In Hanoi, Obama Ignores Government Report About Risks of TPP

President Barack Obama speaks at the National Convention Center in Hanoi, Vietnam, Tuesday, May 24, 2016.
AP Photo/Carolyn Kaster

President Obama is overseas, making a big pitch for his “legacy trade deal,” the Trans-Pacific Partnership (TPP).

His rhetoric in favor of the TPP recalls his similar pumping of the Korea-U.S. free trade agreement. In selling KORUS to the American people, Obama claimed it was going to better the U.S. economy by providing new opportunities and new jobs. Instead, it has produced four years of trade deficits and tens of thousands of lost jobs.

In Vietnam, Obama claimed that TPP is “good for America….good for the world.” He said that it represents “an enormous market” for the United States in the fast-growing economies of Asia. Of course, the two biggest Asian economies, Japan and China, are slowing considerably. And since China is slowing, much of Asia that is dependent on selling to China, is slowing. Also some of these economies are fast-growing because they are starting from a very low base. Their percentage growth does not mean they have the disposable income to buy what America still makes. But those are minor details…

Importantly, Obama studiously ignored a new government report by the U.S. International Trade Commission (ITC) concerning the likely outcomes of entering into the TPP. According to the President, “I have not yet seen a credible argument that once we get TPP in place we’re going to be worse off. We are demonstrably better off. American workers and American businesses are better off if we get this deal passed. And I’m confident we will get it passed.”

Either the President is lying or he is ignorant of the ITC study, which, interestingly, was heavily discounted in advance in a press release issued by Obama’s U.S. Trade Representative. (Imagine the press outrage if Donald Trump ignored a new report by an independent U.S. government agency!)

In its Congressionally-mandated report detailing the potential economic outcomes of the Trans-Pacific Partnership, the ITC puts the best possible face on putative gains. However, it’s clear from the study that the trade deal not only won’t provide any large benefits to the U.S. economy but will also harm our all-important manufacturing sector.

The model used by the ITC to evaluate trade agreements has proven incredibly deficient in predicting the results of PNTR for China and the Korea-U.S. trade deal. The ITC claimed the results of both would be overwhelmingly positive for the U.S., but they turned out to be highly negative. Baked into the ITC model are assumptions that unemployment will not increase and that exchange-rate hanky-panky will be absent. Reality has proven that such assumptions are invalid.

The report contains such minimal findings as a 0.23 percent boost in U.S. annual real income by 2032. If that’s not encouraging, real GDP is projected to climb by 0.15 percent over the next 15 years, and employment will soar by 0.07 percent as a result of the TPP.

Since it’s impossible to spin these as major enhancements to the U.S. economy, the ITC touts the TPP’s potential to “harmonize regulations” and to “protect cross-border data flows.” Okay, but what about the heart of the matter? Will this “most progressive ever” 12-nation agreement really help U.S. manufacturers to boost exports and serve millions of new customers?

Unfortunately, the ITC’s answer is a very quiet “No.” Good-paying jobs in “manufacturing, natural resources, and energy” (MNRE) are actually projected to fall by 0.2 percent. This is not what Main Street America would call a “Big Opportunity,” particular since U.S. manufacturing has only gained back a fraction of lost jobs since the “recovery” began in 2009.

Tellingly, the ITC report avoids quantifying this further dismantling of American industry. While admitting that MNRE jobs will decline, it states, “The model does not capture the costs associated with employment transition or temporary unemployment.” Translation: TPP could in fact result in significant American joblessness, underemployment, or employment in lesser paying jobs, but the ITC model is not constructed to account for that possibility.

The study sees MNRE exports rising by $15.2 billion, but imports in the same category would climb by a far greater $39.2 billion, yielding a trade imbalance of $24 billion. This is emphatically not wealth-generation. And this new $24 billion in trade debt would continue, not reverse, the trade deficits that America has racked up for the last forty years. Isn’t the central objective of trade deals to increase national wealth through greater exports than imports, and thus lower trade deficits? Apparently, President Obama doesn’t think so.

What’s abundantly clear is that the TPP is simply one more in a long line of failed free-trade agreements based on the NAFTA model. While NAFTA and “normalized” trade with China were promoted by President Bill Clinton, the “Economic Czar” in a potential Hillary Clinton administration, as shiny economic-growth packages, the opposite has proven true.

Instead, these trade agreements have only widened America’s trade deficits, thus continuously shaving growth off of U.S. GDP. For example, after Beijing’s accession to the WTO in 2001, the U.S. bilateral trade deficit with China has jumped from $83 billion in 2002 to a staggering $365 billion in 2015.

The assessments in the ITC report make clear that the TPP is a continuation of the wrong approach, and based on the wrong assumptions. Since manufacturing is the primary wealth-generator for the national economy, it confounds logic to embark on a trade deal that will further erode the nation’s industrial backbone. Troublingly, since even the ITC acknowledges that some manufacturing workers will lose their jobs, the TPP will only boost employment in the lower paying services sector by a mere 0.1 percent. In other words, there is nowhere for former manufacturing workers to go but into a downward spiral.

President Obama took six years to formulate the TPP behind closed doors. Public scrutiny would have halted the deal in its tracks.

Thankfully, the ITC report, even if unacknowledged by Obama, offers Members of Congress ample reasons to refuse to even consider the TPP as the president wants. Instead, Congress should pay close attention to the issues raised in the ITC report, along with the absence of enforceable currency provisions in the deal, to demand that the next administration present a new approach to trade that actually benefits the U.S. economy and American workers.

Kevin L. Kearns is president of the U.S. Business & Industry Council, a national business organization advocating for domestic U.S. manufacturers since 1933.