JHI on the Issues 2016: Does the Trans-Pacific Partnership (TPP) Make America Less Competitive?

Candidate Statement:  Donald Trump strongly opposes TPP.  In a speech on October 21, he said “The transpacific partnership will be almost as bad [as NAFTA], and we are going to stand up to foreign product dumping, the manipulation the likes of which you have never seen. Makes it impossible for our businesses to compete.” Trump’s plan for the first 100 days of his presidency includes the withdrawal from TPP. In a speech in September, he added that “TPP would be the death blow for American manufacturing.  It would give up all of our economic leverage to an international commission that would put the interests of foreign countries above our own.”

Summary: Donald Trump has made anti-trade rhetoric a centerpiece of his campaign.  Trump seems to view trade as a zero-sum game where the U.S. always loses and ignores the evidence that trade makes Americans richer, including middle class Americans.  Trump also ignores the evidence that TPP will give the U.S. a strategic upper hand in Asia, allowing us to push back against unfair trade practices by the Chinese.

Talking Points:

  • We cannot increase employment by restricting trade. 
  • TPP is key to setting a rules-based approach to trade in Asia that will limit China’s ability to set the rules of commerce in the world’s fastest growing region.
  • Trump’s assertion that we would “give up all of our economic leverage to an international commission” is demonstrably false.
  • China is aggressively pushing its own Asia trade agreement and is very happy to see the U.S. back away from its Asian allies.
  • The currency manipulation provisions are well constructed and exceed the requirements of any prior bilateral or regional trade agreement. 
  • TPP is a vital tool for creating the political room for many signatory governments to initiate needed structural economic reforms and open their markets to more competition.  In fact, TPP would supersede NAFTA, essentially improving that agreement as it relates to Canada and Mexico.
  • For Chinese neighboring states, who all want to diversify away from China as their largest trading partner, TPP provides an opportunity to stand up to Chinese bullying on trade and security.
  • We DO NOT support passing TPP in the lame-duck session.  Trade deals passed in the dead of night without strong bi-partisan political support will over the long-haul damage the effort to open new markets through free trade.  It is important that the new Congress, whatever its make-up, has the opportunity it needs to evaluate and vote on TPP.

Analysis:

  • Trade is not a zero-sum game.  The U.S. has become the world’s single strongest economy because of free trade, not in spite of it.  In fact, historically we have seen a contraction in our economic prosperity when we pursue anti-trade policies. 
  • More recently, the regime of free and open markets we developed among our allies after World War II was perhaps the single greatest contributor to our victory over the Soviet Union and Communism. The John Hay Initiative lays out the connection between economics and security in its book, Choosing to Lead.
  • Moreover, Trump is wrong when he stated that the American colonies declared “economic” independence from Britain.  They declared political independence and then worked aggressively to reestablish strong economic ties with England.  The framers of our Constitution made it perfectly clear in Federalist 23 that the regulation of commerce with other nations was a “principal purpose” for the Union.
  • Trump’s assertion that we will give up “all our economic leverage to an international commission” is hyperbole.  We believe Trump is referring to the Investor-State Dispute Settlement (ISDS).  ISDS’s authority is grossly overstated by both the political far left and the political far right. 
  • ISDS predates TPP; it allows for the resolution of investment-related disputes through arbitration—a fairly standard process in use for years in other trade agreements.  A good example of such a dispute would be a state expropriating an American investor's assets without providing that investor compensation.  The U.S. has never lost an ISDS case, and American investors have won cases when foreign states with little rule of law have been in the wrong.  As Donald Trump certainly knows, arbitration outside the courts is also common practice inside the U.S.  And, like domestic arbitration cases, ISDS has limited jurisdiction.  Critics often claim the ISDS undermined U.S. rights in a cigarette labeling law in Australia that Philip Morris challenged.  The ISDS did not rule against Philip Morris; it simply denied that it had jurisdiction to rule.  This is hardly evidence of a conspiracy to usurp U.S. economic leverage. 
  • For more on a pro-growth, pro-trade agenda, read JHI’s chapter on trade in Choosing to Lead.
  • For Hillary Clinton’s record on TPP, please see JHI On The Issues: Does TPP Set the Gold Standard in Trade?

Questions the Press should be Asking:

  • How does alienating our Asian economic and security partners make America stronger economically?  How else will we compel China to change its many unfair trade practices?
  • To what extent has America’s shift away from supporting TPP influenced the actions of key U.S. allies in the region, such as the Philippines?
  • You claim that the TPP “would give up all of our economic leverage to an international commission that would put the interests of foreign countries above our own.”
    • What commission are you referring to?
    • Can you name a single case where the ISDS claimed jurisdiction that the U.S. has lost?  If not, how can you assert that it puts foreign interests above our own?
    • Isn’t a rules-based “commission” that has a history of respecting its jurisdictional limits to arbitrate the best way to assure that all parties can expect to be treated fairly under the law?