Concerns over rules of origin and currency manipulation remain.
President Obama’s final State of the Union address on Tuesday night went for over an hour. In it, discussion of the Trans-Pacific Partnership (TPP) trade deal lasted maybe 30 seconds. That would include his pause for applause.
“It cuts 18,000 taxes on products Made in America, and supports more good jobs,” the president said to Congress. “With TPP, China doesn’t set the rules in that region, we do. You want to show our strength in this century? Approve this agreement. Give us the tools to enforce it.”
Except that we’re not so sure that it does. In fact, opinion is decidedly divided over that point, notes the Wall Street Journal:
Even though Beijing isn’t part of the deal, Obama administration officials say the rules will still challenge China to reform its economy in other ways. …
(Donald) Trump disagrees. “It’s a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone,” the billionaire GOP candidate said at the fourth GOP presidential debate, in November.
This has made for some strange bedfellows:
Mr. Trump’s warning echoes criticism from labor unions and Democrats from auto-producing states in the Midwest. They point to the “rules of origin” in the TPP that allow much of the content of cars and other products traded duty-free to come from outside the bloc—including China.
Rules of origin, of course, aren’t the only point of contention regarding the TPP. Critics (us included) have noted that the deal does nothing substantial to halt currency manipulation, a practice by which a country can give its exports a serious boost – at the expense of their trading partners across the table.
Some point out that a strong dollar policy, which increases the purchasing power of American consumers, puts American exports and those that make them at a distinct disadvantage. That’s important to keep in mind.
Others, still, argue that artificially dirt cheap currencies in Asia – including in China, whether it’s a TPP party or not – could wipe out all of the economic gains from a ratified trade deal. Notes Rob Scott, from the Economic Policy Institute:
China, as the world’s largest currency manipulator, could affect trade in the TPP in at least two ways. First, as a result of relatively weak rules of origin, the U.S. and other countries would be vulnerable to increased imports from China through the TPP. Second, currency manipulation by China could influence other TPP members to adjust or manipulate the value of their currencies, in order to remain competitive with China, and thereby nullify some or all of the benefits of the TPP to the United States.
Here’s what AAM thinks: A TPP deal without a tough, enforceable currency provision is an opportunity missed. Including such a provision would set some real rules in that region.