Last Thursday, Senators Hatch, Wyden and Ryan introduced "The Bipartisan Congressional Trade Priorities and Accountability Act of 2015," which is the Trade Promotion Authority bill that would grant President Obama "fast track" authority for the Trans Pacific Partnership (TPP) Agreement.
The TPP agreement has been in negotiation since 2010 between the United States and 11 other countries around the Pacific Rim: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The TPP would cover 792 million people and 40% of the world's economic activity. It is a “docking agreement” so other countries could be added, and India, China and Korea have expressed interest in joining the TPP.
There has been no involvement by Congress in the writing of the agreement; instead, 600 corporate advisors have worked with the U. S. Trade Representative and his staff to write the more than 1,000 pages of the agreement. Members of Congress did not even have access to view the agreement until last year, and they cannot take any staff with them and are not allowed to take pen, pencil, paper or a camera when they go view it at the U.S. Trade Representative's office.
For the manufacturing industry for which I play a role, the most adverse effect would be that the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries.
This act would give constitutional power over trade to the president and take it away from Congress. It would allow the executive branch to conclude negotiations and sign the agreement before a vote by Congress. It allows only 45 days for committee analysis and only 15 days to bring it up for a floor vote. It allows only 20 hours of debate by Congress and eliminates amendments, filibuster and cloture. It requires only simple majority vote in the Senate and House whereas the U.S. Constitution Article 1, Section 8 treaty clause requires two-thirds vote of Senate. The TPP would remain in effect until 2018, but could be extended to 2021.
What is Missing in the TPP?
The TPP does not address any of the "predatory mercantilist" actions that our current trading partners are using that have created the enormous trade deficit that I wrote about a few weeks ago. These policies are: currency manipulation, "border adjustable" taxes called value-added taxes (VATs), which are a tariff by another name, government subsidies for state-owned enterprises, and "product dumping" by manufacturers in one country at below their cost to produce to destroy competition in another country.
“Over 20 countries, representing one-third of global GDP, are engaged in currency wars” by undervaluing their currency. These governments work with their central banks to manipulate the currency value in order to provide a competitive advantage to boost exports and impede imports. China's currency is estimated to be 25-40% undervalued. As Paul Volcker, former Secretary of the Treasury, has explained, “In five minutes, exchange rates can wipe out what it took trade negotiators 10 years to accomplish.” Foreign government intervention in foreign exchange markets is manipulation, not free trade.
Value-added taxes (VATs) range from a low of 10% to a high of 24%, averaging 17% worldwide. The U. S. is one of a handful of 159 other countries that do not charge a VAT. This means that American products that are exported are an average of 17% more expensive when imported by a country that adds a VAT. In reverse, foreign imports are an average of 17% less expensive because the U. S. does not charge a VAT. Thus, we reduce tariffs through our trade agreements only to have our trading partners add a tariff by another name to the cost of our products that we export. This gives other countries an unfair competitive advantage in the global marketplace.
We have all read news stories about "product dumping" cases against U. S. industries, such as the tires, steel, and solar panel industries. With regard to government subsidies, the best example is how Foxconn was able to get Apple's business for manufacturing the iPhone, iPad and now the iWatch because the Chinese government gave them the land and built the building for them.
What is Wrong with the TPP?
The TPP overrules prior acts of Congress and destroys our national sovereignty. For example:
Buy American Act made Null and Void: For the manufacturing industry for which I play a role, the most adverse effect would be that the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries. What this means is that the TPP’s procurement chapter would require that all companies operating in any country signing the agreement be provided access equal to domestic firms to bid on government procurement contracts at the local, state and federal level. There are many companies that survived the recession and continue in business today because of the Buy American provisions for defense and military procurement. The TPP could be a deathblow for companies that rely on defense and military contracts, such as the U. S. printed circuit board industry. Most of the commercial printed circuit manufacturing was already offshored to China and South Korea years ago.
Product Labeling: Country of Origin Labeling, labeling of GMO products and "organic" labeling could be made illegal because of being viewed as an "illegal trade barrier." Even the health warnings on tobacco products could be viewed as an "illegal trade barrier."
Many TPP countries are farm-raising seafood using chemicals and antibiotics that are prohibited in the U. S. and farmed seafood from China is being raised in water quality equivalent to U. S. sewers. According to Food & Water Watch, around 90% of the shrimp and catfish that Americans eat is imported. They warn, “The TPP will increase imports of potentially unsafe and minimally inspected fish and seafood products, exposing consumers to more and more dangerous seafood.”
Bill Bullard, CEO of R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) has stated “that fast food restaurants are not required to disclose the origins of their beef and even when restaurants say the beef is “U.S. Inspected,” it is as likely as not to be imported.” When we were in Washington, D. C. together last month, Bullard told me that the increased importation of sheep and lamb from Australia and New Zealand could wipe out the American sheep ranching industry.
The California Farmers Union recently sent a letter to Rep. Davis Valadao, R-Calif., stating, “Passage of the TPP would lead to a flood of dairy imports from New Zealand chronically depressing U. S. dairy producer prices…Agricultural imports will rise dramatically under the proposed agreement…The agreement further poses a threat to the food security that we have long enjoyed as a nation because imports will replace U. S. produced agricultural products.”
Investor State Dispute Resolution: ISDR is designed to allow foreign corporations to bypass the domestic legal system to use to fight laws they don't like. International tribunals, not U.S. courts, would decide on lawsuits between "investor" companies in member countries and the U.S. Foreign “investors” could file lawsuits against city, state and federal agencies for laws and regulations that may infringe on their “expected future profits.” They can also sue for compensation for the loss of these “expected future profits.” Thus, the TPP would infringe upon states' rights as state and local governments have the constitutional authority to enact rules governing many areas covered by the TPP. But, they will no longer have the freedom to do so in the many regulatory areas covered by the TPP.
The TPP includes hundreds of pages that govern the policies of states concerning non-trade domestic policy and state and local officials would be bound to comply with much of the agreement's rules and regulations.
Space doesn't allow me to cover all of the things that are wrong with the TPP with regard to non-trade issues, such as patent and copyright laws, land use, as well as policies concerning natural resources, the environment, labor laws, health care, energy and telecommunications.
Except for the large multinational corporations that participated in writing the agreement and are its beneficiaries, there is something for everyone to hate. Opposition to the TPP cuts across party lines ─ there are Democrats, Republicans and Libertarians opposed to many of the "leaked" provisions of the TPP. Organizations from the left to the right are opposed to the TPP as negotiated. It will hurt the 98% to 99% of American manufacturers who had no place at the table in writing the agreement. It will hurt American consumers and American workers of all ages. It will harm our environment and put our food and water safety at risk. But, most of all it will destroy our national sovereignty. Now is the time for you to write, call, or email your Senator and congressional representative to urge them to vote "no" on granting Fast Track authority.
