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White House: US Could Lose Big If Obama’s Legacy Trade Deal Dies

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Ryan Pickrell China/Asia Pacific Reporter

The White House warns that a failure to pass the president’s legacy trade deal could result in major economic losses for the U.S., but that may not be the best argument.

The Trans-Pacific Partnership (TPP), a 12-member free-trade agreement advocated by the Obama administration, faces opposition from both the right and the left, with both the Democratic and Republican nominees strongly criticizing the agreement. Nonetheless, the current administration is determined to get the deal passed during the two-month “lame duck” period following next week’s elections.

The White House presents the TPP as a vital counterweight to China, often asserting that China will use the Regional Comprehensive Economic Partnership (RCEP), which excludes the U.S., to economically dominate the Asia-Pacific region at America’s expense if the TPP perishes. “China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk,” Obama said in May.

The White House made similar warnings Thursday.

“If TPP is not passed and RCEP is enacted, which is what all these countries say they are planning to do, then U.S. businesses would face a direct loss of competitive position,” said Jason Furman, Chair of the White House Council of Economic Advisers, according to Reuters.

The council asserted that a RCEP victory over the U.S. would create a situation worse than the present status quo in regional trade. The RCEP could lower Japanese tariffs on Chinese goods by five to 10 percent, creating a situation much more conducive to trade with China than trade with the U.S. The White House argues that the U.S. could see job cuts as well as hundreds of millions of dollars in losses.

U.S. Trade Representative Michael Froman is reportedly pushing the TPP among individual congressmen and engaging Senate Finance Committee Chairman Orrin Hatch to move the deal forward. Froman has previously claimed that not passing the TPP is equivalent to “handing the keys to the castle to China.”

Japan, a staunch U.S. ally in Asia, ratified the TPP Friday, building up support for the agreement before Tuesday’s elections.

Some critics of the TPP argue the agreement would not positively impact the American economy, noting zero change in America’s GDP and employment status, or worse, economic and job losses. If this is the case, the U.S. could lose big if the deal survives.

There are numerous complaints against the TPP. Some fear the TPP puts too much power in the hands of multinational corporations, putting them on an equal footing with sovereign nations, while others worry the agreement will cost millions of Americans their jobs and move money up through the social echelon to social elites. Activists are concerned about environmental degradation, along with dramatic increases in healthcare costs for foreign citizens.

“[The president] should be fighting for a trade agreement that creates jobs and growth — a quite different agreement from the TPP, which will most likely create more economic pain and hardship for America’s working families and small businesses,” wrote Joseph E. Stiglitz, Senior Fellow and Chief Economist at the Roosevelt Institute.

Even those in favor note that economic gains and losses may not be entirely relevant when considering the benefits of the TPP, which is more about geopolitics than pure economics.

“Obama’s creating a narrative for why the TPP is so important, but it may be a weak argument,” Scott Kennedy, Director of the Project on Chinese Business & Political Economy at the Center for Strategic and International Studies (CSIS), told the Daily Caller News Foundation. The RCEP is a “standard tariff-reduction” agreement which, if adopted, would probably have only a limited impact on the U.S. economy. If the other 11 members of the TPP decided to sign a new agreement with China that excluded the U.S., then detrimental economic losses might be a more realistic possibility.

There are two better arguments for the TPP, Kennedy told TheDCNF. It is important to clearly define rules for the global economy, and it is essential for U.S. leadership in the Asia Pacific.

“Economic losses are secondary” to these issues, he explained. Failure to pass the TPP will make it “difficult for the U.S. to lead the way it needs to,” Kennedy said, noting that writing the rules for global trade works to America’s advantage. “The TPP serves American national economic interests, but it is also very important strategically,” he added.

“The Trans-Pacific Partnership (TPP) is the single best assurance we have that the United States will lead a broad coalition of like-minded states committed to reinforcing the rules-based order in Asia,” argue other CSIS scholars.

Kennedy acknowledges that the TPP does have its flaws, explaining that he would have preferred different wording in places. But he is still “for it, warts and all,” because he recognizes its importance beyond global economics.

“I think that the most fundamental myth is that we’re better off without the Trans-Pacific Partnership, that there will be no lasting damage to the American prestige and leadership in the world,”  Mireya Solís, senior fellow and the Philip Knight Chair in Japan Studies at the Brookings Center for East Asia Policy Studies, explained in August.

“How can we ask others to come back and sit at the table and negotiate, even a bilateral, if there’s no assurance that we can actually follow through?” she asked.

The fate of Obama’s TPP will become clearer after the election, Kennedy said.

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