Pacific Rim trade deal: Job creator or job killer?

THE sweeping Pacific Rim trade deal now being debated would cover everything, from Vietnamese labor unions to copyright protections to trade in sockeye salmon. With the details having been released on Thursday, a furious dispute is expected in the US and some of the 11 other countries that negotiated it.

Supporters say the Trans-Pacific Partnership (TPP) would promote economic growth and provide protections for workers on both sides of the Pacific. Critics say it contains giveaways to drug manufacturers and other multinational companies, and exposes American workers to unfair competition with low-wage labor in countries like Vietnam.

Some questions and answers:

What is the TPP?

It’s an ambitious and labyrinth trade agreement involving the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Those countries account for nearly 40 percent of global economic output.

The pact would erase most tariffs and other trade barriers between the countries, whose trade ministers agreed to the deal a month ago. And it would clarify and standardize trade rules, making it easier to sell goods and services across the Pacific Rim.

China isn’t mentioned; why?

That’s right. China, the world’s No. 2 economy, is conspicuously missing. In fact, the deal was designed, in part, to counter China’s influence in the Pacific Rim. US Trade Rep. Michael Froman says it was critical for the US, not China, to write “the rules of the road for trade in the Asia-Pacific region…. After all, this isn’t everyone’s approach to trade. Other countries, such as China, are already moving forward with deals that don’t reflect our interests and our values.”

Still, China could eventually join the TPP.

How does this deal compare with others, like Nafta?

The Pacific deal was negotiated in the shadow of 1994’s North American Free Trade Agreement (Nafta). That deal, among the US, Mexico and Canada, failed to deliver the big job gains its supporters predicted, and was blamed by critics for wiping out many US factory jobs.

In a statement on Thursday, President Barack Obama conceded “that past trade agreements haven’t always lived up to the hype.”

But the president added that “the TPP includes the strongest labor standards in history, from requiring a minimum wage and worker-safety regulations to prohibiting child labor and forced labor.”

The TPP would require even authoritarian Vietnam to allow independent labor unions.

So what’s the case against it?

To start with, critics are unconvinced of the labor standards Obama was eager to tout.

Vietnam, for instance, will get five years to update its labor policies. John Sifton, Asia advocacy director for Human Rights Watch, told reporters on Thursday that Vietnam might change its labor laws, but “we are concerned that Vietnam will not change its practices. They will continue to lock up union dissidents and punish people who challenge the government.”

Sifton said he doubted the US would “have the desire and the will to enforce the terms of the agreement.”

Opponents also complain that the agreement includes giveaways to business lobbies. For instance, the deal gives drug companies about eight years of protection from cheaper competitors for biologics, which are ultra-expensive medicines produced in living cells.

The deal also stresses each country’s “right to protect public health and, in particular, to promote access to medicines for all.” But critics say that provision would keep drug prices too high.

“The TPP will keep affordable medicines out of the reach of millions around the world,” said Judit Rius Sanjuan, an adviser to Doctors Without Borders.

What’s the likely economic impact?

For the US, it probably wouldn’t wipe out as many jobs as critics fear or create as many as supporters predict. Peter Petri, professor of international finance at Brandeis University, has estimated that the impact on US jobs would probably be minimal: Jobs created by expanded access to Asia-Pacific markets would likely be offset by jobs lost to increased competition.

Rajiv Biswas, Asia Pacific chief economist for IHS Global Insight, says Vietnam would be a big winner, as tariffs on garment exports to the US would disappear. Malaysian manufacturers would also benefit from easier access to the US and Canadian markets.

What’s next?

On Thursday Obama formally announced his intention to sign the deal. He now must wait at least 90 days before he can do so: Once the US and other countries have signed on, their legislatures must ratify the agreement, which isn’t guaranteed.

The debate is expected to be especially contentious in the US. Obama faces resistance within his own Democratic Party from union supporters who fear that foreign competition would kill jobs and depress wages.

Hillary Rodham Clinton, who is running for the Democratic presidential nomination, has said she’s against it. Her opposition may make it harder for Obama to round up votes. The deal has more support among pro-business
Republicans.

Under a trade law passed earlier this year, Obama must give the public time to review the text before he signs the agreement and turns it over to Congress for approval. US lawmakers can’t nitpick the deal with amendments. They must simply vote yes or no. Congress will likely take up the issue next year in the heat of the presidential election campaign.