After five years, American-led negotiations over the Trans-Pacific Partnership, a trade liberalization agreement with 11 other countries that collectively account for 40 percent of the world’s economy, are nearly complete. The next step is for Congress to allow for the same legislative process — an up-or-down vote on the deal — that it applied to recent trade pacts, including the North American Free Trade Agreement of 1993 and the United States-South Korea free trade agreement of 2011.
But the congressional outlook for this approach — called Trade Promotion Authority, or fast-track negotiating authority, because it does not allow amendments or filibustering — has dimmed. Without it, the agreement would collapse, the victim of endless amendments. The coming vote, therefore, is the equivalent to a vote on the TPP itself. Should it die, the adverse impact on American national security would be great.
The trade debate coincides with growing challenges to America’s allies. In the Western Hemisphere, the governments of Canada and Chile, which are parties to the trade negotiations, believe the accord (despite domestic critics) will stimulate growth. In Asia and the Pacific, parties to the deal — not only our allies Japan and Australia, but also Vietnam, Singapore and Malaysia — see the trade accord as a way of counterbalancing China’s economic might. This is why trade is central to our foreign policy; without this deal, the so-called pivot to Asia will be hollow.
Three myths are undermining support for the TPP in the United States.
The first is that recent trade agreements have hurt jobs and wages and widened income inequality. This argument fails to differentiate between the impacts of increased global trade and those of trade agreements. The M.I.T. economist David H. Autor and colleagues concluded that from 1990 to 2007, Chinese imports accounted for 21 percent of the decline in American manufacturing employment. But the United States does not have a bilateral trade deal with China. These jobs were lost to expanding trade — not to a trade agreement. Yes, income inequality has widened to economically and socially harmful levels. But it is globalization, technology and flawed educational and tax systems that are driving this trend, not trade pacts.
There’s no doubt that increased trade has weakened the American manufacturing base, just as it has strengthened the services sector. This agreement, however, should not significantly increase imports of manufactured goods to the United States. Six of the 11 other nations in the TPP already have free-trade agreements with us. And the other five face only minimal tariffs.
A second myth is that the TPP would degrade labor and environmental standards and raise drug costs. But the accord includes protections directly drawn from the International Labor Organization, with strong enforcement mechanisms. As for the environment, there is nothing new in the TPP that would affect existing dispute-resolution mechanisms. Finally, it is far from certain that new protections for drug companies would lead to higher drug costs.
A third myth is that the TPP is flawed because it won’t prevent countries from competing unfairly by devaluing their currencies to stimulate exports. This criticism is shortsighted. When the Federal Reserve, having lowered its key interest rate to nearly zero, began extensive bond-buying in 2009, the trading value of the dollar fell against most other currencies. There was severe criticism from Europe and Asia that we were unfairly depreciating the dollar to improve our trade position. Of course, the Fed’s sole goal was to revive spending and investment here. Now, both the European Central Bank and the Bank of Japan have initiated their own versions of extreme monetary easing. And, in response, the trading value of the dollar has risen against the euro and the yen. But the eurozone and Japan aren’t trying to start a trade war any more than we were. We should hope their monetary policies succeed in spurring growth, because then their demand for American exports will rise. What’s more, China, widely seen as the main culprit in currency manipulation, isn’t part of the TPP. The International Monetary Fund should remain the venue for challenging what are judged to be illegitimate government interventions to drive down their currencies.
The benefits of the TPP are many. It would further open the 12-nation region to trade in services and agriculture, two sectors in which the United States historically runs large trade surpluses. Better protection of American intellectual property will help industries, from high-tech manufacturing to Hollywood, in which Asian piracy has been rampant.
Free trade leads to greater overall prosperity. The gains from free trade need to be widely shared, but defeating the TPP would not solve America’s problems with inequality. Instead, it would further rattle our allies. “Further” is the key word here, as there already are rising doubts about American reliability — the result of the debt-ceiling crises, government shutdowns, the failure to follow through on threats in Syria and, most recently, the letter addressed to Iran from 47 senators. If the TPP fails, countries that, rightly or wrongly, see Washington as ineffective will pay America less heed.
It’s reasonable to debate the merits of this major trade agreement. But the critics have exaggerated and distorted the economic costs of the accord, while all but ignoring its benefits — and the strategic costs of a rejection. The real choice is between supporting a trade accord that would help most Americans and serve the country’s strategic aims, and defeating it, which would leave the country poorer and the world less stable.
Roger C. Altman, a former deputy Treasury secretary, is an investment banker. Richard N. Haass, a former director of policy planning at the State Department, is president of the Council on Foreign Relations.