Asia Trade Deal A ‘Boon’ To U.S., Washington – But Congress Queasy

Asia Trade Deal Would Be 'Boon' To U.S., Washington State - But Congress Is Queasy
Wheat is one of Washington state's key exports. However for U.S. wheat exports, tariffs - taxes which foreign governments layer on to the purchase price in their markets - run as high as 31 percent. Such tariffs would be eased under the Trans-Pacific Partnership, or TPP. Photo: Matt Olson.

It may be November before votes in both the U.S. Senate and House are completed on the controversial trade agreement called the Trans-Pacific Partnership (TPP). Yet the push and pull has already ratcheted up to high gear in Washington state.

Backed by outgoing U.S. President Barack Obama, TPP would further open markets in 11 Asia-Pacific nations to U.S. exporters. It has the backing of many employers and industry associations. However, some major labor unions are fiercely opposed, and some officeholders and candidates leery. Now, both business and labor in the trade-dependent Evergreen State are turning up the volume.

Asia-Pacific A Linchpin In Global Economy

In a letter this week sent to the entire Washington delegation in the U.S. House and both of the state’s U.S. senators, 106 companies accent that Asia-Pacific is a linchpin in the global economy, and urge officeholders to support the TPP pact.

Washington’s 2015 exports to TPP countries in agriculture alone totaled $13.1 billion. The state’s manufactured goods exports to the same nations were $22 billion last year, and 2014 exported services to those markets $6.2 billion.

The companies wrote U.S. lawmakers that, by “cutting tariffs and red tape…installing critical new rules for the digital economy and services trade, and establishing stronger protections for…intellectual property…TPP will help our manufacturers, innovators, service providers, and farmers and ranchers export more, produce more and thereby support more jobs in Washington.”

Signatories included dozens of national companies and associations doing business in Washington state or representing employers here. Among those also signing on were Boeing, Bellingham Marine, Darigold, the Northwest Food Processors Association, the Washington Cattle Feeders Association, Washington Council on International Trade (WCIT), Washington Farm Bureau, and the Washington Retail Association.

Grassroots Blowback Strong

However, all three remaining presidential candidates have declared their opposition to TPP. Grassroots blowback has been strong, led by unions wary of lower-cost global economic competition and predicting job losses if it’s approved.

Another sign of labor opposition came Saturday May 21 in the Pacific Northwest at a candidate endorsement session of the Washington State Labor Council (WSLC). Delegates chose to withhold support for three U.S. House Democrats from the state and U.S. Sen. Patty Murray (D-Wash.) because each voted for “Fast Track” trade promotion authority in 2015 to help advance TPP. The three are Rep. Suzan DelBene (D-1), Rep. Rick Larsen (D-2) and Rep. Derek Kilmer (D-6).

In a statement, WSLC President Jeff Johnson said the Fast Track legislation “is intended to speed passage of the…TPP and other NAFTA-like ‘free trade’ deals while blocking Congress from changing them to protect workers, consumers or the environment.”

U.S. Chamber of Commerce President Tom Donahue said last month he doesn’t expect a Senate vote until after the November elections, although a House vote could come sooner.

Rep. Reichert Sees Concerns, And Potential

Reflecting the tough sledding ahead for TPP, U.S. Rep. Dave Reichert (R-8) a Republican from suburban Seattle, in a statement to Lens, said, “…there are significant Member concerns that must be addressed in order for TPP to be successful and pass Congress. In my role, as Trade Subcommittee Chairman, I have heard substantive concerns from my colleagues about issues like intellectual property protections for biologic medicines that must be addressed.”

However, Reichert stressed the economic importance of engineering passage. He noted that 95 percent of world consumers are outside U.S. borders and Washington state wants to reach more and more of them with “high quality apples, airplanes, software, and more.”

He added, “If done right, this agreement has the potential to offer businesses big and small throughout Washington and the country an opportunity to expand to new markets, creating and protecting good-paying American jobs in the process. He added, “trade with TPP countries already supports 348,000 jobs in Washington state and 15 million” nationally, and those numbers would grow with a TPP deal.

Through spokespersons, both U.S. Rep Adam Smith (D-9) and Denny Heck (D-10) of Washington declined to respond to repeated inquiries on whether or not they supported TPP, and why.

A report issued this month by the U.S. International Trade Commission (USITC) found that by 2032, U.S. annual real income would be $57.3 billion higher with TPP than without it. According to the commission, there would also be TPP-induced boosts to real gross domestic product (GDP) of $42.7 billion annually, and $34.6 billion more annually in exports to new TPP partner nations. Industries benefitting most greatly would include agriculture, food and services.

‘Washington State Industries Stand To Benefit’

Eric Schinfeld, President of the Washington Council on International Trade, said in a statement, “This report confirms what we’ve long suspected: that the TPP will be a boon to the U.S. economy and that Washington state industries in particular stand to benefit. Exports of fruit and vegetables, processed foods, dairy, seafood and meat, which are some of our state’s top agricultural exports, are predicted to flourish under TPP. Exports of services, which is Washington’s second largest export, (are) expected to grow 10.8 percent to TPP countries.”

However, Schinfield added that the USITC report’s calculations were conservative because it doesn’t include the easing of non-tarrif barriers. “He said, “…the actual economic boost is likely to be much greater” due to improvements including “streamlined rules and regulations, liberalized cross-border data flows, stronger (Intellectual Property protections), and new labor and environmental standards.”

Reduced Tariffs on Wheat, Salmon, Paper, French Fries, Cherries, Hops

A report from the Office of the U.S. Trade Representative (USTR) says TPP “will cut over 18,000 taxes that other countries impose on American exports.” Washington specifically would benefit, the USTR report says, through TPP cuts of foreign export tariffs currently as high as 30 percent on salmon, 31 percent on wheat, 25 percent on paper, 10 percent on french fries and cherries and 5 percent on hops.

Tariffs aren’t balanced now for the U.S. As Lens reported earlier this year:

The average tariff charged by the U.S. on imports is 1.4 percent, but the average tariff it faces when exporting to other countries is 5.9 percent, according to the World Economic Forum. “No one wants to go into a basketball game down by a dozen points from the tip-off, but that’s exactly what American exporters do every day,” wrote the U.S. Chamber of Commerce in a 2015 report on free trade.

Writing in the Wall Street Journal, retired Roll Call Executive Editor Morton Kondrake and Matthew J. Slaughter of Dartmouth’s Tuck College of Business note that trade pacts like the North American Free Trade Agreement (NAFTA) have boosted income by roughly 10 percent and $1.8 trillion in 2015.

True, trade-driven economies are more prone to innovations which may heighten instability of markets for goods and services, and jobs. Yet as Kondrake and Slaughter state, “…the movement of people and capital from weaker businesses to stronger ones and new opportunities is how many of the gains from trade arise.”

They add there are near-term policy tweaks possible for workers who could bear the brunt, such as an expanded Earned Income Tax Credit and a lower payroll tax for lower earners, but “in the longer term education of all kinds – vocational and technical, apprenticeships, and ongoing retraining – is critical to prepare more workers to gain from trade.”

To some, ramped-up global trade may represent a threat. But the flip side is that it’s a harbinger of the changing landscape for workers, where specialized skills will become more and more necessary. No matter what Congress does on TPP.

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