The Case Against ObamaRyan’s TPP

It won't help the economy, it won't stop China, and it will harm certain U.S. industries

President Obama’s top 2016 legislative priority is passage of his legacy-building “free-trade” deal, the Trans-Pacific Partnership (TPP). But the American public is highly skeptical of TPP and its alleged beneficial economic effects.

The public has it right. The problems with the deal are legion.

Here are a few great reasons to oppose the deal:

  • TPP does not include provisions prohibiting currency manipulation or enforceable penalties for doing so. Currency manipulation has cost the U.S. thousands of factories and millions of jobs over the last two decades.
  • TPP fails completely to address across-the-board Value Added Taxes imposed on our goods at the border of every TPP country but Brunei. VATs raise the cost of U.S. goods and make them less competitive. Worldwide, VATs are estimated to cost U.S. firms $350 billion a year.
  • TPP guts Buy America provisions in U.S. law by allowing firms in any TPP country to bid on U.S. procurement, including Chinese state-owned firms located in Vietnam. Our tax dollars can thus go to China instead of to U.S. producers.
  • TPP has rules that allow Japanese automakers to incorporate Chinese parts in their cars and still receive favorable tariff treatment entering the U.S., thus harming the American auto industry.
  • TPP will produce no job growth, and add at most only 0.04% to our GDP by 2025. This is pocket change. Major studies by the Peterson Institute (2011), the U.S. Department of Agriculture (2014), the World Bank (2016), and Tufts University (2016) show little benefit — or actual job loss — from TPP. The Washington Post Fact Checker gave Obama 4 Pinocchios for claiming the TPP would add 650,000 jobs.
  • TPP will not prevent China from dominating Asian markets, by having the U.S. “write the rules for 21st Century trade,” in Obama’s words. TPP members aren’t going to stop trading with China on China’s terms because the U.S. has put some rules in an agreement. And China is certainly not going to follow U.S. rules anyway.
  • TPP will not constrain China economically. China just launched the Asia Investment and Infrastructure Bank to develop the entire Asia region. Fifty seven countries joined up, including our major European allies, in spite of Obama’s telling them not to.
  • TPP will not complete Obama’s “Pivot to Asia.” We can’t pivot because Obama’s Mideast policies have resulted in multiple regional wars in which we are involved. And the pivot is just a PR ploy to reassure our Asia friends that we will stay involved.
  • One indication of public hostility is that President Obama spent only 28 seconds out of his 70-minute State of the Union speech advocating for it. This is the dog-whistle approach: Don’t stoke the opposition of the average American by raising TPP’s visibility. But signal the free-traders in Congress (mostly Republicans), Wall Street, and multinational corporations that the White House will lobby hard for it, so that they will too.

Another indication of TPP’s unpopularity with the electorate is the reluctance of Senate Majority Leader Mitch McConnell, R-Ky., to bring the deal up for a vote before the fall election. McConnell wants to maintain Republican control of the Senate. But a number of Republican senators are up for reelection in precarious races. Generally a big trade agreement supporter, McConnell is afraid that if he puts senators on record as voting in favor of it, they will be defeated at the polls and he’ll lose his majority.

So the vote may be taken after the election in a “lame duck” session of Congress. This democracy-denying trick allows senators to escape judgment for a pro-TPP vote at the polls, and it keeps the money of TPP backers flowing into campaign chests before the election in hope of influencing senators’ votes.

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Also complicating passage are three issues that trouble even the pro-free trade business organizations that have recently announced support for TPP.

They are:

One, a “carve-out” provision denying tobacco companies the right to sue foreign governments using the Investor State Dispute Settlement process.
Two, the lowering of a special period of patent protection for new biologic drugs from 12 years under U.S. law to five years under TPP.
Three, the requirement that financial institutions store electronic data in the country where it originated.

These three issues mean that the U.S. tobacco, pharmaceutical, and financial industries are unhappy with TPP and may lobby against it.

In short, TPP is an Obama-created illusion that benefits select industries but will not enhance the U.S. economy or contain China. The failure of TPP will not isolate the U.S. Trade will continue, same as it does today without TPP.

The executive and legislative branches need to understand that, instead of chasing success in foreign markets, American firms need to re-take market share here in their home market, which accounts for 22 percent of world GDP. We must pass and enforce trade laws that allow them to do so. To begin the process, voters must let their senators, representatives, and local media know they oppose passage of TPP.

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

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