President Obama Is Right on the TPPAmbassador Ira Shapiro
By Ira Shapiro
(Washington Monthly) – The Trans-Pacific Partnership agreement (TPP), a deeply controversial trade agreement even before this heated campaign season, now faces intense opposition from both presidential candidates, the vast majority of Congressional Democrats, wavering Republicans, a broad coalition of unions and environmental and health groups, and several renowned economic thinkers (Nobel laureate Joseph Stiglitz, former Labor Secretary Robert Reich, and economist Clyde Prestowitz, to name a few).
Nonetheless, President Barack Obama’s steadfast view that TPP is in the U.S. national interest is clearly right.
In the aftermath of World War II, the United States represented 50 percent of the global economy in a world that had been devastated. We could afford to open our market unilaterally to help Europe and Japan rebuild. That humane policy also played to our economic strengths and gave us strong allies in the Cold War. But starting as far back as the 1970’s, bedrock U.S. industries, particularly steel and automobiles, began to face intense competition from these rebuilt economies, which unfortunately did not enter the global market in the same spirit of openness. To secure advantages for themselves, other nations imposed tariffs on U.S.-made goods, subsidized their manufacturers and engaged in a variety of other behaviors that unfairly disadvantaged American-made goods and services. Thus, for the past 30 years, the challenge of U.S. trade policy has been to end this unfairness and achieve reciprocity – fairer trade – in a dramatically changed world. Our goal has been to insist that other nations open their markets to a degree comparable to ours.
Democratic and Republican administrations have pursued reciprocity in a number of ways, including by exerting unilateral pressure. But the principal instrument for achieving reciprocity has been negotiated trade agreements – multilateral, regional and bilateral – which have provided a means to ensure that other countries grant U.S. products and services access to their markets. Today, the United States still constitutes almost 25 percent of a world economy that is 18 times larger than it was in 1945. We lead the world in agricultural exports, virtually every service industry, and information and communications technology and life sciences, which are building blocks of future prosperity. The shale revolution has made the United States the world’s leading producer of oil and gas. America is the world’s most attractive place for foreign investment, which increases competition, promotes innovation and creates jobs.
Last year, the U.S. auto industry, which now includes the domestic “Big 3” as well as Japanese, German, and Korean companies, exported over two million cars and SUVs to more than 100 countries around the world. No country has an economy that matches ours in strength across the board. It’s no accident that we have recovered more quickly and more robustly from the Great Recession than virtually any other country.
Those facts should provide some optimism, but not complacency. Five years ago, having led the United States through the global economic crisis, President Obama doubled down on our commitment to TPP, which began as a relatively modest negotiation that did not yet include Canada, Mexico or Japan. Obama recognized that our future prosperity depends on doing business with the vast majority of global citizens who live outside our borders. He understood that the Asia-Pacific nations were integrating economically, and that the United States faced the danger of being left outside, disadvantaged by the preferential trading agreements these other nations reached among themselves.
The president saw TPP as an opportunity to advance our priorities and values, including enhanced labor rights, environmental protection, an open Internet, and rules for the digital economy. He realized that the Asia-Pacific nations were seeking not only our military presence, but an economic alternative to compete with China’s state capitalism.
No trade agreement is perfect or beneficial to only one party; other nations work hard to protect and advance their interests. But TPP, as negotiated, delivers on the major promises made by the President and the U.S. Trade Representative, Michael Froman, when Congress passed Trade Promotion Authority last year to allow the President to complete the negotiation.
The TPP’s opponents bring a great deal of experience and intellectual firepower to the trade debate, and they certainly understand that China represents our major trade challenge. Yet, ironically, their scorched earth opposition to TPP would bring about much the same results as Donald Trump’s dangerously ignorant trade policies.
The opponents would have Congress refuse to ratify an agreement with 11 other nations, including some of our closest allies – an agreement that other nations are already clamoring to join. Their position bears considerable resemblance to Trump’s “mad as hell” tendency to equate, indiscriminately, China, Mexico, Japan, and the European Union as equally threatening “foreigners” who will jeopardize America’s interests. However carefully explained or elaborately justified, walking away from TPP would be seen, quite rightly, as an act of isolationism, protectionism, and retreat – and a boon to China.
It would also justly be viewed as scapegoating, blaming other nations for our homegrown problems. Globalization and technological change put pressure on every nation, but those forces did not cause America to become the country with the worst level of inequality among advanced nations. Paul Pierson and Jacob Hacker have brilliantly explained the thirty-year evolution of our “winner take all” economy with virtually no mention of international trade.
No other country pressured United States to embrace tax cuts for the wealthiest Americans; deregulate a voracious financial sector which took the world to the brink of a global depression; relentlessly weaken labor unions; fail to invest in infrastructure; finance political campaigns in a way that further magnifies the interests of the wealthiest 0.1%; and descend to hyper-partisanship that creates gridlock and thwarts constructive policies.
The anger that many Americans feel is eminently justified, but a focus on blocking TPP is tragically misplaced. We need to make major policy changes, while avoiding what would be a massive self-inflicted wound to the U.S. economy and future economic prosperity.