Economics, Far East, latest, United States, USA
Comment 1

The Facts on the Trans-Pacific Partnership Compared to the Obama Administration’s Claims

by Kevin Zeese and Margaret Flowers, January 12, 2016

Just yesterday the World Bank published a comprehensive analysis of the TPP and concluded that by 2030 the TPP will have a miniscule 0.4% impact on US trade. See “Potential Macroeconomic Implications of the Trans-Pacific Partnership,” The World Bank, January 2016. The economic impact for the United States is minimal but the impact on workers, the environment, food safety, traditional energy and the overall balance between corporate power and government is dramatic.

The president’s claims about the TPP should be examined closely and measured against the facts of what the TPP will actually do and the impact similar trade agreements have had. We know from past comments by the president and the US Trade Representative that their sales pitch for the TPP is not always consistent with the facts. Below we provide fact-based sources of information on the key issues surrounding the TPP.

  1. US Laws and Regulations

The president claims that “No trade agreement is going to force us to change our laws.”

In fact, trade agreements, including the TPP, can force governments from local to national to change their laws through legal challenges and regulatory coherence requirements.

There are numerous legal challenges against the US already occurring under NAFTA. The ISDS chapters in the TPP give greater legal standing to transnational corporations and give it to sectors that were not included before like the financial services sector. The TPP will immediately add 9,000 foreign corporations that can sue the United States under its current membership.

Recent cases that change US law or policy include:

The TPP will force  existing laws to be consistent with what is in the agreement. Implementing legislation for the TPP that will be sent to Congress for fast track approval will require US laws to be changed to be consistent with provisions in the TPP, e.g. Buy American procurement laws will be dramatically altered. An agency will be tasked with making sure that all new laws are consistent with the TPP provisions and the TPP privileges corporations to have influence on regulations. See:

Under Article 27 of the TPP, International trade commissions that operate outside of Congress’s reach can change the provisions within the TPP, thereby changing US laws in a completely undemocratic way. No congressional approval is required for these new trade laws. Even national security can be reversed by the TPP, e.g. if Congress determines that foreign purchase of a US corporation risks our national security, the TPP overrules that congressional determination.

  1. Made in America

According to the USTR website, the “TPP will make it easier for American entrepreneurs, farmers, and small business owners to sell Made-In-America products abroad by eliminating more than 18,000 taxes & other trade barriers on American products across the 11 other countries in the TPP—barriers that put American products at an unfair disadvantage today.”

In fact, the Labor Advisory Council created by the US Congress wrote President Obama to say that it reached the opposite conclusion: “While the TPP may create some limited opportunities for increased exports, there is an even larger risk that it will increase our trade deficit, which has been a substantial drag on job growth for more than twenty years. Especially at risk are jobs and wages in the auto, aerospace, aluminum and steel, apparel and textile, call center, and electronic and electrical machinery industries. The failure to address currency misalignment, weak rules of origin and inadequate state-owned enterprise provisions, extraordinary rights provided to foreign investors and pharmaceutical companies, the undermining of Buy American, and the inclusion of a labor framework that has proved itself ineffective are key among the TPP’s mistakes that contribute to our conclusion that the certain risks outweigh the TPP’s speculative and limited benefits”

  1. Banking regulation

The White House claims the TPP “makes sure that the United States and other TPP members have the ability to fully regulate financial markets so as to ensure financial stability . . .”

In fact, the TPP gives banks and other financial services more power than any other previous trade agreement and minimizes the power of governments to regulate financial services. Under the TPP, financial firms can sue in trade tribunals to challenge financial stability measures that do not conform to their “expectations.” It requires countries to allow new financial products (like complex derivatives) and services to enter their economies if permitted in other TPP countries. The use of capital controls and other financial policies that regulate capital flows to promote financial stability are forbidden and subject to compensation demands by foreign corporations.

  1. Workers’ rights and jobs.

According to the Wall Street Journal, President Obama said the TPP is “an agreement that puts American workers first and will help middle-class families get ahead.”

In fact, the Labor Advisory Council created by the US Congress wrote President Obama and said the TPP “should not be submitted to Congress or, if it is, it should be quickly rejected. The interests of U.S. manufacturers, businesses, workers and consumers would be severely undermined by the entry into force of the TPP.”  Their 121 page analysis concluded that the was a  “threat to future economic gains here in the U.S. and the standard of living of our people will be put in jeopardy by the Agreement.” In short “The TPP is likely to harm the U.S. economy, cost jobs, and lower wages.” The TPP does not meet the negotiating objectives set by Congress when they granted the president trade promotion authority (fast track) five years after negotiations had begun.

