But they make a lot of really poor arguments in the trade deal’s favor.
It’s March. That means everyone in America – including the humanoid robots that work in and around Washington politics – is watching college basketball. So please forgive us for missing the delicious box of chicken nuggets that is this opinion by a gaggle of very smart academics, which published last week. They lay out in a series of hard-to-swallow passages how passing the Trans-Pacific Partnership (TPP) as-is will help the American worker.
If your bracket is as busted as mine is, turn away from the hoops, pick up a fork and knife and dig into a series of contradictory pro-TPP passages, as written by a trio of well-meaning MIT economists. Let's begin!
The Lay-Out-the-Damning-Evidence-Yourselves Section
There is indeed substantial evidence that import competition from low-wage countries has contributed to the momentous decline in U.S. manufacturing employment in the last two decades. We even researched and published some of that empirical evidence. Still, we believe blocking the TPP on fears of globalization would be a mistake.
I don’t think we need to unpack that at all. They even provided their own links!
There are several reasons to support the TPP despite globalization concerns. …
This is a bad way to begin an argument, but okay, let’s see what these reasons are …
First, the TPP — which seeks to govern exchange of not only traditional goods and services, but also intellectual property and foreign investment — would promote trade in knowledge-intensive services in which U.S. companies exert a strong comparative advantage.
Oh, like Apple? Don’t forget: Everyone’s iPhones are designed in California but Made in China, where there are a lot more employees and they don’t treat them very well. Comparative advantage in IP in action!
Second, killing the TPP would do little to bring factory work back to America.
So … let’s just sign it already?
Third, and perhaps most important, although China is not part of the TPP, enacting the agreement would raise regulatory rules and standards for several of China’s key trading partners. That would pressure China to meet some of those standards and cease its attempts to game global trade to impede foreign multinational companies.
If this is the most important reason, then all the more reason to insert a binding currency provision into the TPP, something it currently lacks and the Obama administration adamantly opposes. According to economists with the Peterson Institute for International Economics, global currency manipulation has cost the U.S. economy between 1 and 5 million jobs. And China loves screwing around with its currency.
But I digress. Let’s move on. What say you next, opinion authors?
The Sorry-Not-Sorry Section
Since 2000, America has lost 5 million manufacturing jobs. Regions that specialized in apparel, footwear, furniture, home electronics, toys and sports equipment — industries in which China achieved explosive growth — have seen factories close and wages for local workers flatten.
That was after America normalized trade with China to help boost it into the World Trade Organization. Man, you guys really aren’t selling this trade thing very well …
Our research indicates that rising import competition from China accounted for 21 percent of the overall decline in U.S. employment in manufacturing industries during the 1990s and 2000s. The wave of automation that replaced middle-class jobs available to workers without a college education added to those losses.
We sympathize with the regions and families that suffered, but halting TPP would not assist U.S. manufacturing or benefit U.S. workers. The reality is that the globalization of manufacturing is a fait accompli. Those manufacturing jobs are not coming back.
This is an awkward argument to make to the 12 million U.S. manufacturing workers who still earning a living in an incredibly competitive international market.
Further, the TPP’s lower trade barriers would barely affect import competition faced by U.S. manufacturers.
Hmm. Go on …
The World Trade Organization counts 160 members, including every major economy and most importantly China, which joined in 2001. According to the World Bank, WTO members can export manufacturing goods to the U.S. market at an average tariff of just 2 percent.
See the earlier point about China’s ascension to the WTO.
Within the proposed TPP, the United States already has bilateral trade deals that have eliminated all manufacturing tariffs with five of the 11 members … Cutting already rock-bottom U.S. manufacturing tariffs to zero for the remaining TPP countries would thus have negligible effects on U.S. producers.
They’re also allowed to competitively price their currencies without risk of repercussion!
But if the TPP has little downside for the U.S., what’s the upside? Why bother with the deal at all?
Oh man, I don't know. Why?
The reason is that the TPP is about much more than manufacturing. Most notably, it promises to liberalize trade in services and in agriculture, sectors in which the United States runs large trade surpluses, but which the World Trade Organization, despite 20 years of trying, has failed to pry open internationally.
That’s great news for the millions of Americans who work in agriculture. Oh, wait.
The Let's-Wrap-It-Up Section
Americans have to take advantage of a new reality: Today, U.S. companies rely on global production networks for their success. When a trading partner exports a product to the U.S., the domestic economy gains because the U.S. often has exported the parts, components, or ideas for that product to that country.
I would imagine the massive number of Americans who the authors themselves say have lost manufacturing jobs because of Chinese imports are really enjoying the new reality.
China’s manufacturing growth, for instance, would have been inconceivable without its import of U.S. technology from multinational companies, which generates income for the domestic economy and gainful employment for engineers, programmers and other skilled occupations. The phenomenal sales of the iPhone 6, which Apple designs in California, rests on the capability of Foxconn’s plants in China to assemble handsets at reasonable cost.
For the U.S. to derive maximum benefit from its advances in technology-intensive products, such as smartphones, U.S. companies need strong global protection of intellectual property. The TPP seeks to harmonize such protections across member countries.
Great job, tech! Let’s get those IP protections locked in ASAP.
If passed, the TPP also would create a powerful template for future trade deals, including with China, which would move the U.S. closer to resolving conflicts the WTO has been unable to handle.
It wouldn’t, however, codify rules barring currency manipulation, which (again) China has used to prop up its massive trade surplus with the United States and sap American jobs.
Expanding global trade has remade manufacturing, forcing workers, businesses, and entire regions to endure often painful adjustments. However, much as we might like to return to 1970 when manufacturing comprised a quarter of U.S. nonfarm employment, that’s impossible without massive protectionist barriers that would isolate the U.S. economy and lower U.S. living standards.
The Alliance for American Manufacturing is all for free trade, provided it's fair. Without a currency rule, we’re just not convinced it will be.
Blocking the TPP because of justified unhappiness over manufacturing’s lost glory would amount to refighting the last trade war — beggaring the future as retribution for the past.
That's quite a finish. What trade war are they talking about? Read the whole goofball opinion right here.