The recently concluded Trans Pacific Partnership (TPP) agreement represents a historic opportunity to both support U.S. business and advance progressive goals.
While opposition from Donald Trump and the anti-globalization right was expected, the TPP is also widely disliked on the left because many see trade liberalization as the enemy. With their shared labor and environmental sensitivities, Hillary Clinton joined Bernie Sanders in opposing the trade agreement.
This is a pity because the TPP could advance progressive goals in some important ways. In particular, the agreement could:
• Raise economic growth – both in the United States and overseas. The Peterson Institute for International Economics estimates that the agreement could boost world economic output by $223 billion by 2025. Although a larger economy does not necessarily help the poor, it increases resources available to governments for job creation, social services, and poverty reduction.
• Boost exports and job growth. By eliminating duties on 18,000 U.S. exports, the TPP is expected to expand U.S. agricultural trade, which accounts for 20 percent of all U.S. farm income. The agreement will also support U.S. jobs outside agriculture by eliminating duties on almost 60 percent of U.S. machinery exports.
• Help poor countries. High economic growth fueled by expanding trade can transform the lives of the poorest. Rising exports fueled the largest reduction of poverty in human history in Asia between 1970 and 2000. This transformation was especially pronounced in China over the last 30 years as the middle class expanded and living standards improved. TPP implementation could support further advances in countries such as Vietnam, where the agreement could expand the economy by 11 percent or $36 billion by 2025.
• Lower prices. Cutting quotas and tariffs boost effective personal income by cutting costs faced by consumers. This is especially beneficial in the food trade, where spending most heavily burdens the poor. In America, the poorest 20 percent of the population spends over one-third of its income on food. This is around the same share of all income spent in Vietnam. Lower food prices would provide important relief for stretched family budgets.
• Empower consumers. Protected companies essentially levy a tax on consumers to boost sales. This affects both ordinary people and companies sourcing raw materials for further production. The TPP would allow more firms to compete – which can reduce prices, boost product quality, and spur greater productivity. Open trade also curtails the ability of politically well-connected interests to manipulate trade policy for their own interests.
• Impose new regional environmental and labor standards. Importantly, TPP parties agreed to address environmental challenges such as pollution and illegal wildlife trafficking, logging and fishing. The TPP also requires members to allow collective bargaining, ban child and forced labor, and regulate minimum wages, work hours and workplace safety. In particular, the TPP requires significant labor reforms in Mexico, Malaysia, Brunei and Vietnam.
• Help America. According to the centrist think tank Third Way, in the 17 countries in which the United States has concluded a trade deal since 2000, our goods trade balance went from a $3 billion deficit to a $31 billion surplus. In the five largest 17 agreements implemented to date, U.S. exports increased in four out of five product categories by an average of 157 percent.
There will also be challenges. If it comes into effect, the TPP will need to be enforced and its measures clarified. Technical standards will need refining. In the food trade, U.S. food safety standards must be met and trading partners required to employ science-based standards to protect human health and the environment. The agreement will keep policy-makers busy – but with great potential benefits.
As we consider the TPP and other trade measures, there is a pressing need to support those left behind by trade liberalization and other economic changes. All too often, people suffer gravely from change and dynamism – and the policy response to date has been grossly inadequate. While the economy as a whole benefits from liberalized trade, too many workers and communities pay dearly for the costs of transformation – whether they come from competition, technology or trade. We must do much better.
A progressive trade policy should embrace both open markets and policies to improve competitiveness, expand opportunity and support our citizens. The public sector should invest in improved access to education and healthcare, provide better infrastructure, and support for research and development. Wage insurance to protect incomes over time would also be a highly desirable addition. Governments should fight unemployment by using active labor market programs that include job-search assistance, career counseling, training, moving allowances and other re-employment services for all displaced workers – regardless of why they lost their jobs.
It is chimerical to hope that America can close the door to the world and be better off. Killing the TPP will not protect American jobs and it won’t stop offshoring. We can’t bring back the 1950s. Rejecting TPP won’t repeal the pain of our declining middle class and raise incomes and employment. However, the TPP could help reduce these problems, especially over time. The young seem to agree. According to Pew Foundation, while only 49 percent of those surveyed support the TPP, 65 percent of 18-29 year olds did.
As we debate the TPP, we can choose either to look back or to move forward. The TPP is poised to boost economies along the Pacific Rim, and create U.S. jobs, cut global poverty, lower prices, empower consumers and raise the bar on labor and environmental standards. Beyond this it is a key part of ensuring the United States remains a strategic leader in the Pacific Rim. This is why the TPP – combined with support for people and investment in our future competitiveness – is the real progressive policy.