by Micaela Young
The Trans-Pacific Partnership (TPP) negotiations came to a dramatic conclusion on Monday, October 5. The “free-trade” deal that links 12 nations and covers more than 40 percent of global GDP has been deemed a great success by the White House and big business. However, many organizations including the National Farmers Union (NFU) have come out with strong critiques of the agreement due to the lack of enforcement on one key issue: currency manipulation. Straight from the NFU, alumna Barbara Patterson gives us a sneak peek into the impacts of this deal and what it will mean for farmers.
What Is The Trans-Pacific Partnership?
According to the Office of the U.S. Trade Representative (USTR), the TPP writes the rules for trade between world superpowers and some of our most rapidly growing and industrializing countries: Australia, Canada Japan, Malaysia, Mexico, Peru, United States, Vietnam, Chile, Brunei, Singapore, and New Zealand (Figure 1). The TPP works toward the goal of eliminating tariffs and nontariff barriers to trade in goods, services and agriculture. Currently, over 80% of imports from TPP countries already enter the U.S. duty-free, but the USTR boasts that the TPP will eliminate 18,000 different taxes on Made-In-America exports and help small businesses, including farmers and ranchers, benefit from global trade by providing rules to promote internet-based commerce, as well as new access to markets in the Asia-Pacific region. With Asia’s middle class expected to reach 3.2 billion people by 2030, the executive branch hopes that “setting up shop” in the region will drive up demand for U.S. goods in the future.
This new agreement also promises to level the playing field for U.S. workers in the global economy by providing the highest labor standards of any trade agreement in history. The USTR reports that the countries agreed to enforceable labor standards that include the freedom to form unions, prohibitions against child labor, and safe working conditions. In addition, the TPP also includes rules to set environmental conservation standards, such as protections on endangered species and cracking down on ozone-depleting substances.
President Obama, who whole-heartedly supported this deal, “fast tracked” negotiating authority through Congress, saying in a press release on the day the deal was signed that “this partnership levels the playing field for our farmers, ranchers and manufacturers…it includes strongest commitments on labor and the environment…and those commitments are enforceable, unlike past agreements. It’s an agreement that puts American workers first and will help middle-class families get ahead.”
Currency Manipulation: What it is and why it matters
Shortly after the TPP was signed, Tim Griffin’s Fundamentals of U.S. Agriculture class Skyped in with Friedman alumna Barbara Patterson (N14) who works at the National Farmers Union (NFU) in Washington, D.C., lobbying the Hill on behalf of NFU’s constituents, small farmers, and ranchers. Barbara talked about her recent work on the Country of Origin Labeling issues, as well as on the TPP. After reading the NFU’s strongly worded statement opposing the TPP because it lacks currency manipulation language, I decided to contact Barbara to get the inside scoop.
According to an NFU Fact Sheet, currency manipulation is a trade distorting action that lowers the cost of U.S. imports and raises the cost of U.S. goods, which can be done through the purchase of foreign exchange reserves or other financial assets. The Economic Policy Institute notes that lowering the value of any countries’ currencies relative to the U.S. dollar in turn acts as a subsidy to those countries’ exports and a tax on U.S. exports to every country where the U.S. competes with those currency manipulators. In a nutshell, our goods will become more expensive to buy, and our exports will not be as high as expected.
“Currency manipulation is done to explicitly decrease the value of currency, making goods cheaper abroad compared to U.S. goods. The TPP, unfortunately, does not take this historical issue into account. The president and those on the Hill knew that if the TPP included currency manipulation it would tank the deal,” said Patterson.
“There will also not be as much economic stimulation for the U.S. as promised—we will be bringing more goods in than we will be sending out. Many small farmers have off farm jobs as supplementary income, so when it is predicted that there will be a decrease in jobs due to currency manipulation and the trade deficit that is a major concern.”
Included in the deal is Japan, which is the second largest currency manipulator behind China. Research done on the U.S.-Japan trade deficit has shown a direct decrease in total employment in trade-related industries. This will especially be true for manufacturers including those in the auto industry who also lobbied for currency manipulation protections to be included in the TPP. The Congressional Research Service report on the TPP projects that the manufacturing industry will experience a $44 billion drop in welfare from baseline due to the deal, with the agriculture sector seeing a net-zero increase.
“I grew up outside of Detroit, where I saw the impacts of the influx of cheaper Korean and Japanese cars that damaged our domestic industry,” said Patterson.
“While it may seem like it, the NFU is not opposed to trade deals. Opening up trade with Cuba could be a good thing with increased exports. We just want to make sure that the farmers and ranchers we represent get what they are promised.”
The TPP also promised to include rules on human rights, including language to eliminate exploitative child and forced labor. When I asked Patterson if she thought these promises would be kept she responded: “An amendment in the Trade Promotion Authority law forbids the U.S. from working with a country with poor human trust scores—these rules were ultimately targeted at Malaysia, which has had a bad history of human trafficking violations. This law would have prohibited fast tracking the trade agreement if Malaysia were included, but in the spring, even though new violations had been discovered, the U.S. State Department improved Malaysia’s status to Tier 2 on the watch list.” Negotiations between the U.S. and Malaysia could not have been conducted without this improved status.
An Upgrade Or a Low-Budget Sequel?
Past trade agreements have not treated the American worker well. The 1993 North American Free Trade Agreement (NAFTA) resulted in trade deficits with Mexico that has cost 682,900 U.S. jobs as of 2010. The Economic Policy Institute also reports that the U.S.-Korea Trade Agreement signed by President Obama in March of 2012, which promised to increase U.S. goods exports by around $10 billion while supporting 70,000 American jobs, saw growing trade deficits by 2014 that cost nearly 60,000 jobs.
The USTR claims that the TPP is a response to the shortcomings of past trade deals, upgrading to higher standards that “reflect today’s economic realities.” Without including measures to penalize currency manipulation, however, we will most likely see trade deficits and job losses rear their ugly heads once again. Unfortunately, the underlying motives for signing the deal may have been more strategic and politically driven than the USTR admits.
The fight continues for Patterson, the NFU, and other organizations fighting for fair opportunities for the low and middle-class American.
Micaela Young is a first year NUTCOM student and ACSM personal trainer. She is a competitive runner and avid eater who hopes to one day be a force for changing our current food culture.