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The Trans-Pacific Partnership: Too Important to Fail?

July 11, 2016
The race for the presidency has been characterized by debates over whether or not free trade has been beneficial for the population of the United States and if it will be in the future. The candidates have surprisingly condemned free trade and ridiculed important agreements such as the Trans-Pacific Partnership (TPP) despite how many economists argue its benefits.

by Andre Na, C’18

Following the recession, there has been a widespread increase in the number of critics who are against free trade; the U.S. middle class and workers in the manufacturing industry have voiced concerns that free trade only benefits multinational corporations. Furthermore, others argue that free trade causes American manufacturing jobs to be outsourced to foreign nations where the cost of production is lower. In attempts to gain support from constituents, both Democratic and Republican candidates have staunchly opposed free trade policies throughout their campaign for office. Those who oppose free trade fail to consider the positive impacts that indicate that free trade agreements like the TPP could have for the global economy.

The TPP is a trade agreement between the United States and 11 other countries in the Asia-Pacific, including Canada and Mexico. [1] The TPP negotiations spanned a course of 5 years, but the details of the TPP were not officially announced until 2015. Enactment of the TPP would result in the elimination of over 18,000 tariffs on goods produced in the states to further promote free trade and dissolve 99% of tariff lines. Over 95% of the world’s consumers live outside of the borders of the U.S. and a decrease in tariffs would enable more American producers to send their goods to foreign markets that demand U.S. goods. [2] The negotiations of the TPP would represent over 40% of the global economy. [3] If enacted, the TPP is projected to increase exports for the U.S. by $357 billion by 2030, an increase of 9.1%. [3]

Opponents argue that the trade deal would only encourage American corporations to send their manufacturing facilities abroad for cheap labor and production costs; which would lead to a decrease in available jobs in the U.S. Yet, studies indicate that the agreement would actually add more jobs to the U.S. economy due to greater demand for U.S. exports. Economists from the Peterson Institute for International Economics estimate that the TPP could create as many as 800,000 new jobs. [3] Allowing U.S. companies to export without tariffs would also benefit the average middle-class worker. A study conducted by the White House shows that companies that export their products tend to pay 18% higher salaries than companies that do not. [1]

The TPP’s focus on Asia is critical for the United States. The middle class population of Asia is expected to jump to 3.2 billion by the year 2030, which means that Asia would account for over two-thirds of the world’s middle class population. [2] Economists emphasize the importance of the TPP for that reason and further argue that this growing middle class is likely to have a greater demand for American exports. Since 2000, the market share of U.S. exports into Asia has declined by approximately 46%, another indicator that the U.S. must refocus its attention to the continent. [2]

Economists have urged for the passage of the TPP, saying that if the U.S. does not take the lead in trade negotiations other countries such as China will skew trade terms in their favor. However, politics have greatly affected the public’s perception of this agreement despite economists’ predictions of the benefits that could arise if adopted. Both the Democratic and Republican presidential candidates have argued against the TPP in hopes to garner more votes.

Delaying the passage of the TPP would be very costly to the United States. If it is not enacted in the year 2017, but the following year, the U.S. economy could face losses as great as $388 billion. [3] Even President Obama has voiced his concerns stating that “anti-global engagement from both elements of the right and left is a big mistake.” [4] The Trans-Pacific Partnership and the difficulty in passing it is reflective of the current political atmosphere in the U.S. It is a further testament to the idea that despite how important legislation may be for the economy, politics can overwhelm the trajectory of it.

 

Sources:

  [1] https://www.whitehouse.gov/issues/economy/trade

 

  [2] http://www.thirdway.org/e-binder/your-one-stop-shop-third-ways-resources-on-the-trans-pacific-partnership

 

  [3] http://www.thirdway.org/third-way-take/6-more-reasons-to-support-tpp-what-the-latest-economic-study-shows

 

  [4] http://www.dailyherald.com/article/20160322/discuss/160329874/

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  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>