If past is prologue, the latest trade deal being foisted on the American public by a Democratic president and a Republican Congress — known as the Trans-Pacific Partnership — will be every bit as injurious to the U.S. economy and national security as the last time we waltzed down that “free trade” dead end in 2001.
In 2001, China joined the World Trade Organization and immediately began flooding U.S. markets with illegally subsidized exports. In heavily lobbying for China’s accession to the WTO the year before, then-President Bill Clinton insisted the deal would allow American workers and American factories to produce goods on U.S. soil and sell them into a Chinese market of over a billion consumers.
Instead of Clinton-esque prosperity, all we have seen is the flight of American corporations to the sweat shops and pollution havens of China, the closing of over 70,000 factories, the long-term unemployment of over 20 million Americans, the reduction of our historical GDP growth rate by one-third, a $3 trillion debt to the Chinese, the mother of all budget crunches from a hollowed-out manufacturing base and shrunken tax base, and meat-axe, across-the-board defense cuts now threatening national security.
The idea that another Democratic president and Republican Congress would try such a charade again is laughable on its face, yet here we are on the verge of passing the Trans-Pacific Partnership. To be clear, this is not a “free trade” agreement as journalists often describe it, and it is certainly not a “fair trade” agreement.
Rather, the TPP is a backroom deal among the usual suspects — Wall Street capital seeking to make a killing overseas and multinational corporations with American names like Apple, General Electric and Caterpillar that love to evade U.S. taxation and regulation and salute no U.S. flag.
Sadly, to seal the political deal there are also U.S. agricultural interests that are more than happy to sacrifice America’s blue-collar manufacturing workers on the altar of selling more corn, soybeans, rice, and wheat to Asia.
In fact, this backroom deal is breathtaking in scope. It includes America’s neighbors Canada and Mexico. On the other side of the Pacific, it includes Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. Most importantly, there is also the world’s third largest economy, Japan, and quite possibly the world’s 12th largest economy in South Korea. Together, these TPP nations account for about 40 percent of world GDP and about a fourth of world trade.
The world’s most populous nation and biggest cheater in the global-trading arena nonetheless casts a long shadow over the TPP debate.
Conspicuous in its absence from this list is the People’s Republic of Mercantilist China. Yet the world’s most populous nation and biggest cheater in the global-trading arena nonetheless casts a long shadow over the TPP debate. This is because the Obama administration incessantly spins the TPP as a necessary counterweight to China’s rising economic and military might.
The cynicism behind such spin is equally breathtaking. For all the TPP will do is further weaken America’s economic base and defense capabilities while strengthening China’s. Here’s just a glimpse of that grim future.
As soon as the ink is dry on the TPP, Wall Street capital will begin heading to Asia instead of financing domestic investment. Shortly thereafter, America will begin hemorrhaging jobs in key manufacturing industries — and the U.S. auto and auto-parts industry has the biggest bull’s eye on its back.
Even our agricultural industries will be in for a surprise as the signatory countries will find myriad Asian, non-tariff barrier ways to keep American products off their shelves. The abiding fact here is that while Uncle Sam, AKA Uncle Sucker, will keep its part of the TPP deal, most of the other countries will find ways to cheat. Just witness the ballooning U.S. trade deficit with South Korea after a TPP-like deal in 2012.
Under TPP rules, China will still be able to invest in TPP countries and ship its “Made in China” products to the U.S. under the cover of foreign flags.
As for China, it won’t miss a mercantilist beat. Under TPP rules, it will still be able to invest in TPP countries and ship its “Made in China” products to the U.S. under the cover of foreign flags and with the benefit of even lower tariffs than it might face today.
Here’s the worst part — and a key factor missing from the current 2016 presidential debate: No one inside the Beltway or on the campaign trail seems to be able to connect the dots between the crushing negative effects of trade deals on America’s manufacturing and tax bases and our increasing inability to defend our national security interests.
The canary in the coal mine here is the U.S. Navy — down from a high of about 600 ships in the Reagan years to close to 200 ships today. Indeed, the U.S. Navy is one of the worst casualties of a series of trade deals that have allowed other predator and mercantilist nations like China to grow at America’s expense.
The math here is simple. Bad trade deals equal slower growth equal a smaller tax base equal defense budget cuts.
It would be refreshing at this juncture if our presidential debates dealt substantively with the TPP and, more broadly, China’s dangerous military rise. To put this another way, wouldn’t it be nice if we had a presidential election that was a referendum on foreign policy and economics rather than an orgy of bickering about wedge issues? That would certainly be a welcome change of pace — and might even save our sinking Republic.
Peter Navarro is a business professor at the University of California-Irvine and author of “Crouching Tiger: What China’s Militarism Means for the World.” (Prometheus Books) www.crouchingtiger.net
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