October 5, 2015
The Coalition for a Prosperous America (CPA) opposes the Trans-Pacific Partnership (TPP) agreement because it will harm American job creation, agricultural and goods production and our economic prosperity.
“US trade negotiators had no strategy to increase American net trade when conducting these negotiations,” said Michael Stumo, CEO of CPA. “Instead, they pursued a deal for the sake of getting a deal, regardless of the result. The result is another negotiating loss instead of a win.”
We Have Poorly Performing Trade Deals with Most TPP Countries Already: The TPP agreement is promoted as a trade deal with over 40% of the global economy. That assertion is largely absurd and should be ignored. The US economy alone is 60% of the TPP countries total gross domestic product (GDP) or economic size. We have existing and poorly performing trade agreements with seven TPP countries that consist of another 20% of the TPP economic size. Those countries are Canada, Mexico, Peru, Singapore, Peru, Chile and Australia. As a result, we are not “opening trade” with 80% of the TPP countries. Instead, the TPP is a trade agreement on top of existing trade agreements.
No Economic Benefit Expected from other TPP Countries, Including Japan: We have no trade agreements (except the World Trade Organization agreement) with the remaining five TPP countries constituting 20% of the economic size of all TPP countries. But there is little reason to believe the US will gain net exports from those countries. Four of the countries – Brunei, New Zealand, Vietnam, Malaysia – have GDPs smaller than Philadelphia.
The fifth country – with which we have no bilateral trade agreement – is Japan which constitutes 14% of the TPP countries’ GDP. However, Japan cannot – or will not – substantially increase the purchase of US goods for several reasons. First, the yen has devalued by over 55% in three years. This devaluation from Prime Minister Abe’s aggressive monetary strategy. The result is equivalent to a tariff on US goods and a subsidy to Japanese exports. The Japanese consumer’s purchasing power has been severely devalued.
Japan has increased it’s value added tax from 5% to 10% effective this month. This 5% consumption tax increase will be paid by US exporters when crossing the Japanese border. In contrast, Japan’s average weighted tariff is a mere 2.5%. The US cannot win by negotiating tariff reductions when other countries then raise border adjustable consumption taxes.
Japan operates a nationalistic, partially closed economy strategy. They grew from post-World War II depression based upon net exports and spurring diverse industry growth under government strategic planning. The country will not change to become a net importer of US goods after signing the TPP deal.
There are many other reasons the US congress and the public should oppose the TPP:
Ignores Balanced Trade and Domestic Growth: US trade bureaucrats negotiated the TPP without regard to the forty straight years of US trade deficits. They also ignored the relative decline of US manufacturing market share in the world as compared to the growth of China’s and Europe’s global market share since 2000. Instead, the deal will spur continued decline in relation to other developed economies.
Korea Agreement Failure Repeated: The agreement doubles down on the model that produced the trade deal with South Korea. The US trade deficit with South Korea worsened by over 70% after that deal was implemented in 2012. Congress needs to find out why before approving new agreements.
Currency Manipulation Failure: The Administration refused to follow Congressional instructions on currency as set forth in the recently passed Trade Promotion Authority legislation. Currency devaluation, as Vietnam recently did, makes any trade deal concessions meaningless.
Central Planning of Outsourcing: The TPP negotiators agreed to manage the decline of US based manufacturing and agriculture including dairy, beef, and autos through deals on more import penetration to the US to displace our industry.
Windfall for China: Rules of Origin are weaker than prior agreements. A more substantial portion of goods can be made in non-party countries like China and still receive favorable trade treatment. China conceded nothing to receive this misguided benefit. Instead of containing China, the TPP incentivizes more production in China and other non-party countries.
Globalizes the Legislative Process: The agreement harms US sovereignty by globalizing rules that should be dealt with by Congress regarding pharmaceuticals, health and safety laws, and many other regulatory standards. Industries now have one-stop-shopping with trade negotiators to get rule changes rather than asking Congress to consider the national interest.
Globalizes Courts: The TPP grants jurisdiction to global courts that foreign corporations can use to invalidate US federal, state and local rules and laws. The US federal and state courts set up by our constitutional system are avoided.
Tax Bait and Switch: The agreement allows other countries to raise border adjustable consumption taxes (value added taxes or goods and services taxes) to replace any tariff reductions or other concessions. Just as under NAFTA, CAFTA and European trade, American companies will still face similar export charge hurdles as tariffs are reduced but other border taxes rise.
Contact: Sara Haimowitz, Development Director
202 688 5145, firstname.lastname@example.org
The Coalition for a Prosperous America is a nonpartisan, nonprofit organization representing the interests of over three million households through our agricultural, manufacturing and labor organization members.