The Coalition for a Prosperous America finds that the best case scenario for the TPP is a 0.4% increase in GDP over ten years. And the Center for Economic and Policy Research finds that the vast majority of workers will find a decrease in wages because of the TPP.

The TPP opens up the floodgates of legal immigration of workers into the US. Under Chapter 10 of the TPP, not only foreign companies will be coming to the United States to compete with US companies, but those foreign companies can send in their foreign employees – they don’t have to hire US workers even if there are people in the United States who can do the job. Under Section 10.5 the US cannot limit the number of foreign service companies or the number of workers. Chapter 12 requires the US to grant visas to all professionals and their families seeking to enter the country for business purposes along with their families to work for a foreign corporation.  Insourcing may have a greater impact on employment than outsourcing.

  1. Globalization

According to the USTR website,“The rules of the road are up for grabs in Asia. If we don’t pass this agreement and write those rules, competitors will set weak rules of the road, threatening American jobs and workers while undermining U.S. leadership in Asia.”

In fact, the United States already has bilateral trade agreements with 6 of the 11 TPP countries and for the large economies that we don’t have trade agreements with, Japan and New Zealand, the tariffs are already extremely low. This goes hand-in-hand with Obama’s statement that “Almost 95% of the world’s consumers are outside America’s borders.“ While the statement is true, the TPP will not have a significant impact on increased trade as the World Bank found only a 0.4% increase by 2030. See more on why Obama’s 95% claim is irrelevant here.

  1. NAFTA

According to the USTR website, “Because TPP includes Canada and Mexico and improves substantially on NAFTA’s shortcomings, it delivers on that promise. TPP learns from past trade agreements, including NAFTA, by upgrading existing standards and setting new high standards that reflect today’s economic realities.”

President Obama campaigned on a platform of renegotiating NAFTA to improve environmental and labor standards, but in actuality the TPP weakens those standards. As described in other sections, the environmental protections are weaker than previous agreements and do not include enforceable standards. Labor protections are likewise absent. While corporations can sue if laws that protect workers or the environment interfere with their profit margins, unions, environmental advocates and the public do not have the right to sue corporations under the TPP if corporations are causing harm to them. Under ‘economic realities’, the Obama administration is clearly using the TPP to push greater privatization of goods and services and to undermine public provision of goods and services. The TPP goes beyond NAFTA to take away the ability of governments to support entities, called state-owned enterprises (SOEs), that provide for the common good such as in health care, education, housing, transportation, energy, water, etc. Instead, these areas are opened for private corporations to take over through what the administration calls a ‘leveled playing field’ but which in reality is an effort to give more subsidies to corporations. Ending SOEs hurts workers in the US by opening these jobs to foreign corporations who can bring in foreign workers to displace US workers.

  1. China

The White House claims that if the US does not write the rules then “competitors who don’t share our values, like China, will step in to fill that void.”

In fact, “China is already deeply integrated into trade and supply chains with all TPP countries—far more deeply than the U.S. is in many cases. A number of forces are responsible for drawing China closer together with other Pacific economies—including geography and several hundred billion dollars in Chinese foreign investment and development funding. It is difficult to believe that these deep relationships will be weakened simply through the conclusion of the TPP, particularly based on the TPP’s porous rules.”  In addition, “The TPP will allow China to benefit without even joining. Its weak rules of origin, lack of rules on currency manipulation, and benefits that would apply to Chinese companies operating in any of the TPP countries mean that China has very little incentive to change its mercantilist model that has been undercutting U.S. manufacturers and displacing millions of U.S. jobs for more than a decade.

Fear of China has been used before to pass trade agreements that ended up hurting the US economy. We were warned that unless NAFTA and free trade deals with eight Latin American nations were enacted, China would write the rules and grab our trade in the hemisphere.  NAFTA went into effect and in its first 20 years, the US share of goods imported to Mexico dropped from 70 percent to under 50 percent while China’s share rose more than 2,600 percent.

  1. The Environment

The White House claims the “TPP’s Environment chapter [is] the most far-reaching ever achieved in a trade agreement.”

Friends of the Earth describes the TPP as a step backward from trade agreements negotiated by President George W. Bush writing: “The environment chapter, which actually only deals with a narrow range of conservation measures, is largely unenforceable and is substantially weaker than trade deal conservation provisions negotiated by President George W. Bush.” According to the Sierra Club’s analysis of the TPP “The final TPP environment chapter fails to provide adequate protection in five of six environmentally critical areas, while doing nothing to strengthen an enforcement mechanism that has consistently failed to curb environmental violations on the ground.” In fact, while the language and enforcement provisions are a step backward, polluting firms actually gain more power to stop laws designed to protect the environment and deal with climate change: “The TPP investment chapter would allow firms to sue governments for billions in money damages if climate, environmental or public health regulations interfere with expected future profits.

