Manufacturers Have Mixed Opinions About Leaving the TPP

GettyImages-500691894-compressorAs President Trump withdraws the U.S. from the Trans-Pacific Partnership, manufacturers are responding with both disappointment and cheers. The U.S. manufacturing industry remains split on how the trade agreement could have impacted themselves and others.

The National Association of Manufacturers has generally been pro-TPP, saying it would eliminate hundreds of millions of dollars in annual tariffs paid to foreign governments and that it would reduce foreign government barriers and market distortions. NAM also said it would set stronger and more transparent standards to protect property and innovation with a more level playing field. NAM President and CEO Jay Timmons said the TPP would open markets and put manufacturers in a much stronger position to compete in an important and growing region of the world.

“Without such an agreement, the United States would be ceding economic leadership to other global powers, letting them set the rules of economy engagement in the region,” said Timmons.

“Withdrawing from the TPP is a first step in a long road toward reforming trade policy and we look forward to working with the administration on finding solutions to create trade deals that keep jobs here in America.

Yet even some of the TPP’s supporters say that it doesn’t go far enough in protecting intellectual property of U.S. companies, cutting red tape or protecting workers. Even in light of these facts, however, supporters say ending the deal outright would only leave the situation “worse” as U.S. companies will have a harder time competing with TPP economies. Doug Lippoldt, a trade economist at HSBC Global Research, said that losing out on the growth potential “may leave the U.S. economy worse off than it otherwise would have been.”

Supporters say pulling out of the TPP won’t stop the rise of emerging economies in Asia. China is already formulating the regional Comprehensive Economic Partnership, which does not include the U.S.

Meanwhile, Chinese President Xi Jinping addressed the World Economic Forum in Davos, Switzerland in mid-January and said that the global economy “is the big ocean you cannot escape from. We will open our arms to the people of other countries and welcome them aboard the express train of China’s development,” said Jinping.

There are just as many others in the manufacturing industry that have opposed the TPP, however. One pro-TPP study from the nonpartisan Petersen Institute for International Economics found that 50,000 U.S. workers could be out of a job each year during the implementation of the TPP.

The Alliance for American Manufacturing said it was “okay” with Trump’s order to leave the TPP, noting that the deal needs more protection against currency manipulation, restriction of participation by state-owned enterprises and enforcing stringent rules of origin.

“Withdrawing from the TPP is a first step in a long road toward reforming trade policy and we look forward to working with the administration on finding solutions to create trade deals that keep jobs here in America,” said AAM President Scott Paul.

AAM pointed to a report from the Economic Policy Institute that said countries in the proposed TPP cost the U.S. 1.1 million manufacturing jobs in 2015. EPI researchers Robert Scott and Elizabeth Glass argued (then) that the U.S. could expect the trade deficit to continue to increase if the TPP went into effect without addressing currency manipulation.

Currency manipulation has been a big concern, because it acts like a subsidy to the goods it exports and a tax on what it imports from the United States. “That makes it harder for the United States to export its own goods, and makes it easier for the U.S. to import goods. That creates trade deficits which then drive job losses,” the AAM said.

Research published by the Global Development and Environment Institute at Tufts University projected that the TPP would lead to nearly a half million job losses in the United States between now and 2025. They said the TPP favors competition on labor costs and remuneration of capital.

“Depending on the policy choices in non-TPP countries, this may accelerate the global race to the bottom, increasing downward pressure on labor incomes in a quest for ever more elusive trade gains,” said the authors.