China will likely benefit from Donald Trump abandoning the TPP, but it remains to be seen how the death of the deal will affect American workers.
By Kate Wheeling
Donald Trump shows the executive order withdrawing the U.S. from the Trans-Pacific Partnership. (Photo: Ron Sachs — Pool/Getty Images)
“I am glad the Trans-Pacific Partnership is dead and gone. For the last 30 years, we have had a series of trade deals — including the North American Free Trade Agreement, permanent normal trade relations with China and others — which have cost us millions of decent-paying jobs and caused a ‘race to the bottom’ which has lowered wages for American workers,” said longtime TPP opponentBernie Sanders, per the Washington Post.
Experts largely agreed that the economic effects of the TPP—Barack Obama’s signature free trade agreement between the United States and 11 other countries along the Pacific Rim—in the U.S. would be minimal. And as Dwyer Gunnreported for Pacific Standard last year, though the TPP would lead to some job loss, it would also lower the cost of consumer goods for low- and middle-income Americans.
“All this is to say that, essentially, the TPP, like all international trade agreements (and globalization in general), will have some winners and some losers, but may not be as transformative as either side makes it out to be,” Gunn wrote. The same has been true of the North American Free Trade Agreement (NAFTA), according to a 2015 review by the Congressional Research Service. “The net overall effect of NAFTA on the U.S. economy appears to have been relatively modest, primarily because trade with Canada and Mexico accounts for a small percentage of U.S. GDP,” the report states.
In other words, these massive multinational trade deals don’t matter much to middle-class Americans, economically speaking.
That may be because while free trade agreements do work to boost exports, that doesn’t actually translate to more manufacturing jobs in the U.S., according to economist Jock O’Connell. While exports increased by 123 percent between 1980 and 2008, 5.3 million manufacturing jobs were lost, O’Connell reported in Pacific Standard in 2013. The disconnect can be largely explained by increased productivity in manufacturing—fewer people are needed to make the same amount of goods—and export numbers that are inflated by “re-exports”—goods that are imported and then exported without making it to American markets. O’Connell explained:
Re-exports are on the rise across the nation — accounting for 12.5 percent of America’s merchandise export trade last year, up from 8.7 percent in 2000. But they don’t create a lot of jobs. Instead, they produce overly sunny numbers. Exclude re-exports from New York’s merchandise export trade since 2000, and what appears to be about a 40-percent increase in exports over that period is really half of that. Exclude re-exports from California’s merchandise export trade, and what emerges is that exports of goods declined by 7.4 percent between 2000 and 2012.
But while trade agreements like the TPP may not make much of a difference to Americans’ bank accounts or budgets, the future of the TPP certainly matters to foreign workers. As Gunn explained last year, the TPP contained provisions targeting forced labor in countries like Malaysia. “If the agreement is ratified by all member countries — and the labor provisions contained within it are actually enforced — the TPP has the potential to dramatically improve working conditions in its less-developed member countries,” Gunn wrote.
From a geopolitical standpoint, bailing on the agreement opens up the field for China to further expand its influence in the region. As Gunn reported in November:
Many of the countries participating in the TPP are also participating in negotiations for the China-led Regional Comprehensive Economic Partnership. Since Trump’s election, China has been aggressively moving ahead with the RCEP, and the Wall Street Journalreported that several TPP signatories are now “shifting their focus” to RCEP. Should only the RCEP take effect (as now seems increasingly likely), a number of U.S. industries will struggle to compete in key global markets.
Trump is expected to pursue bilateral trade deals, and though he could make individual deals with countries that would have had agreements with the U.S. under the TPP, it may now prove harder to forge those connections. “The U.S. will be seen as an unreliable partner both economically and perhaps even in the security arena,” Victor Shih, an associate professor at the University of California–San Diego and expert on China’s economy, told the New York Times. “While some countries in Asia have no choice but to be close to the U.S., others may begin to look to China.”