Warnings on TPP Failure

4 Nov 2016

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Despite all the anti-trade campaign rhetoric, the Obama administration is continuing its uphill push to get the Trans-Pacific Partnership through Congress in the lame-duck session.

On a call Thursday afternoon, the White House Council on Economic Advisors issued a brief on the risks to industries and jobs if Congress doesn't pass the Trans-Pacific Partnership.

Michael Froman, the U.S. trade ambassador, said the Obama administration continues to work with various congressional committees and leadership to try to bring the trade deal to a vote before the end of the year.

"We certainly have not given up on the lame duck," Froman said. "That is our focus right now. President (Barack) Obama has made it abundantly clear that he is very much committed to trying to get this done and wants to maximize the chance to get it done this year."

Froman repeated a theme that the U.S. can't let other major export countries continue to negotiate trade deals while the political system in the U.S. stalls on free-trade agreements such as TPP.

"For some time we've been talking that if we don't pass TPP, the world is not going to sit on the sidelines," Froman said. "It is going to move on without us."

The U.S. already does $864 billion in exports of goods and services to the other 11 countries in the TPP trade deal, which includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Other countries are going to move forward and continue to negotiate other trade agreements. Specifically, the White House pointed to the TPP alternative, the Regional Comprehensive Economic Partnership (RCEP), a 16-country pact driven by China that includes seven countries also already part of TPP. Trade ministers from those countries are meeting now and trying to complete a deal by the end of the year.

The U.S. currently exports $225 billion in goods and services to the seven countries that are part of both TPP and potentially the RCEP trade deal.

If TPP is not passed but the RCEP gets done, then U.S. businesses will face a loss of billions in exports and face higher tariffs than Chinese exports to many of the same countries, the White House stated.

"They (China) are executing on their regional strategy," Froman said. "The question is, whether we are going to execute on ours."

Froman noted that U.S. failure on TPP would damage the country's credibility in the region as well. Given that so many U.S. political candidates have criticized China on trade, Froman said it would seem that the U.S. has a chance to beat China to the punch on a trade deal, or lose out.

Presidential candidates Hillary Clinton and Donald Trump have both criticized TPP as not strong enough to provide more jobs to the U.S. economy.

Thursday's report stressed the losses if the U.S. does not act. Further, Froman said the U.S. risks losing strategic position in the Pacific region over time as well.

"The cost of not doing this is not just economic, but it is also in terms of U.S. leadership and our strategic position in the region," Froman said. "It would be one thing if the rest of the world were just waiting on the sidelines, but they are not. There are plenty of countries ready to fill that void."

The White House report focused mainly on 35 industries employing over 5 million people that could be at risk of losing jobs if China gets more preferential treatment selling to Japan than the U.S. does. Under RCEP, China would get significant tariff cuts for shipping to Japan. The rates would be less than half of what the average U.S. tariff is now for the same goods.

"We're already seeing lost exports because other countries, like Australia, are moving ahead with preferential trade agreements with countries like Japan that are having an adverse effect on some of our exports," Froman said.

Kevin Kester, a California rancher and vice president of the National Cattlemen's Beef Association, said the Australian-Japan trade deal is already translating into a $400,000 loss per day of exports for the U.S. beef industry. That's mainly because Australia has a 10% tariff-rate advantage over U.S. beef right now. TPP would level the playing field by putting the U.S. tariff rate for beef at the same rate as Australia.

"TPP represents an opportunity to solidify our presence as leading beef exports in the Pacific," Kester said.

Getting TPP done could translate into $800 million more in beef sales just to Japan, Kester said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG)