Trying to look sympathetically at Trans-Pacific Partnership

TPP Banner-aIn the 19th Century, the Victorian historian Thomas Carlyle coined the phrase “dismal science” for the field of economics. With the help of new insights and the world of computing power, it has become more accurate, like a physical science. However, there are still vast realms of uncertainty, and that certainly is true as we consider the proposed Trans-Pacific Partnership. Some call the TPP “NAFTA on steroids,” and if you like NAFTA, this must be good, and if you don’t then we have a problem.

The chief American proponent for the agreement is President Obama, but by listening to him you would hardly know it. He seems to speak about it only in secrecy, which is interesting because that is the way in which he wanted the U.S. Senate to consider the terms of the Partnership. The Senate complied last week by putting it on a “fast-track” for consideration, thereby forbidding amendments or filibuster. Debate and discussion will be quick and without nuance, resulting in an expeditious up or down vote. While that might be desirable in the case of a presidential nomination, it hardly seems appropriate for a complicated economic pact laced with unintended consequences.

Supporters and opponents of the Partnership agree that it will be a bonanza for multi-national corporations. If you believe in top-down or trickle-down economics, then “what’s good for business is good for the United States” (and by extension, the world). If you’re somewhat suspicious of the motives and practices of large multi-national corporations, then you have plenty of reason to pause in offering support for the Partnership.

For those who are not direct beneficiaries of the largesse of big business, there are two key questions to initially ask, (1) would the loss of wage gains of American workers be worth the savings for American consumers, and (2) on an ethical level, are we comfortable with American workers losing economic power while laborers in developing countries see their wages, and hence purchasing, power rise? There are other important considerations, such as what impact the TPP would have on American and global environmental issues, how would labor safety and working conditions be affected, and is the establishment of “private courts” really a fair way to settle international disputes?

Let’s take issue one, the loss and gains for American workers and consumers. The TPP should result in lower prices for American consumers, because it will make it easier for companies to produce goods and services and overseas, distant from prevailing American wages and salaries.

Should we be concerned about the prices that American consumers are paying? Below is a chart representing changes in the Consumer Price Index over the past three years, as calculated by the U.S. Bureau of Labor Statistics. In only one month over the past three years has inflation reached 3 percent, and this past February, we actually had deflation, prices falling.

Consumer-Price-Index-aThe concerns of the American middle class and the poor have not been about high prices, rather about job opportunities, job security, and salaries that provide the necessary income to support a family. As shown so clearly by the Economic Policy Institute,

Productivity-Wages-aThe pay of American workers was increasing along with productivity until the late 1970s. Since then, wages have essentially remained stagnant, while productivity has more than doubled. In other words, corporations are increasing their earnings at the expense of the sweat and intellectual prowess of their employees. More and more households now have two wage-earners, and in some cases, families are worse off now with two wage-earners than they were a generation ago with one. If one of the fundamental questions in considering the merits of the Trans-Pacific Partnership is whether to look for ways to benefit the American worker rather than the American consumer, the evidence seems to be clear that consumers are doing well-enough, and workers are struggling. Workers need the help, and the TPP would not be good for them.

The second question is whether the increase in wages for workers in developing countries is more important than increasing wages for American workers. From a global and non-biased point of view, it may be better in the short run to favor the benefits that workers in developing countries would accrue with passage of the TPP. However, in virtually every developing country, it would be better to put laborers to work on projects needed in their countries, such as infrastructure, housing, schools, and health facilities. With the TPP, most of the products that they would produce would be for the benefit of foreigners. At the present time, it is fair to argue that helping American workers close the gap between their incomes and those of the wealthy is of greater importance. The United States still has a long way to go in creating more economic and political equality, and that should be our first order of business. As the U.S. does that, it can play a fundamental role in helping the economies of developing countries by providing them with the capital and skills to make their economies more self-reliant. Once that is done, they can participate more in international trade in a way that benefits their citizens as both workers and consumers.

The TPP is not an easy issue, but considering how it will furtively be considered by the U.S. Senate (and American people) and the damage that it will do to American workers, it seems that the prudent position would be to oppose the TPP. It’s a shame that, in this case, President Obama favors action that can be so detrimental to American workers.

For a quick, visual explanation of the problems with the Trans-Pacific Partnership, what this animation offered by  former U.S. Labor Secretary Robert Reich: