Will Obama Push Unpopular TPP In State Of The Union Speech?

Dave Johnson

President Obama gives his last State of the Union speech tonight. Will he provide a positive, progressive message for the future, or will he continue to push the wildly unpopular, corporate/Wall Street-written Trans-Pacific Partnership (TPP)?

TPP Unpopular

Last week the Washington Post reported, in “Hundreds of advocacy groups ask Congress to block Obama’s Pacific Rim trade pact,” that “A coalition of more than 1,500 interest groups is sending a letter to Congress on Thursday demanding that lawmakers block the Trans-Pacific Partnership (TPP), the 12-nation Pacific Rim trade pact championed by the Obama administration.”

Labor unions, environmental groups, consumer advocates and faith groups are among the 1,525 organizations that signed onto the document, which was organized by the Citizens Trade Campaign. Hundreds of local labor union affiliates have signed on.

In addition, all of the Democratic candidates, along with Republican front-runners Donald Trump and Ted Cruz, oppose TPP. (Or at least say they do, because of widespread public opposition.)

Honey Laundering

Obama has invited Ronna Rice, CEO of Lucky Clover Honey to the State of the Union. He plans to point to the company as an example of a small business that would benefit from TPP. But a closer look shows that the opposite is really the case. (Remember when Obama used Nike as an example of a company benefiting from TPP, when Nike imports every shoe it makes, while TPP would likely force New Balance to stop making shoes in the U.S.?)

Public Citizen pointed out eight of the 11 TPP partners already have no tariffs on honey, so there’s won’t be any increased honey sales to them.

● A tariff in Vietnam will be removed (after several years) but Vietnam is the United States’ second largest source of honey imports and is unlikely to be buying US honey.

● Speaking of imported honey and pointing out problems with TPP, Malaysia is the sixth largest source of US honey imports, even though they have few commercial bee operations. So what’s going on? It looks like China is shipping honey to the U.S. through Malaysia, after the U.S. caught China “dumping” honey on the US market at below-market prices. Public Citizen cites the NYT report “Food Detectives on a Tough Case”:

According to the American Honey Producers Association, Malaysian beekeepers, for example, have the capacity to make about 45,000 pounds of honey annually, but the country has exported as much as 37 million pounds of honey to the United States in a year.

As it turned out, Chinese honey was being shipped through ports such as Shanghai, or Busan, South Korea, and slapped with labels from other nations to skirt American duties. The practice is known as transshipment, or “honey laundering.” Some of it was not even real honey, but a mix that included corn and rice sweeteners.

“Honey laundering.” Ouch.

● Vietnam and Malaysia will get tariffs removed under TPP, and will increase exports to the U.S., hurting Lucky Clover Honey’s ability to even sell their honey here in this country.

● Only 3 percent of U.S. small and medium enterprises export any good to any country.

● “So … it boils down to Japan. There’s a 25.5% tariff on honey in Japan now, which goes to zero in year eight of the TPP. BUT, even though the United States sells quite a bit of honey in Japan now, China flattens us in Japan with respect to relative market share.”

Public Citizen concludes:

The real TPP story for Lucky Clover honey is not so sweet. For the years until the Japan-Korea-China FTA goes into effect, would the TPP tariff cut increase the U.S. share of Japan’s imported honey market relative to China? And more critically, would any such exports gains in Japan even make up for the increased imports of duty-free Vietnam and Malaysia honey into the United States under the TPP – more import competition in the firm’s main market?

Countering China?

Obama might claim in his address that the real purpose of TPP is to counter China, so never mind the job losses and inequity it will cause. He regularly repeats the focus-group-tested phrase, “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules.”

Sounds great, but what does it mean? On a press call discussing this with several foreign policy experts, a strong case was made that TPP would actually weaken U.S. standing in the world versus China.

On the call, Rep. Brad Sherman (D-CA) said that “China, without showing, up has written two key rules in TPP.”  Sherman cited currency manipulation and rules of origin as the two elements of TPP that strongly favor China. “TPP enshrines that currency manipulation is OK … TPP’s rules of origin,” provide, for example, that “30% made in Vietnam, so China gets a fast track to get 70% Chinese-made goods into the US. But even those could be manipulated so percentage is in the eye of the manufacturers accountants.”

Sherman said TPP harms our national security. He said TPP actually removes a very important tool of US diplomacy. “The agreement takes away ‘essential exception’ for sanctions, like against Iran. Japanese companies doing business with Iran can say a sanction is not important and America has to pay a price to the company – so we lose the ability to apply sanctions.”

Mike Wessell, a Commissioner on the U.S.-China Economic and Security Review Commission, said TPP is not a substitute for a clear, consistent and comprehensive China policy. Countries in the area don’t need TPP to convince them. TPP does nothing to stop China’s reclamation of reefs, etc., and will do nothing to stop China’s other actions — like the air defense identification zone, drilling rigs in disputed waters, China’s military buildup, space exploration, etc. — overwhelmingly tipping the balance against Taiwan, along with China’s crackdown on dissent, labor rights, religious freedom, etc.

Clyde V. Prestowitz, former counselor to the Secretary of Commerce in the Reagan Administration and now founder and president of the Economic Strategy Institute, (his bio states he “played key roles in achieving congressional passage of NAFTA.”) said, “China is already writing the rules of trade,” and “all the TPP countries already have free trade agreements with China, all are negotiating the regional comprehensive program with China. … China is writing the rules they want, and nothing we are putting in our rules impedes them.”

Citing the promised increase of sales of US cars in Japan, Prestowitz said that trade barriers are not the problem. “It is disappointing to hear the President say that. It shows a complete misunderstanding of how trade works, and what the barriers are. Hyundai is gaining market share against the Japanese in every market except Japan, where it has withdrawn from the market, there are no dealers. In the US dealers are independent, in Japan they are not, so foreign and US cars will not be sold there.”

On national security Prestowitz warned that “TPP will not impede China from building bases, or from their ‘One belt one road‘ project. It’s not going to happen.”

During the Q&A, Prestowitz said the “counter China” focus actually means labor rights will suffer. “Are we really going to sanction Vietnam for not having unions, when we are saying the agreement is about foreign policy and we side with Vietnam against China?” he said.

Wall Street

TPP is wildly unpopular. But Wall Street wants TPP, and Wall Street money still calls the shots. The President is going to push for TPP, and a number of members of Congress are going to go along and vote for it.

Currently it looks like TPP might not pass if the vote comes during the election season, because voters might hold members of Congress accountable. But Rep. Sherman speculated that, for this reason, the vote might come after the election in the “lame duck” session before newly elected members are sworn in. He said, “Wall Street has the money that our current campaign finance system requires. Members can take the money for their campaigns, get elected in November, then deliver the votes in December to reward those contributors after the election.”

So keep an eye on your member of Congress, and work to get them to pledge to vote against TPP, even if the vote comes right after the election. And tonight, when President Obama introduces the CEO of Lucky Clover Honey, remember that he is just “honey laundering” to make TPP seem like a sweet deal. Like so many things in our rigged economy, TPP is a sweet deal for Wall Street, but not the rest of us.

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