The Obama administration is certain a completed Pacific trade agreement will boost U.S. economic growth and exports, while codifying an American interpretation of international trade rules at the start of the 21st century.
Judging by the slog it took to extract Trade Promotion Authority from Congress, the rest of America isn't exactly convinced. But soon we may have an actual agreement to review. Now that the Trans-Pacific Partnership negotiations are nearing the final stages, we'll be able to see for ourselves if those bold claims — currently relegated to conjecture until the deal is signed and the text is released — will withstand scrutiny.
Until then, the skepticism will come in large doses.
It's well-earned. The benefits of free trade are only fully realized when it coincides with strong trade rules, strictly enforced. But too often we've seen too little of the latter. It's no coincidence that, tracking the years, the number of middle-income manufacturing jobs in America has plummeted while the annual goods trade deficit has exploded.
The administration may claim otherwise, but even a favorite study among the TPP's advocates, from scholars at the Peterson Institute for International Economics, predicts the deal would raise overall economic output by less than half a percent. A population increase in the U.S. would have a greater impact on growth.
And that wasn't its only stark truth; the pro-TPP study also predicts rising U.S. trade deficits in heavy manufacturing, light manufacturing, autos and auto parts as to the tune of more than $39 billion by 2025.
This is the deal American manufacturers are stuck with?
Is it possible to make the TPP a better deal for manufacturing in the closing hours of the negotiations? Yes, I believe it is. But there's a lot that must be considered to make it a winner for American factory workers.
To begin, what will the TPP do to deter currency manipulation? Will it do anything at all? Currency manipulation by our purported trading partners has helped run the U.S. goods trade deficit into the hundreds of billions of dollars in the last 15 years, but efforts to win rules on currency during the fast-track debate fell short. No one watching the deal expects an enforceable rule on currency, which will please TPP participants Japan and Malaysia greatly; the International Monetary Fund just last week chided Japan's Abe government for a continued over-reliance on a significantly devalued yen.
What about strong rules of origin? Enforcing tough ones will ensure the benefits of the TPP go to countries that have a responsibility to follow the agreement's rules. Weak rules, conversely, will only invite abuse of supply chains that cross multiple borders. For example, China, which has weak rules of origin requirements, shouldn't get a free ride into this massive deal.
What does the TPP do to address state-owned enterprises? If the goal of the TPP is to write the rules of international trade before Beijing does, the elephant in the room — the rise of state-capitalism as a significant source of global trade distortion — must be addressed. It's not "free trade" if private sector U.S. firms must compete with other governments. How hard a line have U.S. negotiators driven on market participation by SOEs, which are prevalent in Vietnam and other TPP countries?
And what market access requirements will be included in the TPP? In 2012, the Big Three auto companies sold fewer than 14,000 cars in the Japanese market while their Japanese competitors sold more than 5.3 million cars here — moving more in a single day than U.S. producers were able to sell in Japan over an entire year. Even if Japan "triples" its commitment, that doesn't go nearly far enough towards reciprocity.
Will solutions to any of these issues be included in the Trans-Pacific Partnership? And will they have any teeth?
If the TPP falls short in any of these areas, it will be American manufacturers and workers who will pay for it. And the American interpretation of international trade in the 21st century will be: Trade with us, at our expense.
Scott Paul is president of the Alliance for American Manufacturing. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.