Feb 09, 2016 - 8:00am

Sen. Sessions on the TPP: Myths and Facts


Senior Vice President for International Policy

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On Feb. 3, Sen. Jeff Sessions of Alabama greeted the signing of the Trans-Pacific Partnership (TPP) with a statement reprising a number of his frequent criticisms of international trade and trade agreements.

New trade agreements can be an invaluable tool to stimulate economic growth and job creation, as the Chamber has explained in detail. With broad support among our membership, we’ve recently endorsed the TPP. Of course, no trade agreement is perfect, and we’ve identified a number of areas where we are urging the administration to work with Congress and industry to secure improvements. But, on balance, the TPP holds great promise.

So what about Sen. Sessions’ criticisms?

“A massive 5,544 page trade deal.” The Republican senator repeatedly refers to the length of the “gargantuan” TPP, which is necessarily a long and complex agreement because it covers trade between 12 countries representing about 40% of the world economy.

But even a cursory review reveals that more than two-thirds of all these pages are dedicated exclusively to tax cuts. These are tariff schedules specifying the timeframes over which more than 18,000 foreign tariffs — that is, taxes levied on American-made goods by foreign governments — will be eliminated.

This is why legendary anti-tax advocate Grover Norquist, president of Americans for Tax Reform, has praised the TPP. “This is both sound foreign policy” and “great economic policy,” Norquist recently told National Journal:

“It’s 4,000 pages of tax cuts. Tariffs … tariffs suck. Tariffs kill jobs. Tariffs slow the economy. This is good. It’s not everything you wanted—no. But it’s progress towards almost everything you wanted.”

So, that may be a lot of paper, but from the perspective of those seeking to tear down the tariff walls that separate American workers, farmers and companies from potential customers abroad, it’s for a great cause.

“Foreign currency manipulation.” Sen. Sessions says the TPP “fails to meaningfully address harmful foreign currency manipulation.” The Chamber strongly agrees the United States should continue to press economies to adopt market-determined exchange rate systems that reflect economic fundamentals, and there are several fora for such discussions.

In recent years, the G-7 economies have affirmed that they will not target exchange rates to achieve domestic economic objectives. G-20 members have made similar commitments to avoid persistent exchange rate misalignments and refrain from competitive devaluations.

This seems to be working. William R. Cline, a senior fellow with the Peterson Institute for International Economics, recently observed that the Japanese yen has shed the “modest undervaluation” evident last spring. Overall, the forces impacting the dollar’s exchange rate appear to be “driven by divergent macroeconomic policies and market forces, rather than the pattern of the mid-2000s associated with exchange rate intervention” by foreign central banks, Cline notes.

Here’s how U.S. Chamber President and CEO Thomas J. Donohue addressed this issue before the Senate Finance Committee last April:

“The notion that you can use trade policy tools to address monetary policy challenges causes concern in many quarters. Here’s one example: It is not in the U.S. interest to enter into an international agreement that would handcuff U.S. monetary policy and limit the flexibility of the Federal Reserve to respond to in an economic crisis.”

“Ceding constitutional authority.” Sen. Sessions is mistaken when he claims that “Congress will have ceded its constitutional authority to negotiate trade deals” once the TPP is implemented and that “Congress would be powerless to stop” other countries from acceding to the TPP once it has entered into force.

This is nonsense: Congress would of course vote on any other country joining the TPP in keeping with the legislature’s constitutional authority over international trade.

It’s relevant to consider what the Trade Promotion Authority (TPA) law approved by Congress last June says. Given that the TPP was signed under this authority, it’s important to recall how — in the words of Senate Finance Committee Chairman Orrin Hatch (R-Utah) — the TPA statute:

  • “Provides that any provision of a trade agreement inconsistent with U.S. federal or State law will have no effect.
  • Confirms that U.S. federal and State law prevail in the event of a conflict with a trade agreement.
  • Affirms that a trade agreement cannot prevent the United States or the States from changing law in the future.
  • Confirms that the Administration cannot unilaterally change U.S. law.”

As Claude Barfield, resident scholar at the American Enterprise Institute, has written: “U.S. sovereignty is closely guarded and reinforced through specific clauses [in the TPA law] that nullify any section of an agreement that is inconsistent with U.S. law.”

“Trade deficits.” Sen. Sessions has long contended that trade agreements lead to larger trade deficits. This argument has been pushed vigorously by anti-trade activists, and it could not be more wrong, as we’ve explained at length. (So have others.) 

In fact, for those worried about the U.S. trade deficit, trade agreements are clearly part of the solution — not the problem. The United States has a trade surplus with its 20 trade agreement partners as a group.

The U.S. trade surplus with these 20 countries includes a $50 billion surplus in manufactured goods, according to the U.S. Department of Commerce. The United States has significant trade surpluses in services and agricultural products.

So where does this misinformation come from? Sen. Sessions has at times appeared to echo Rep. Rosa DeLauro (D-Conn.), who cites a modified set of trade statistics to charge that the United States has a trade deficit with our trade agreement partners. These modified statistics distort the official data by subtracting goods dubbed “re-exports.” These are goods imported into the United States and then exported again without modification.

The problem is that Rep. DeLauro still counts these goods as imports when they enter the United States. This sleight of hand is intended to inflate the overall trade deficit and hide the fact that the United States actually has a trade surplus with our 20 trade agreement partners as a group. This twisting of data would merit an “F” in algebra class.

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The debate over TPP seems likely to generate both light and heat, but it’s unfortunate that so much misinformation is making the rounds. Hopefully facts and reason will prevail, and members of Congress will see the benefits of a market-opening, growth-driving, job-creating trade agenda.

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.