POINT: Should Congress pass the TPP trade agreement?
Yes, Trans-Pacific Partnership is good for Illinois, good for America
By RICHARD PAULLIN
Widely maligned by presidential candidates and pundits of all political stripes, the Trans-Pacific Partnership is nevertheless a vital component of continuing and future prosperity for Illinois agricultural, manufacturing and service firms. In 2014, U.S. merchandise exports to TPP countries supported 3.1 million American jobs; services exports supported another 1.1 million jobs.
The Preamble to the Trans-Pacific Partnership clearly sets forth its goals: “[To] establish a comprehensive regional agreement that promotes economic integration to liberalize trade and investment, bring economic growth and social benefits, create new opportunities for workers and businesses, contribute to raising living standards, benefit consumers, reduce poverty and promote sustainable growth.”
For the record, the TPP partners are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The U.S. already has Free Trade Agreements with six of them. Only Brunei, Japan, Malaysia, New Zealand and Vietnam are new. But this is a fast-growing region: the TPP partners account for 40 percent of global GDP and 800 million consumers. By 2030, the middle class population in the Asia-Pacific region is expected to be 10 times the size of the United States!
Illinois depends on world markets for jobs and prosperity. Last year, Illinois exported $63.4 billion of merchandise to world markets, of which $34.1 billion (54 percent) went to our 20 Free Trade Agreement partners. Illinois merchandise exports alone supported more than 345,000 jobs in 2014.
Since 2005, Illinois manufacturers have experienced an 87 percent growth in their exports to our FTA partners. It is only reasonable to expect that the TPP will accelerate future export growth as it will eliminate all foreign import taxes on industrial and consumer goods. For Illinois’ top export sectors, the cut in tariffs will be immediate and dramatic: Chemicals, with a current maximum tariff of 35 percent, will see 97.2 percent of all tariffs cut to zero immediately; Machinery, with a current maximum tariff of 59 percent, will see 96.8 percent of tariffs cut immediately; Information & Communication Technologies, with a 35 percent current maximum tariff, will receive immediate duty-free treatment for 99.6 percent of their products; Health Products, currently subject to a maximum 30 percent tariff, will receive immediate duty-free relief on 99.9 percent of their products; and Automotive Products, with a 75 percent current maximum tariff, will see 98.2 percent of their products subject to zero tariffs immediately.
The TPP’s benefits will not apply only to manufacturers. TPP assists Agricultural exporters as well. TPP will provide commercially meaningful market access for U.S. agricultural exports. It will eliminate the use of agricultural export subsidies, discourage countries from imposing export restrictions, and guarantee that food safety, animal health, and plant health measures are established and applied transparently in a science-based manner.
Illinois ranks third nationally in the export of agricultural commodities with $8.2 billion worth of goods shipped to other countries. Exports from Illinois account for 6 percent of all U.S. agricultural exports. Illinois is the nation’s second leading exporter of both soybeans and feed grains and related products. Approximately 44 percent of grain produced in Illinois is sold for export. Four TPP partners – Mexico, Japan, Vietnam and Australia – are among the top 10 export destinations for U.S. agricultural products.
Large agricultural associations agree with the benefits that are provided through TPP. The National Pork Producers Council, for example, recently joined 225 other agricultural and food organizations in support of TPP.
“The TPP is critical to the livelihood of the U.S. food and agriculture sector because it will create conditions that encourage economic growth and increased employment in rural areas and throughout the supply chain,” the agricultural and food groups say in a letter to Senate and House leaders. “Exports are fundamental to the success of the agricultural industry because 95 percent of the world’s consumers live outside of the United States and 20 percent of U.S. farm income is from exports.”
The service sector, as well, will
experience immediate and long-lasting benefits. TPP will expand market access and investment opportunities in a number of services sectors, including entertainment, telecommunications, software licensing, the Internet industry, retailing, and logistics/express delivery. Moreover, TPP will bar discrimination against digital provision of services and prevent customs duties on electronic transmissions. Illinois’ vibrant service sector, with exports last year of approximately $30 billion, stands to
Seemingly lost in the debate over TPP and other FTAs is one inescapable fact: exports create and support jobs for U.S. exporters. In 2013, 22,770 Illinois companies exported; 90 percent of them were small-medium enterprises. Export-related jobs are good jobs, paying 13-18 percent better than the average job. Companies that export are 8.5 percent less likely to go out of business.
Also lost in the debate is the strategic importance of the TPP to long-term U.S. influence in the Asia-Pacific region. It is, in fact, the fastest-growing region in the world and a critical driver of economic growth worldwide, accounting for 60 percent of global GDP and 50 percent of all international trade. It is also a region currently dominated by China. For U.S. exporters and investors to thrive in the region, they need a transparent set of rules, standards, procedures and protections. The TPP is the vehicle for delivering those standards to the region. Do we really want China to be setting the agenda for environmental sustainability and protection? For the rules protecting intellectual property? For the standards to guarantee food safety, animal health, and plant health measures?
Commerce Under Secretary for International Trade Stefan Selig said TPP will allow us to expand our commercial leadership by opening market access in the part of the world “where the majority of global middle class will be located within the next 15 years.” It is an opportunity we should embrace. Every day Congress dithers on TPP is a lost export opportunity for some Illinois business.
Richard Paullin is executive director of the International Trade Association of Greater Chicago and chairman of the Illinois District Export Council.