Commentary Law and Policy

Why We Should Be Skeptical of the Trans-Pacific Partnership

Ari Rabin-Havt

Even under the rosiest scenario, the trade deal would lead to modest economic gains. Meanwhile, historic precedent portends disastrous economic consequences.

Feel burned by NAFTA?

Lied to by the WTO?

Deceived by permanent normalized trade relations with China?

Those were all previous trade treaties, negotiated and ratified under former presidents. The Obama White House wants to assure progressives that the Trans-Pacific Partnership (TPP) is going to be different. In an email to supporters last week, the president touts the upsides of the TPP, writing that it will “[level] the playing field for American workers,” that it’s “good to the environment,” and most importantly that it’s “consistent with my top priority as president: making sure that more hard-working Americans have a chance to get ahead.”

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The TPP is a treaty being negotiated between the United States and Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, with the goal of creating a NAFTA-style free trade zone between said countries. The negotiations began in 2005 and are reportedly nearing their conclusion.

Allies of the president are quick to point out that progressive skepticism of the TPP is premature because the text of the treaty remains private—so secret that while trade advisers from some of the largest companies in the world have access to its contents, members of Congress have vocally complained that their access has been severely restricted.

Trust, without any ability to verify. The president is demanding that Congress pass trade promotion authority, sometimes called “fast track,” legislation, which would only allow for 90 days between the TPP being revealed to the public for the first time and its passage in Congress, with the legislative branch forgoing its prerogative to amend the treaty. This removes any opportunity to build significant opposition to the treaty.

There is the rub. Corporations, trade associations, lobbyists, Wall Street-funded think tanks, and other institutions pushing for passage are waging their fight based on experiences with previous treaties and the legislative goodies they think they will receive. (And of course the leaks from the 600 “trade advisors” letting them know how their industries will benefit.)

But the White House is right. It would be unfair to tar them with the track record of, for example, the Clinton White House’s history on trade. And as it happens, we don’t need to. The current White House’s own record is damning on its own.

At the end of 2010 President Obama signed and pushed for passage of the Korea Free Trade Agreement. First signed by President Bush in 2007, the treaty was not ratified by the newly Democratic Congress.

Barack Obama reopened negotiations and in December 2010 he signed an updated version of the treaty. Because the treaty was first signed in 2007 it was grandfathered into the fast-track legislation passed during the Bush administration that formally expired in 2007, clearing the path for the newly Republican House of Representatives to ratify the treaty in 2011.

In his 2011 State of the Union address, the president touted the benefits of the U.S.-Korea agreement, telling Congress, “Last month, we finalized a trade agreement with South Korea that will support at least 70,000 American jobs.”

Using language similar to his TPP advocacy, the president said, “Before I took office, I made it clear that we would enforce our trade agreements, and that I would only sign deals that keep faith with American workers, and promote American jobs.” He continued, “That’s what we did with Korea, and that’s what I intend to do as we pursue agreements with Panama and Colombia, and continue our Asia Pacific and global trade talks.”

Three years since ratification of the Korea treaty, we can ask ourselves how it is living up to its promise. Public Citizen’s Global Trade Watch recently released a fact sheet updating the performance of the Korea Free Trade Association, and there appears to be a misalignment between rhetoric and reality.

Over the past three years, “the U.S. goods trade deficit with Korea has ballooned an estimated 84 percent, or $12.7 billion.” Using the administration’s own “trade-jobs ratio” this cost our economy “nearly 85,000 American jobs.”

What’s more, far from the promised panacea of newly opened markets leading to increased access for U.S. manufacturers, “U.S. goods exports to Korea have fallen an estimated 5 percent, or $2.2 billion,” according to Global Trade Watch. During the same period, imports from Korea increased by $10.5 billion.

These statistics aren’t surprising. They simply add the Korea Free Trade Association to a scrap heap of treaties that have failed to live up to their promises to the American worker.

Even more frightening are the outcomes if we take the administration at its word on the benefits of the Trans-Pacific Partnership.

A fact sheet distributed by the Progressive Coalition for American Jobs, a newly created pro-TPP astroturf group, states that “according to analysis supported by the Peterson Institute, by 2025 TPP is estimated to increase U.S. exports by $123.5 billion.”

Never mind that the membership list of organizations that are part of the Progressive Coalition for American Jobs seems to be a secret as heavily classified as the actual text of the TPP. Also please ignore the fact that one of the researchers who concocted the Peterson Institute’s rosy forecasts for NAFTA (abominably predicting a gain of 130,000 jobs in five years) later told the Wall Street Journal that “the lesson for me is to stay away from job forecasting.”

If Peterson’s $123.5 billion estimate bucks the trend of the likes of NAFTA, the WTO, and permanent normalized trade relations, and it comes to fruition, what would it actually mean for the U.S. economy? Less than half of 1 percent of our gross domestic product. Economist Dean Baker points out, “This is presumably mostly due to greater efficiency, but if half was due to increased labor supply it would only translate into 300,000 additional people working.” This amounts to less than six weeks of employment gains in the current economy.

Therein lies the problem. Even under the rosiest scenario, TPP would lead to modest economic gains. Meanwhile, historic precedent, including the Korea Free Trade agreement negotiated and signed by President Obama, portends disastrous economic consequences.

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