The TPP has required each country to make concessions

The TPP has required each country to make concessions

On 5 October, the 12 countries negotiating the Trans-Pacific Partnership (TPP) announced that their trade ministers had agreed a deal. But Mike Flanagan still doubts it will come into action this decade.

While we’re still unclear about most details, we do know the next three steps:

  • Each of the 12 partners – the US, Japan, Vietnam, Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru and Singapore – now needs to get the pact formally accepted by its government – which in most countries requires detailed scrutiny by the national legislature. Before that process starts, deals made late at night by exhausted negotiators need to be turned into detailed sets of proposed revisions to each country’s laws. Getting to the start of scrutiny will take months.
  • Some countries, like the US, have rules controlling how long the legislature can review the deal. But the US has no legal limit on how long a President can lobby Congress before the process starts. The only way he and his advisors can judge how much persuasion they’re going to need is to start exposing them to the deal’s details.
  • Once the deal does get accepted by all 12 nations, it then needs to be formally signed by all 12 heads of state, and then turned into lots of tariff schedules and approved procedures – a process which typically takes a year.

The TPP has required each country to make concessions. Vietnam, for example, will allow independent trade unions. Japan will drop most of its rules preventing US car imports, and the US and Canada will remove many of the import duties they levy against New Zealand dairy products. On the other hand, a lobby by multinational banks for legally moving customer records across borders has failed.

Manufacturing employment

There are lots of ways the TPP is likely to make international trade easier: but do many people in the democracies see that as a good thing any more?

America’s clothing and textile makers, for example, have gone from employing over 900,000 workers 20 years ago to just one-sixth of that today. Over the past four years, stories about a rebirth of upstream textile and garment plants have turned into no net new jobs.

Three days before the TPP announcement, the US revealed that textile and garment manufacturing jobs in September 2015 were down on the same month the previous year – like every other September for the past 30 years.

American media is still getting excited about one Chinese spinning mill that opened a few months ago in South Carolina. But in spite of a $230m investment, it brought just 500 jobs: about the average number lost every single month.

Indeed, September saw the smallest proportion of Americans in jobs for 40 years – and average hourly earnings fell again. Almost simultaneously with yesterday’s TPP announcement, the only major apparel chain committed to manufacturing in the US – American Apparel – announced it was filing for Chapter 11 bankruptcy.

While business lobbyists claim that freer trade is good for Americans, and media rarely challenge their spurious claims about booms in new jobs, the reality for most job-hunters is that the jobs aren’t there – and pay less.

So in 2016, with 87% of Congressional seats up for re-election, the overwhelming likelihood is that most people in Congress will be increasingly hostile to anything threatening more US job losses.

Indeed the independent view of the US Congress Research Service is that TPP will result in fewer US textile jobs – because more US garment imports from Vietnam will mean lower US fibre and fabric exports to Central America. Most US Presidential candidates – with billions of dollars of advertising funds – seem set to attack TPP as well.

American politicians are also likely to be cynical about the number of new US jobs coming from a more open Japanese car market, but their Japanese opposite numbers are likely to be downright hostile to the risk of aggressive American car-makers destroying Japanese jobs. Just as Canadian politicians will worry about their dairy farming constituents’ losing market share to New Zealand – while Kiwi dairy farmers just grumble that not all US and Canadian barriers will disappear.

TPP support lacking

Most readers of this Rant probably assume, like me, that free trade is “win/win”: lower prices in the West, and more jobs in developing countries. But the political reality is that many developed-country voters – or at any rate politicians reading the letters and emails they’re getting from their constituents – now see free trade as “lose/lose.”

Meanwhile, as bankers see the benefits they expected from TPP whittled down, their pro-TPP lobbying is likely to be limited. And however convinced left-leaning activists are that big business buys votes, no Western politician wanting re-election wants to be seen as the mouthpiece of banks.

Nowhere in the better-off TPP partners is anyone offering politicians or voters a single serious argument for supporting the TPP.

“Good for business,” says America’s apparel importer lobby, “but we mustn’t have any rules favouring US-made fabric or fibre” – so guaranteeing the hostility of America’s textile makers as well as its unions.

“Hundreds of thousands of extra Vietnamese garment-making jobs,” say Vietnam’s garment makers – guaranteeing the support of most Vietnamese, but the hostility of most other TPP politicians or voters, from New Zealand to Mexico, studying the arguments.

If – as is possible – TPP fails to get ratified by its 12 members, or if – as I believe is almost certain – squabbles delay its ratification for years, those lobbyists will blame politicians: always the coward’s excuse.

The real reason will be that pro-trade lobbyists have simply failed to provide voters with a single convincing reason for supporting TPP or any other trade deal. And, until they do, we’ll spend the next decade making no progress on dismantling trade barriers. 

Click on the following link to read more: Update: Negotiators agree landmark TPP trade deal.