Trade delegates who signed the Trans-Pacific Partnership Agreement in Auckland, New Zealand on Thursday, Feb. 4, 2016. (David Rowland/SNPA via AP)
In recent weeks, the Obama administration has intensified its efforts to persuade Congress to approve the Trans-Pacific Partnership (TPP) during the post-election, lame-duck session of Congress. Ratification of the 12-nation trade deal would be an historic, against-the-odds victory for President Obama. But the urgent need for action has less to do with his legacy and more to do with economic and political realities.
While pro-trade Republicans lead the Congress, support for new trade agreements is at its lowest point since perhaps the 1940s. Both Hillary Clinton and Donald Trump have campaigned against the TPP in its current form. Despite a February 2018 deadline for ratification, the 2016 lame-duck Congress may be the last chance to get it done before the political environment gets even worse.
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Why should the United States and other nations ratify the TPP?
For starters, because it would help unify and stimulate the world’s most dynamic economic region, home to 825 million consumers and 40% of the world’s economic output. By bringing together both advanced economies (Australia, Canada, Japan, New Zealand, United States and Singapore) and less-developed but rapidly-rising economies (Brunei, Chile, Malaysia, Mexico, Peru and Vietnam), the TPP would create the world’s largest free-trade zone, with more than twice the population of the European Union.
In terms of specifics, the pact would eliminate tariffs in key sectors, lower barriers to services, and increase transparency, while also instituting stronger intellectual property protections and labor and environmental rules.
Perhaps the largest practical outcome of the TPP would be the first-ever free trade agreement involving Japan, the world’s third-largest economy. In the future, TPP also has the potential to incorporate the world’s second largest economy, China.
And yet, despite all the rhetoric, the TPP should not be regarded as earth-shaking. The U.S. already has 14 free trade agreements with 20 countries, including six of those in the TPP.
But the new pact does go further in many important areas, establishing freer and fairer terms of commerce throughout the enormous Asia-Pacific region. The TPP’s scope and economic power may make it hard for other nations, such as China, to resist joining later.
What about the impact on jobs and growth in the United States?
As the chief executive of a U.S-based, global electronics industry trade association, I am well aware that many U.S. companies did not survive the exposure to greater global competition over the last 30 or 40 years. But those that did survive embraced the globalization challenge. They focused on their comparative advantages, invested in innovation, and increased their productivity. And today, the U.S. electronics industry is stronger and more optimistic than ever.
That optimism is reinforced by the fact that the United States is finally beginning a serious bipartisan effort to improve U.S. competitiveness in a global economy. The effort has been led by Democrats like President Obama, who has championed the successful National Export Initiative; and by Republicans like House Speaker Paul Ryan, who has been a strong voice for tax reform that will level the playing field for U.S. companies internationally.
The campaign to improve U.S. competitiveness is also being led by members of Congress in both parties who came together in 2014 to enact the Revitalizing American Manufacturing and Innovation (RAMI) Act, which is sparking a new era of U.S. leadership in manufacturing innovation.
Moreover, whichever party wins the White House and the upper hand in Congress in the upcoming elections, the U.S. government is sure to maintain its priority focus on economic growth, domestic investment and exports.
So Americans need not be afraid of the TPP. Indeed, the alarmist anti-trade rhetoric is at odds with the realities that face U.S. companies today. With 95% of the world’s consumers living outside the United States, the growth of the U.S. economy depends on lowering barriers to U.S. exports, encouraging world-class innovation and workforce skills, and adopting a globally competitive approach to taxation and regulation.
Approving the TPP will help strengthen and expand the U.S. manufacturing sector and the overall U.S. and global economy. Rejecting the pact will cast a long shadow over our collective future.
When Congress returns to work after the election, lawmakers should put aside the political rhetoric, face the economic realities, and enact the Trans-Pacific Partnership.