By Jerry Creasy president of the business and economics
You may be wondering why you should be concerned about some boring free trade agreement that few people know anything about, but I’m here to tell you that it plays a significant role in the future of the labor market that us college students will soon become a part of.
The Trans-Pacific Partnership is a relatively new free trade agreement being spearheaded by the U.S. and about a dozen other Pacific Rim countries, including Canada, Chile, Vietnam, Japan, Australia, New Zealand, Brunei, Malaysia, Peru, Singapore, and Vietnam.
The agreement on the U.S side is currently stalling in the Senate, as the vote to “fast-track” the legislation was struck down on Tuesday, which would have essentially allowed the agreement to be pushed through on a quicker agenda.
It is supposedly designed to ease the flow of goods and services in order to grow businesses and the economy, but since the legislative hearings of trade agreements occur in secret, it is difficult to tell what the text of the proposal actually says.
In order to really understand something like the TPP, we first need to understand what free trade is.
Free trade is designed to create open markets between countries. This means imported and exported goods and services should not be taxed or tariffed by countries engaging in trade with each other.
The opposite of free trade is fair trade, aptly named even though it doesn’t really create “fairness,” so to speak. The idea behind fair trade is to protect industries and services being produced within a country from being infringed upon by another country.
For example, when Hyundai, a Korean car company, exports a car to the U.S, the U.S. may impose a tariff, which is an import/export tax, so that it is closer to the price that American car manufactures can afford to charge customers in the U.S. However, this hurts the global economy because we are not focusing on something we could be competitive at. All we are doing is causing the price of cars to be higher than necessary.
The benefit to free trade is that it creates more competition between countries and can lead to specialization in the goods and services being produced. Specialization makes economies more efficient and wealthier in the long run. This is because countries are then able to focus more on a few products and services and, therefore, produce them better than one country would if it tried to make everything it wanted or needed all on its own.
If you as an individual tried to grow your own food, brew your own beer, make your own clothes and design your own computer, you would not be very well off because you don’t have the time or resources to do all of those things well.
However, if I only made clothes and you only grew food then I could trade my clothes for your food and we would both be better off. That is why when individuals, or countries in this case, trade with each other they focus on a few things and then trade those with another country for something else.
For instance, the U.S focuses on pharmaceutical drugs while China focuses on the manufacturing of consumer products such as children’s toys. This is incentive for free trade. It makes it easier for countries to trade their specialized products with those of other countries.
This is in part why the TPP is being pushed through and why many other free trade agreements in the past, such as the European Union and the North American Free Trade Agreement were passed. However, it may not be the only reason that this deal has been drafted.
Unfortunately, little is known about the TPP by the general public. The trade agreement has been in the developmental stages since its drafting date all the way back in 2005, and the process to put this trade act together has been all but transparent. Much of it has taken place behind closed doors with both the public and even Congress to some extent held in the dark.
Initially, four countries signed the agreement and then the others came on to negotiate while others were still in the prospective stages. In the last five years or so, negotiations have been slowly rolling along with many of the decisions occurring in secret. However, WikiLeaks has been successful in obtaining some information on the deal, but it pales in
comparison to how much we don’t know.
In more ways than one, the TPP may be particularly damaging to some industries and demographic groups in the U.S.
Back in the early 1990s, the passing of NAFTA reportedly resulted in the “relocation of some 700,000 jobs, 61% in manufacturing,” according to an article by Jana Kasperkevic of The Guardian.
However, if you buy the free trade argument on the whole, the economies of those engaged in free trade will improve even though it will result in the shifting and changing of some industries. This kind of outsourcing of manufacturing jobs is notorious for being one of the main causes of the decline of the American dream, on which a person is able to rely on the abundance of a high-paying job in the U.S. It is also seen as one of the reasons that wages have stayed stagnant in this country for so long. A loss of decent full time jobs is painfully felt by American workers, resulting in resentment of free trade agreements and the government officials who support them.
The passing of this act could be very beneficial to U.S corporations with stake holdings in any of the countries involved. According to WikiLeaks, many parts of the TPP will result in a significant amount of increased freedom for transcontinental businesses, such as Nike. In fact, Nike is one of the main supporters and happened to be where President Obama decided to speak to the public on how great TPP would be for everyone involved.
The President claimed it will help improve working conditions overseas while simultaneously creating a stronger workforce here at home. It is curious, however, that President Obama chose Nike headquarters as his platform for his speech, as has been one of the companies most notoriously known for sub-par working conditions in its manufacturing plants overseas where it outsourced a number of jobs.
It is difficult to say whether or not this agreement would actually be worth it for the global economy or, more importantly for American college students, whether or not it would stand to benefit the U.S. job market.
Another key component of this deal is that one of the largest Pacific Rim countries is being intentionally left out of the deal.
You guessed it: China.
The deal is somewhat aimed at countering China’s influence amongst the Pacific Rim, since the country is infamous for manipulating its currency so that it is worth less than others and thereby incentivizes businesses to buy products made there rather than from North America or Western Europe.
Another issue is that many of the corporations resemble oligopolies to an extent with major shares of the markets that they compete in. This means they have very few competitors and thus have a huge effect on the market. This could give them significant power and influence over the details of this agreement so that it benefits them.
With an increasingly competitive labor supply, it may become harder for graduating college students to find work. Some jobs will be shipped overseas not only in the manufacturing sector, but other areas as well. Others will have wages forced down as competition from foreign countries becomes fiercer. Additionally, when large companies have such a large impact on the economy, wages could decrease, along with employment.
We will just have to wait and see how this pact plays out, but for now it’s up in the air.
