New Series Introduction: International Trade

A little over a month ago we ran the series introduction on prescription drug pricing. This week we’d like to introduce you to our second initiative – international trade.

During this past election cycle, the topic of international trade was front and center in President-elect Donald Trump’s campaign. For Mr. Trump, job loss in the rust belt and an overall sense of stagnation in the US economy had one looming culprit – bad trade deals. Over the course of his campaign, he frequently criticized the Trans-Pacific Partnership (TPP), blaming it for the hurt many Americans still feel in the wake of the Great Recession. Unsurprisingly, following his victory in the general election, he has recently expressed his intent to withdraw from TPP as soon as he steps into office this coming January. So for all intents and purposes, the deal is basically dead on arrival.

Of course, the issue of international trade isn’t going anywhere anytime soon. Most if not all the elements of TPP will be topics of intense discussion moving forwards. In fact, TPP provides fertile ground for thinking through various polemical flashpoints within the context of international trade. So before going any further, it might be helpful to provide an overview of the deal.

TPP: An Overview

What originally began as a trade agreement between Singapore, Chile, New Zealand and Brunei more than a decade ago, TPP encompasses 12 countries and commands an estimated 40 percent of the world’s GDP.

While talks of the TPP began in 2005, US involvement did not officially begin until December of 2009, since then, a total of 12 countries have been in negotiations: US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.

The goal of the trade deal is to remove tariffs between those parties and create new labor, intellectual property, and environmental standards—one of the reasons former presidential candidate Hillary Clinton called the trade the “gold standard” in 2012. Tariffs on affected American goods—some 18,000 of them—would be phased out over a ten-year period once the treaty is ratified, with dual intentions of increasing growth and improving relations between the countries.

While the deal may be built around economic growth, opponents are worried the TPP will cost American workers their jobs, especially those in manufacturing, and drive down wages. Critics have said the TPP may not change the number of jobs in the US overall, but it would likely move more manufacturing jobs offshore to low-wage countries.

Opponents also note that companies would be able to challenge countries’ regulations and court rulings before the World Bank or UN. In March of last year, the New York Times ran an article highlighting these concerns, saying “the planned deal widens the opening for multinationals to sue in the United States,” and that the deal  gives “greater priority to protecting corporate interests than promoting free trade and competition that benefits consumers.”

The final text of the would-be landmark trade agreement must be ratified by February 2018 by at least 6 of the 12 countries comprising 85% of the deal’s total economic output, essentially meaning the US must be involved for the deal to pass. The Obama administration was given fast-track authority by Congress in 2015, meaning that Congress could only vote up or down on the bill without the opportunity to filibuster or make changes within 90 days of the White House sending the deal to Congress. According to insiders, the White House will likely submit legislation during this year’s lame duck session after November 8.

Congress remains divided about the future of the TPP, and the division doesn’t stop at the party line. Although Clinton’s former running mate Senator Tim Kaine supports TPP, many Democrats have expressed concerns over how the labor and environmental protections will be enforced. On the other side of the aisle, while many Republicans are focused on the possibility of losing US jobs, Vice-President-elect Mike Pence and Speaker Paul Ryan have expressed their general support for the deal.

More vocally opposed to the deal is Democratic Senator Elizabeth Warren (MA), who has taken particular issue with the Investor-State Dispute Settlement—a clause that would allow companies to sue countries over discriminatory practices impacting their bottom line. Senate Finance Committee Chairman and Republican, Orrin Hatch (UT), has said the trade deal has too few protections on intellectual property rights related to to research and development of biologic drugs, a class of drug that is both expensive and complicated to manufacture.

Adding to a souring forecast, Speaker Paul Ryan and Senate Majority Leader Mitch McConnell made clear that the outlook for the trade agreement moving forward in Congress is virtually non-existent.

Interestingly, recent poll on the issue suggests that the vast majority of Americans hadn’t heard or read anything about TPP. Over the coming weeks and months, we’d like to walk through the policies of this and other trade deals with you. Our hope is that we’d learn something together.

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