Economics

What is the TPP and why are both parties so angry about it?

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Delegates protesting against the Trans Pacific Partnership (TPP) trade agreement hold up signs during the first sesssion of the Democratic National Convention in Philadelphia. , Pe

Delegates protesting against the Trans Pacific Partnership (TPP) trade agreement hold up signs during the first sesssion of the Democratic National Convention in Philadelphia, Pennsylvania, July 25, 2016.

Credit:

Mark Kauzlarich/Reuters

When Bernie Sanders spoke at the Democratic National Convention Monday, he ticked off some economic provisions he championed for the Democratic Party platform: breaking up big banks on Wall Street and opposing "job killing trade agreements like the TPP." 

Many in the audience crowd chanted “No TPP!” and held signs with the letters TPP crossed out.

For those who were a little confused about why the crowd got so riled up, let’s start with the basics: TPP is shorthand for the Trans-Pacific Partnership.

The agreement would create a trade zone with lower tariffs — or taxes — for 12 Pacific member nations: the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. (Notably, not China.) Combined, the 12 countries account for 40 percent of the global economy.

Opponents of the TPP, including labor oranizations, say this new trading alliance would allow American firms to more easily move jobs overseas to take advantage of cheap, foreign labor. Or, conversely, American employers could keep jobs here in the US, but at lower wages.

President Barack Obama doesn’t see things that way.

“With this Trans-Pacific Partnership, we are writing the rules for the global economy. America is leading in the 21st century. Our workers will be the ones who get ahead. Our business will get a fair deal,” Obama said last October.  

President Obama has added that not passing the TPP would give China the advantage in writing the rules of 21st century trade. China is working on its own trade deal with 15 other nations.

The president is urging Congress to ratify the TPP before he leaves office, in part, because of the man who could assume his role.

“The Trans-Pacific Partnership is another disaster,” Republican presidential nominee Donald Trump said recently. “Done and pushed by special interests who want to rape our country.”

Then there’s Hillary Clinton, her stance is less cut and dry. As secretary of state, Clinton called the Trans-Pacific Partnership the "gold standard in trade agreements." But now, she says the TPP doesn’t meet her high standard for creating good American jobs.

“Saying it was ‘the gold standard’ really puts her into a corner, because nothing really changed,” said economist Derek Scissors with the American Enterprise Institute in Washington. “She has never come up with a reason, well it was the gold standard, and then this happened.”

Still, Clinton could take control of the narrative by talking about the positives that come with more free trade and the TPP.

“One of the problems that the pro-trade lobby has had is to tell the good stories,” said Shihoko Goto with the Wilson Center in Washington. “And the good story is that trade actually brings a lot of jobs into the United States as well.”

For example, foreign multinationals would certainly be more attracted to setting up shops in the US, thereby providing jobs for Americans.

“You already see that with companies like the Japanese carmakers, like Toyota, Honda, Nissan. They all have big bases in places like Ohio and in Tennessee,” said Goto. “And this will actually increase with the TPP because the United States and Japan do not have a bilateral free trade agreement.”

On the other hand, the TPP could cost some American jobs. For example, American textile workers would likely lose more work to Vietnam, where workers earn significantly less.

The US has other interests in passing the TPP: new markets would open to American exporters and intellectual property rights would be better protected across borders. 

In short, there would be winners and losers, as with every trade agreement. Overall though, Goto thinks the TPP would benefit the US economy.

Derek Scissors isn’t as convinced of its value, calling the deal a “missed opportunity” to go further and be even more comprehensive. But he added the TPP wouldn’t be a job killer either.

“When people like Donald Trump, like Bernie Sanders are telling you that the TPP is a disaster, that’s not what the evidence says,” said Scissors.

Beyond the economic case for the TPP, there’s the political one: the TPP would strengthen ties among Asian Pacific nations.

“One of the TPP countries is Vietnam. Vietnam, of course, is a communist country, and yet communist Vietnam is eagerly embracing the TPP standards,” said Goto. “Now I think that’s a good thing.”

Hillary Clinton would like a more stable Asia to be part of her legacy as secretary of state. As president, Clinton could, potentially, help make that happen, but she’d have to go against her current stance opposing the TPP. And that, well, that would create a whole other set of political problems if a President Clinton is running for re-election in 2020.  

In Business, Economics and JobsEconomicsPoliticsElection 2016.

Tagged: North AmericaUnited Stateseconomicsgovernmentpolitics.