Is the TPP deal another “Giant Sucking Sound” or a path to 21st century shared prosperity?

25/06/2015

TPP Sucking Sound

TPP Sucking Sound

Throughout his two terms, President Obama and the Republicans in Congress have not been able to work together.

A rare exception is their current alliance to secure Congressional passage of what is known as “fast track authority” for the President to create, with eleven other countries including Canada, the Trans-Pacific Partnership (“TPP”).

This week the Senate joined the House of Representatives in voting for this fast track authority giving the Obama Administration the ability to move forward and conclude the negotiations. The support came mostly from Republicans but with some defectors on both sides of the aisle.

The other countries involved in the TPP are: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Look who is missing from the group – China!

The Office of the U.S. Trade Representative claims that the TPP will support American exporters, including small businesses, and enforce labor rights and environmental protections.

The Obama Administration and Congressional Republicans also view the TPP as a way to counter the expanding economic and military influence of China in the Pacific region.

Can you hear the “giant sucking sound”?

Despite their loss in Congress this week, the vigorous opposition to TPP will continue when the actual treaty is finalized and presented to Congress for ratification. The opposition is led mostly by Democrats and union members, but it includes citizens of all political leanings.

In 1992, presidential candidate Ross Perot predicted that the NAFTA agreement would lead to the loss of millions of American manufacturing jobs.

He called it the “Giant Sucking Sound” – one of the most famous lines in American political history.

In my view, no one can credibly argue that NAFTA and the following trade deals with China and other countries did not lead to the loss of America’s manufacturing base and millions of blue collar factory jobs.

The evidence is there for all to see – shuttered factories in big cities and small towns all over America, persistent wage stagnation and high unemployment for workers without college or specialized vocational skills. Big box stores sell consumer goods mostly imported from China.

You don’t have to be a trained economist to see the downside of the free trade deals signed since NAFTA.

The unseen benefits of free trade agreements

Unfortunately, the upsides of free trade are not always fully recognized. Freer trade has provided American consumers with year round fruits and vegetables imported from the Southern Hemisphere.

Cheaper imported consumer goods have increased our purchasing power even as real wages for millions in the U.S. have stagnated since the 1970s.

What many people don’t see is the biggest upside of free trade – increased exports of foodstuffs, airplanes, defense articles, construction equipment and vehicles, high technology products and many services.

Unless Americans work for companies like Apple, Caterpillar, Boeing or Tyson Foods, they are not seeing all the products which leave our shores every day – only the products that come in.

International trade was much easier for all Americans to support when it only involved things like importing coffee and bananas – foodstuffs that we cannot grow here.

Would public opinion really be aroused to a fever pitch over imports of French perfume, English bone china or Canadian hydro-electric power? Of course not.

Are trade deals the real culprits for American job losses?

Protectionism and support for trade barriers arise when global corporations send manufacturing and service jobs to cheap labor countries and equivalent “good jobs” are not created to replace them.

The blue collar factory worker is left floundering when his job is sent to China and his only options are lower wage retail or attending community college to be “re-trained” for jobs that may not exist or he cannot fill.

When it was only factory workers who were displaced by free trade, service workers and other professionals were not really concerned – especially when they could buy less expensive imported goods like flat screen TVs.

But when corporate America started outsourcing programmers, radiologists, call center operators, lawyers and others, a much larger anti-free trade bloc has emerged.

Some opponents of free trade are encouraging class warfare with their rhetoric about inequality, while they fail to note that it is not only trade deals, but also advances in technology thathave displaced so many workers – like secretaries and low skilled factory workers.

The irony is that while millions of Americans are unemployed or underemployed, companies which want to manufacture high value products in the U.S. have a hard time finding workers with the math and computer skills needed to operate factory equipment.

I am fortunate to currently live in Pasco County, Florida which, as a leading participant in the Tampa Bay Advanced Manufacturing Skills Initiative, has recently established a world class, internationally recognized German/European apprenticeship program in cooperation with local companies and educational institutions.

This program will help existing manufacturers grow and will attract other companies to relocate here, especially exporters.

Don’t shut it down – lead it forward

The opponents of TPP are taking the short view. In some ways, they resemble the 19th century Luddites – the English textile workers who destroyed labor saving machinery in textile mills.

Technological progress has always displaced workers – the famous example of the automobile displacing horse drawn wagons and buggies.

Clearly, earlier trade agreements did not do enough to protect American workers from sudden dislocations and, especially when it comes to China, the agreements did not protect the environment.

The TPP promises to address these types of problems. Of course, many opponents distrust this will happen.

The way I see it – we can either have the twelve countries in the TPP, including the U.S. and Canada, lead the way in the Pacific region, or we can withdraw and let China dominate the region.

Wouldn’t the U.S.- and Canadian style’ worker protections and environmental standards and those of Australia and New Zealand be a better model than what we have seen from China to date?

Properly managed trade agreements like TPP will advance shared prosperity.

The “giant sucking sound” has already occurred, not so much from NAFTA but from our existing trade imbalance with China.

Advances in computing, communications and aviation have shrunk the globe. There is no going back. The way forward is to increase the volume and quality of our exports and increase the skills and work ethic of our citizens – not to close ourselves off from a leadership role in global trade.

Do you oppose or support the TPP deal? Do you think Canada and the U.S. can lead the way in the Pacific with worker protections and environmental standards?

 Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Susie Yovic Hoeller, CITP|FIBP

Author: Susie Yovic Hoeller, CITP|FIBP

Susan (“Susie”) Yovic Hoeller has been practicing international business and regulatory law for over three decades. Susie was born in Chicago and raised in Montreal. She has represented Fortune 100 companies, middle market companies, and start ups while living in Chicago, Dallas and NW Arkansas. She is currently located in Tampa, Florida.

disqus comments

  • Bobby Yovic

    I think there are solid examples of situations where protecting a local market is favorable, but globalization is an unstoppable trend so countries that close their boarders such a Brazil are putting themselves in a competitive disadvantage. The key (and future) just like with any business is for countries tniche down to what they are good at and compete based on intrinsic advantages. In North America we have excellent higher education, the world hub for financial/capital services (New York), a stable social structure, good infrastructure and the world hub in tech (San Fran). Smart people will learn how to leverage these assets to create truly competitive and job creating businesses. Typed on iPhone

    • Well put Bobby! Thank you for the comment.