Voters of all stripes have recognized the Trans-Pacific Partnership (TPP) as another betrayal of Americans, and they have resoundingly rejected it. Some polls show up to 80% of voters of all stirpes reject TPP as they learn more about it. Despite that, President Obama, working with Speaker Ryan and Leader McConnell, continues to push it and will possibly seek passage in a “lame duck” session of Congress. Here economist, Dr. Palley, lays out his reasons why TPP should be rejected.
By: Thomas Palley July 5, 2016
President Obama’s pushing of the TPP is recklessly irresponsible politics that benefits Donald Trump, who is the outsider Republican nominee. Hillary Clinton, the presumptive Democratic presidential nominee, is the insider who has touted her links to President Obama, but lacks credibility regarding her TPP opposition because of her past endorsement.
In the current dangerous political climate, there is no room for error. Yet, that is what we have. Clinton has refused to condemn the TPP in the Democratic Party platform, setting herself up for Trump. Not only does she risk handing the issue to Trump, giving him the economic high-ground, she also sets herself up as “crooked Hillary.” She was for the TPP, then she was against it, and now she is for it again? That plays into voters’ worst assessment of her character.
As for President Obama, he must be made to realize that every time he pushes the TPP, he might as well be campaigning for Donald Trump.
Unconvincing Economic Arguments
TPP’s economic arguments are unconvincing. Past agreements stand discredited, having resulted in lost manufacturing jobs; worsened trade deficits; and wage stagnation.
Economic models show trivially small estimated gains, despite the fact these models are rigged by assumption to show gains. The models assume full employment, deny negative demand effects of trade deficits, and deny costs from closing and offshoring factories. The trivial gains are tantamount to disproof.
Worse yet, the TPP’s extended drug patent and software copyright provisions will be like a massive tax on ordinary Americans and others, and will ultimately kill millions who cannot afford medications. These provisions are the opposite of removing barriers. They create barriers via government-sponsored monopoly, lobbied for by corporations.
Lastly, the TPP fails to address the glaring problem of currency manipulation that has so injured American workers. Currency manipulation gives countries an unfair exchange rate subsidy. Even the world’s most efficient producers cannot compete when rivals get a 30 percent currency subsidy.
Unconvincing National Security Arguments
Unable to win the economic argument, the Obama administration is cynically pushing unconvincing national security arguments that the TPP is needed to hem in China. Past agreements have already done great national security damage by hollowing the industrial base needed for military provisioning; by transferring that base plus technology to China, giving it industrial might and high-tech weaponry; and by creating a global supply-chain that runs through China, giving it power to choke off supply and also making countries further down the supply chain beholden to China.
Worst of all, by eroding the U.S. manufacturing base and making China the world’s factory, past agreements have massively increased China’s geopolitical power. In today’s world, commerce is the currency of power. China can now provide manufactured goods and investment capital in return for oil and commodities. That explains China’s power in Africa, Latin America, and Australasia. The U.S. was pre-eminent, but it unilaterally deindustrialized at the request of multinational corporations, which wanted cheap production platforms in China.
American workers have already paid massively for past agreements. Now, they are being asked to pay again to fix national security breaches those agreements created. However, there is zero evidence TPP works as a fix and it could even backfire. Simultaneously, there is clear evidence of hypocrisy in TPP’s lax “rules of origin,” which will allow corporations to smuggle in Chinese products as “made in America.”
A final, spurious argument is our allies expect TPP to pass because they have negotiated in good faith, putting U.S. credibility and face on the line. The world knows, or should know, that the U.S. does not sign agreements of massive economic and possible national security import on the basis of saving face.
Dangerous To Democracy
Perhaps the most powerful argument against the TPP is its danger to democracy. Its investor-state dispute settlement gives foreign investors, including U.S.-owned foreign corporations, rights to sue the U.S. government in private courts under privately appointed arbitrators. Companies can sue for lost profits resulting from changes in regulation, non-exempted by TPP, that voters want or governments deem needed. That grants corporations a private judicial system that can overrule U.S. law and the will of the people. It is a colossal and terrifying surrender of sovereignty that promises to castrate democratic governance as we know it.
TPP Is About Global Governance, Not Free Trade
TPP masquerades as a “trade agreement” when it is in fact a “global governance agreement” that empowers and enriches corporations at the expense of voters and workers.
Corporations and establishment economists call it a trade agreement since that is favorable verbal terrain for business dealing with a public steeped in the loaded language of “free trade.” If the TPP were described as a “global governance agreement,” that would immediately surface the enormity of the issues and the irresponsible undemocratic process pushing it.
A new world order is being smuggled in using the rhetoric of “free trade” and the economic zombie of comparative advantage. Today, trade is not driven by comparative advantage: it is driven by “barge economics.” It is as if companies float their factories and offices around the world to get access to the cheapest, most exploitable labor, to take advantage of undervalued currencies, and to take advantage of unregulated economies without standards. That is not comparative advantage: it is exploitation by global arbitrage.
TPP Cannot Be Saved; It Must Be Stopped
The TPP cannot be saved because it is fundamentally flawed. It is not a matter of adding more generous trade adjustment assistance to compensate job losers. Nor is it a matter of sweetening the legislative pot by adding a large infrastructure package to the bill. Though both are desirable, that would be political bribery aimed at greasing a tragically bad bargain.
The TPP rests on faulty economics and leads in the wrong direction. Rather than fostering shared prosperity, it further locks-in the corporate globalization model that has already created grotesque income inequality and undermined our future. It must be stopped. That is the only way to clear the political stage for a worker-friendly approach to global governance. Our remaining “market access” negotiating leverage must not be squandered on TPP. It must be used to reverse existing dire arrangements and shape a future global race to the top.
The TPP reflects the flawed economics and arrogant politics of Wall Street and the national security establishment that has betrayed working people. It must be rendered the economics and politics of the past, or else it could hand the future to Donald Trump. Mr. President, wake up and smell the coffee.
Dr. Thomas Palley is an economist living in Washington DC. He holds a B.A. degree from Oxford University, and a M.A. degree in International Relations and Ph.D. in Economics, both from Yale University.