the “May 10” standards and its trade balance impact. Though the Korea FTA, the U.S. template for the TPP, included the “May 10” standards, the U.S. trade deficit with Korea has grown more than 70 percent in the three years since the deal’s passage. According to the administration’s trade-jobs ratio, that equates to the loss of more than 70,000 U.S. jobs – the same number of jobs that the administration promised would be gained under the deal.
98 percent of U.S. exporters are small or medium-sized enterprises (SMEs).
[The few small businesses that export have endured slow and falling exports under FTAs.]
Only 3 percent of U.S. SMEs export any good to any country. In contrast, 38 percent of large U.S. firms are exporters. Even if FTAs actually succeeded in boosting exports, which government data show they do not, exporting is primarily the domain of large corporations, not small businesses.
The relatively few small businesses that do actually export have endured even more disappointing export performance under FTAs than large firms have experienced. U.S. small businesses have watched their exports to Korea decline even more sharply than large firms under the Korea FTA (a 14 percent vs. 3 percent decrease). And small firms’ exports to Mexico and Canada under NAFTA have grown less than half as much as large firms’ exports. Indeed, small firms’ exports to all non-NAFTA countries has exceeded by more than 50 percent the growth of their exports to NAFTA partners.