Logistics article(s)
June 8, 2016

The Trans-Pacific Partnership (TPP) trade agreement, the largest regional tariff-cutting agreement ever signed by the United States, has come under great criticism from all leading contenders for both of that country’s Democratic and Republican presidential nominations.


Since it was announced, the TPP has drawn criticism from Republican candidate Donald Trump and Democrats Hillary Clinton and Bernie Sanders. Critics contend the pact will do little to expand the sale of American products abroad while reducing jobs and worker pay in the United States.


US Commerce Secretary Penny Pritzker, an appointee of President Barack Obama, strongly defends the TPP, however, and predicts it will be ratified by the US Congress this year before Obama leaves office. To become effective, the agreement must be approved by a majority vote in both houses of Congress.


“It’s very polarized, as we all know, but I think the window [for Congressional ratification] is this year,” Pritzker said during an April briefing at the National Press Club in Washington. “At the end of the day, I think we will do the right thing.”


She said support for the 12-nation agreement, signed by the Obama Administration in February is “much stronger than reported in the press.”


Pritzker noted that the other 11 nations involved – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – account for about 40% of the world’s gross domestic product. By cutting tariffs and harmonizing labour and environmental standards, the trade pact would expand American exports to these nations and subsequently increase American jobs, she said. Rejecting the TPP would cost US$94 billion in US economic output in one year, she added.


Pritzker stressed that the agreement is a good deal for all 12 countries that are participating, including the United States. She emphasized that there have been about 100 free trade agreements negotiated in the Asia Pacific since 2000. “So other countries and their companies have the ability to access those markets without paying the tariffs that we’re paying,” she said. “I mean tariffs like 40% on manufactured goods, and up to 70% on autos. Remember, these are markets where China and other countries have no tariffs, no barriers.”


The pact does not include China, and while Pritzker did not refer to that country directly, she said the agreement is good “for the security interests of the United States.” She added that “if we are not selling our goods and services [to these Pacific Rim countries], both our workers and our companies will be left behind.”


Pritzker particularly stressed that the TPP allows for greater digital trade. “About US$400 billion of our services exports, and the fastest part of our exports, services exports, are digital products,” she said. “We dominate the world in digital products. For the first time, there’s now a chapter on protecting against data localization, creating opportunities for our companies, chapters on small and medium sized enterprises.”


She outlined how the TPP particularly sets the rules for labor standards and environmental standards – “the rules of the road for small and medium sized businesses.”


Pritzker added: “These businesses struggle most by variable customs rules or arbitrary tax rules or procurement that’s being affected by corruption, all of which will be positively impacted by the Trans-Pacific Partnership.”


Regarding other matters, Pritzker said that the biggest issues facing the US Commerce Department today are intellectual property protection and the overcapacity of steel.


“[The overcapacity of steel] is a very, very big concern for us at the Department of Commerce right now,” she said. She referred to the OECD meeting in April. “Frankly, you know, the Chinese government needs to decide whether they’re going to pursue the reform agenda that they have laid out,” she said. “They’re really at an inflection point. And this idea of constantly reinvesting in steel when they use about 840 million tons of steel a year, but they have capacity for about 1.2-plus billion tons of steel a year, is totally distorting the world marketplace. It’s affecting jobs here in America, and jobs all over the world.”


“That’s a challenge that we at the Department of Commerce are dealing with [in regards] with China,” she said.



By Karen E. Thuermer

Correspondent | Washington

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