Jun 17, 2015 - 5:00pm

Three Hard Truths About Trade and TPA


Senior Vice President for International Policy

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Photo Credit: Andrew Harrer/Bloomberg

UPDATE: The House approved Trade Promotion Authority (TPA) on Thursday, sending the bill to the Senate for final passage. “The Chamber applauds the U.S. House of Representatives for approving Trade Promotion Authority, which is vitally important to our economy. With TPA, the United States can pursue new market-opening trade agreements to spur growth, foster innovation, and encourage the creation of good paying jobs here at home,” U.S. Chamber President and CEO Tom Donohue said after the vote. “We now call on the U.S. Senate to once again reaffirm its commitment to helping ensure high-standard outcomes in trade agreements that support U.S. growth and jobs.”

Last week, a bipartisan majority in the U.S. House of Representatives approved Trade Promotion Authority (TPA). However, by defeating Trade Adjustment Assistance (TAA), which was included in the Senate-approved trade bill, the House left the entire package at a standstill.

But that’s not the end. As Congress prepares to consider these bills — following a different legislative pathway — they should bear in mind these hard truths:

  1. We can’t stop the competition American workers face from low-wage countries — because it’s already here. “Our average applied tariff is only 1.4%, among the lowest in the world,” explains U.S. Trade Representative Michael Froman. Meanwhile, our partners’ tariffs soar into the double and triple digits.

    According to the World Economic Forum Global Enabling Trade Report 2014 report, the United States ranked a disastrous 130th out of 138 economies in terms of the “tariffs faced” by our exports overseas. In other words, American exporters face higher tariffs abroad than nearly all our trade competitors.

    What we can do is work to create a level playing field for American workers, farmers and companies. Negotiating trade agreements is the only way the United States has ever eliminated the foreign tariffs and other barriers facing U.S. exports. And the United States has never negotiated a major trade agreement without TPA.
  2. We can’t stop the tide of international commerce from rising. The introduction of container shipping half a century ago has reduced the cost of trade dramatically and led to a nine-fold increase in world commerce. World container-fleet capacity has nearly doubled since President Barack Obama took office in 2009.

    The widening of the Panama Canal is one more milestone in the growth in world trade. Interestingly, arch-protectionist Sen. Elizabeth Warren is a strong supporter of a $300 million project to expand the port of Boston to handle the larger “post-Panamax” vessels expected once the canal is widened.

    This irony led former Office of Management and Budget Director Peter Orszag to ask: “Why is expanded trade with Asia helpful if it’s facilitated by canal and port improvements, but harmful if encouraged by a trade deal?”

    What we can do is use trade agreements to shape the rules for trade in the decades ahead. We can frame agreements to protect Americans’ intellectual property, eliminate kickbacks for government-owned firms, and foster the digital economy.
  3. We can’t stop other nations from forging new trade pacts — including agreements that exclude the United States and put American workers at a disadvantage.

    Already, there are 406 bilateral and regional trade agreements in force around the globe, according to the World Trade Organization (WTO). This number has more than doubled in the past decade. By contrast, the United States has just 14 such agreements in force with other nations.

    This dynamic spells real trouble for U.S. competitiveness. After all, what if U.S.-based companies are the only ones paying tariffs or facing other market access barriers?

    Just this week, Australia and China are signing a bilateral trade agreement, and Mexico and the EU agreed to launch negotiations towards a new trade agreement. The eighth negotiating round for a massive Asian trade pact — embracing China, Japan, Korea, India, and all of Southeast Asia but not the United States — was just concluded.

    “The world doesn’t wait, not even for the United States,” Singaporean Foreign Minister K. Shanmugam told the Center for Strategic and International Studies this week. Without engagement on trade, he continued, “your only lever to shape the architecture, to influence events, is the Seventh Fleet — and that’s not the lever you want to use.”

    What we can do is choose to shape events — not resign ourselves to being shaped by them. This is what the United States has done on the world stage for decades, and our standard of living and our standing in the world have risen as a result.

This is no time for withdrawal from world affairs. We cannot simply raise the drawbridge: The price would be high. Congress must move ahead on trade.

Tell Congress: America Must Lead On Trade

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.