Bottom Line: Does the TPP Trade Deal “Put American Workers First”?

Dave Johnson

The full text of the Trans-Pacific Partnership (TPP) has finally been released and We the People can see what has been negotiated in our name. President Obama laid out the bottom line, saying the deal “puts American workers first.” Does it?

TPP Text

The full text of TPP can be seen here. The text consists of more than a thousand pages of incomprehensible legalese like this:

… the rate of customs duty applicable to the originating good from the Party where the good acquired the originating status in accordance with the process requirement or change in tariff classification requirement set out in Annex (PSR); or (ii) the rate of customs duty applicable to the originating good from the Party where the largest value was added among claimed production process, or the highest rate among the rates applicable to the originating good from those Parties involved in claimed production process, when the good acquired the originating status through a production process in accordance with the requirement set out in Article DD. 2(a), (b) or the regional value content requirement set out in Annex (PSR).

and this:

Pursuant to paragraph 1(b), the Commission shall review the operation of this Agreement with a view to updating and enhancing this Agreement, through negotiations, as appropriate, to ensure that the disciplines contained in the Agreement remain relevant to the trade and investment issues and challenges confronting the Parties.

You get the picture. This is going to take time and experts to figure out. Worse, it was negotiated in a corporate-dominated process, so if TPP is approved we have to assume that anything that is hard to understand or ambiguous will later be used to justify taking from We the People and giving to A Few People.

So Does TPP “Put American Workers First”?

President Obama set down the bottom line of TPP by releasing a statement calling TPP, “a new type of trade deal that puts American workers first.” In the statement he wrote, “If you’re an autoworker in Michigan, the cars you build face taxes as high as 70 percent in Vietnam.”

It is interesting that he would use the example of auto workers here. The September post “TPP Terms Are Even Worse For U.S. Than NAFTA?” looked at how TPP will affect the American auto industry and found:

Under NAFTA 62.5 percent of the value of cars and 60 percent of auto parts must be made in NAFTA countries, or a tariff will apply. But for TPP the U.S. Trade Representative Michael Froman appears to have made a deal saying only 45 percent for cars and 30 percent for parts need to be made in TPP countries – the rest of that business goes to China and other non-TPP, low-wage, low-labor-standards and low-environmental-protection countries. The result will be a huge shift of jobs and business away from American, Mexican and Canadian auto and parts makers.

Now we know the actual terms. Canada’s Globe and Mail reports, in “Canadian auto sector alarmed by concessions revealed in full TPP text ,” that

Canada’s auto parts makers, who employ 81,000, say the text of the agreement shows the local-content protections for vehicle components are significantly skimpier than the former Conservative government had advertised. Former prime minister Stephen Harper had said local-content requirements for important vehicle components would be between 40 per cent and 45 per cent.

… Engine parts and such body stampings as truck frames and metal roof panels will only be required to have TPP content of 35 per cent.

Basically when we are talking about “non-TPP countries” getting some percent of the business, we are really just talking about China. So says tariffs do not apply if 35 percent to 45 percent of the car and parts are made in TPP countries. This means that 55 percent to 65 percent of the car and parts can be made in China and still be tariff-free. This is much worse than even NAFTA, which, as we know, destroyed American auto and parts manufacturing jobs and entire regions of our country.

Kevin L. Kearns, President of the U.S. Business and Industry Council, in the post “Domestic Manufacturers Call Full Text of Trans-Pacific Partnership (TPP) Agreement a ‘Very Bad Deal for America.’” says of this,

“Apparently, one of America’s biggest economic problems is that Toyota does not sell enough cars and trucks here, and thus does not displace enough American jobs. The TPP deal allows Toyota and other Japanese automakers a special concession to keep their global supply chains intact.”

So the president’s singling out of auto workers as benefiting from TPP was unfortunate. They do not, and American auto workers will be hit hard as production moves to China.

In the release statement Obama also wrote, “If you’re a worker in Oregon, you’re forced to compete against workers in other countries that set lower standards and pay lower wages just to cut their costs.”

Does TPP stop the competition of Oregon’s workers “against workers in other countries that set lower standards and pay lower wages just to cut their costs” as the president promises here?

The athletic apparel maker Nike is based in Oregon. The workers who actually make Nike’s shoes are already all outsourced, already located in countries “that set lower standards and pay lower wages just to cut their costs,” including TPP signatories Vietnam (where it employs 345,000 workers), Mexico and Malaysia. TPP will remove tariffs already charged on those shoes and garments as they come into the U.S., making it even more attractive to outsource production to countries “that set lower standards and pay lower wages just to cut their costs.” Nike will be rewarded by that tariff cut with greater profits from their choice to outsource.

Meanwhile Nike competitor New Balance has been trying to continue to make shoes in the U.S., and this removal of tariffs is likely to force them to give up. TPP lowers the cost of moving production to countries “that set lower standards and pay lower wages just to cut their costs.”

So the president cited autos and Oregon, but a close look reveals these to be unfortunate choices. In both cases American workers are put first – first in line to be laid off as even more production shifts out of the country.

Does TPP Put American Steelworkers First

If TPP truly puts “American workers first” you’d think that American workers would be happy about TPP. They aren’t. The United Steelworkers said of the TPP text:

“It’s a dagger twisting in the heart of American manufacturing,” the USW said in a Nov. 5 statement. “Even the Wall Street Journal predicted the deal would cause a massive trade deficit in manufacturing, which would result in hundreds of thousands of job losses.”

The TPP, the union said, provides incentives for U.S. companies to outsource production and send jobs overseas. It would cause dramatic job losses in the U.S. manufacturing sector, and its rules of origin for automobiles and auto parts would allow China to provide the majority of a vehicle’s content, it said.

The TPP also would allow currency manipulation to continue, do nothing to prevent state-owned enterprises from receiving state support and protection, and allow foreign workers to continue to suffer violations of their rights, the USW said.

So it looks like TPP does anything but “putting American workers first.” It puts them first in line to be laid off.

Economic Theory

So why the big push for TPP?

Here’s the thing. By moving production to low-wage countries with poor environmental and safety (and other) regulations that protect people, American companies can lower the cost of production. Economic theory says this “frees up resources” in our own economy to be put to “more productive uses.” Economists say the workers can thereby move into higher-paying jobs, doing things that can’t be done in Vietnam.

But of course this is not what has been happening since the country’s elites were sold on the “free trade” agenda decades ago. We have seen the financial sector (and its associated value system) increase as the manufacturing sector (and its associated value system) declines. We have seen a dramatic increase in inequality as the “investor class” pockets the wage and other cost differential from moving production out of the country. We have seen entire regions of the country literally devastated (see Detroit and the “Rust Belt”) because the resources released by outsourcing America’s production have not been reinvested in the U.S. They have instead found their way to foreign tax shelters. We have seen the country lose entire industries, and the supply chains, “know-how” and other elements of a manufacturing ecosystem that might enable us to rebuild someday.

Now that we can actually read it we can see that TPP is just one more “NAFTA-style” power-grab elevating the “investor class” above the rest of us and our ability to run our own government in ways that make our lives better. TPP is about taking from We the People and giving to A Few People. It is a bad deal and it must be stopped.

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