  1. Human Rights

The USTR claims “Through the commitments in TPP, we can press to ensure that people everywhere are treated with dignity and respect.”

The Obama showed its ‘commitment’ to human rights through its treatment of Malaysia. Malaysia was initially not eligible to be a member of the TPP because if its record of human rights abuses, including human trafficking i.e., slavery. Many US electronics corporations have outsourced their labor to Malaysia. Instead of demanding higher human rights standards for Malaysia before granting it membership, the US State Department arbitrarily altered its human rights status to make Malaysia eligible. See U.S. Officially Ignores Grave Human Right’s Violations in Malaysia to Advance TPP.

  1. Food Safety

According to the USTR website, the “TPP is an opportunity to set better standards for food safety. TPP promotes the use of transparent and science-based rules, and allows the United States to help TPP countries improve their food safety systems. At the same time, TPP does not require any changes to U.S. food safety laws or regulations.”

We have already described how trade tribunals can force the repeal of US laws that require labeling of food for country of origin or dolphin-safe tuna, but that is just the beginning; “The TPP is a giveaway to big agribusiness and food companies that want to use trade deals to attack sensible food safety rules, weaken the inspection of imported food and block efforts to strengthen U.S. food safety standards. The food and agribusiness industries inserted language into the text of the TPP that will undermine U.S. food safety oversight and expose consumers to risky imported foods.”  At the border, food inspections are hobbled because the TPP’s “Rapid Response Mechanism allows companies to challenge border inspection procedures that companies claim cause unnecessary delay—like holding suspect shipments while awaiting laboratory test results.” As to controversial Genetically Modified foods, the TPP is the first agreement that provides protections for GMO’s as “Agribusiness and biotech seed companies can now more easily use trade rules to challenge countries that ban GMO imports, test for GMO contamination, do not promptly approve new GMO crops or even require GMO labeling.”

  1. Trade Deficit

An oft repeated mantra of the president is that the TPP will reduce 18,000 tariffs (which he likes to call taxes for rhetorical reasons) and that this will lead to a reduced international trade deficit.

Last year, the U.S. only exported any goods in less than half of the 18,000 touted tariff categories. For the nearly 7,500 categories of goods out of the claimed 18,000 for which we did sell something, almost 50 percent had sales under $500,000, e.g. a 34 percent “tax” cut by Vietnam on Alaskan caviar. In 2014, Vietnam’s per capita GDP was about $2,000 and about $150,000 worth of caviar was imported by Vietnam from anywhere.. Almost 2,000 of the tariff reductions in the products we do sell won’t be realized for over a decade or more, including beef and pork to Japan. The Department of Agriculture issued the administration’s only major study on TPP’s economic impact and found it would result in 0.00% increased US growth if all tariffs on all products were eliminated, which did not occur. The United States already has free trade deals in place with Canada, Mexico, Peru, Australia, Chile, and Singapore, which collectively represent over 80 percent of the trade counted in the oft-touted line about the TPP covering 40 percent of world trade.

So-called Free Trade Agreements continue to produce massive deficits currently at more than $40 billion per month as exports continue to decline. Global Trade Watch reports that the massive increase in international trade deficits — which should be seen as the hollowing out of the US economy — has coincided with post-NAFTA trade agreements,  “since establishment of NAFTA and the WTO in the mid-1990s, the U.S. trade deficit jumped exponentially from under $100 billion to over $700 billion — over 5 percent of national income.” There is nothing in the TPP that will change this trend.

  1. Internet Freedom

According to the USTR website, they describe the TPP as “Ensuring a Free and Open Internet, the “TPP puts in place strong rules that make sure the best communications tools and platforms are not unduly limited by trade barriers and laws that restrict the flow of data and information.”

In fact, the TPP is “biggest global threat to the internet” and will bring new restrictions to the Internet.  The TPP forces other countries to adopt very restrictive and punitive laws regarding copyright and internet use. which would impact users’ freedom of expression, privacy, right to due process and ability to innovate. The Electronic Frontier Foundation (EFF) summarizes the impact, “The TPP is likely to export some of the worst features of U.S. copyright law to Pacific Rim countries: a broad ban on breaking digital locks on devices and creative works (even for legal purposes), a minimum copyright term of the lifetime of the creator plus seventy years (the current international norm is the lifetime plus fifty years), privatization of enforcement for copyright infringement, ruinous statutory damages with no proof of actual harm, and government seizures of computers and equipment involved in alleged infringement,”

One little talked about provision would “make it a crime to reveal corporate wrongdoing ‘through a computer system.’ Experts have pointed out that the wording is very vague, and could lead to whistleblowers being penalised for sharing important information, and lead to journalists stopping reporting on them.” See more from EFF in this statement.


1 Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s