By Paoloa Masman on Coalition for a Prosperous America
President Barack Obama penned a Washington Post op-ed yesterday outlining a flimsy case for the Trans-Pacific Partnership (TPP) deal. The TPP is currently on life support due to a voter revolt against trade and global governance deals.
Presidents Clinton and Bush also pushed similar trade and global governance agreements with similar arguments. We now have trade deals with 20 countries, we have data, and we don’t have to rely only on projections. The data are not kind to Obama’s optimistic arguments.
Here are the top five reasons why voters should not believe President Obama’s claims in his op-ed.
1. Trade agreements do not improve US trade performance
Rhetoric does not equal reality. Most people are surprised to discover that there is zero correlation between our trade agreements and improved US trade performance. We have trade agreements with 20 countries negotiated since 1986. During that time, America’s trade deficit worsened drastically.
A trade deficit means that we import more than we export. While some trade deals with small countries like Singapore were followed by a modestly improved trade balance, other deals with larger economies like Mexico and South Korea were dramatic failures. For example, our trade deficit with South Korea doubled four years after the 2012 implementation of that deal.
2. “Writing the Rules of Trade for China” is Untrue
President Obama places heavy reliance on the claim that the US is writing the rules of trade for China. That is an untrue or irrelevant claim. First, we have seen this movie before in that President Clinton made the same argument when China joined the World Trade Organization (WTO) in 2000. China was a known trade cheater. By joining the WTO, which the US had a hand in writing, we were told that China would now follow western rules. But they do not.
Second, the US is not writing the TPP rules. We are one of twelve countries including Bahrain and Vietnam that compromised extensively in a give and take. Third, China is not a TPP signatory and has agreed to nothing in that agreement. The TPP in some ways ties our hands but not theirs.
3. China will make trade and investment agreements regardless of TPP
President Obama says that we must sign the TPP because China is making deals with some of those countries. Whether or not we have the TPP, China will trade with those countries and that trade will have some rules. We heard the same argument when President Obama was pushing the South Korea trade deal. The European Union was negotiating with South Korea and we were going to be left in the cold if we did not hurry up and agree.
The false urgency implies that there will be no trade if we don’t sign a deal. It also implies that if we do sign a deal, they won’t sign deals with others. Neither implication is true. Just as the US has trade deals with many countries, so do our trade competitors.
4. America trades with most countries without bilateral trade agreements
President Obama and many pundits imply that rejecting a trade agreement means we will not trade and that we will be isolated. However, the total volume of trade with any country has no correlation with the existence of a trade agreement. We traded with Mexico, Singapore and South Korea long before we had an agreement with them. We trade with European and African countries despite the fact we have not trade deal with them.
President Obama knows, or should know, that global trade increases when economies grow. And that global trade slows or decreases when economies shrink, as in the Great Recession. This “law of gravity” is resistant to the existence of trade deals. We don’t lose market access without an agreement anymore than China does.
5. The TPP will not create jobs, net exports or economic growth
President Obama’s claims of economic growth from tariff cuts among the TPP countries is false. Pro-TPP think tanks like the Peterson Institute and the World Bank admit that there will be no net job creation from the TPP. They admit that there will be no net trade balance improvement from the TPP. They admit that job loss will occur, but in a hand-waving exercise claim that job losers will get a new job with equivalent pay soon thereafter.
The pro-TPP economists only leg to stand on is theoretical efficiency gains after a trade deal that could provide embarrassingly meager growth after a fifteen year period. But that can be a net benefit only if if you assume no currency manipulation, job loss or trade cheating. Because those assumptions have been shown historically false, there is no basis to project economic growth from the TPP.
As a result, there is no more reason to believe President Obama’s claims about the TPP than we could believe Presidents Bush and Clinton on their false trade deal arguments.