5 Ways the Trans-Pacific Partnership Will Affect Your Wallet
Trade deals are boring. They’re complex, riddled with economic terms, and often the most interesting part is seeing how many favorites Donald Trump can get on his tweet saying that he hates the deal, and President Obama is incompetent. (It’s more than 4,700 and counting, by the way.)
The incompetence of our current administration is beyond comprehension. TPP is a terrible deal.
— Donald J. Trump (@realDonaldTrump) October 5, 2015
But no matter how little you know about the Trans-Pacific Partnership that was minted October 5, the reality is that it will likely affect your life in some way or another if Congress chooses to ratify it. It has a long, uphill, Everest-like climb to reach that point since both Republicans and Democrats have their issues with the trade agreement, but it’s worth knowing how it could affect your bottom line.
Here’s some of the basics: the agreement was made between 12 countries, including the United States, Mexico, Canada, Japan, Vietnam, and Australia. (All of them are located on the Pacific Rim.) The deal would eliminate more than 18,000 taxes (tariffs) the other countries place on exported goods from the U.S., which The White House argues would make American-made products more affordable for people in member countries.
Though trade agreements all begin with tariffs and open trade, this one also addresses issues of property rights, child labor laws, environmental standards, and access to the Internet. Its advocates say these regulations will be enforced with greater strength than in previous agreements, allowing American businesses to compete on a larger scale. But opponents of the agreement say it will harm our economy and hurt working families.
Who is right? The answer is there are probably some trade-offs no matter who you are, and politics muddy the waters. This would be one of the biggest feathers in Obama’s legacy cap if the deal goes through, and some people want to see it fail just for spite. However, just because it’s biggest advocates want to see it succeed after five years of negotiating doesn’t mean it’s going to benefit you. Here’s what you can expect if the deal is passed.
1. It could mean lower wages
The TPP would likely be a boon for our country’s GDP, but individual workers would be negatively affected, the Economic Policy Institute argues. EPI’s argument is this: more tax-free imported goods means lower prices all around. While that’s good on the consumer end, those same people could see a drop in wages as a result. EPI calculated that a non-college-educated worker loses $1,800 per year because of suppressed wages as a result of open trade. Since about 70% of workers in the U.S. don’t have a college degree, that affects more than just manufacturing employees. Most people with college degrees would have the potential to earn more.
In a statement against the TPP, presidential candidate and Vermont Senator Bernie Sanders said the trade deal with worsen the “race to the bottom” (of wages) by forcing American workers to compete with labor in Vietnam, where the minimum wage is 56 cents per hour.
2. If we earn more, it won’t be a windfall
If you do more reading on the TPP, know that almost every organization talking about it has an agenda right now — take their words with a grain of salt. But even if we do see wage gains from the TPP, they’re likely to be incredibly small. The Center for Economic and Policy Research released a paper that shows gains from free trade agreements would only equal about 43 cents per person, per month in the United States.
It’s a whole lot of new regulations, and for it you won’t even have two extra quarters to rub together at the end of each month.
3. Agricultural exports could increase
If you work in the agriculture business, the TPP could be hugely beneficial. For example, right now U.S. poultry faces a 40% tariff if it is exported to Malaysia, giving almost no incentive for people in Malaysia to buy those products because of the steep price. Overall, the Office of the U.S. Trade Representative expects the $58 billion in agricultural and food exports to grow as a result of the duty-free trade.
4. Intellectual property rights should increase
If you work in a creative industry or make any portion of your money based on patents you or your company holds, the TPP should add some teeth to enforcing the integrity of that work overseas. (Hollywood has to be in favor of this part, at least.) “Stronger international intellectual-property protections would help American companies export more to countries where patent laws were previously ambiguous or absent, which would then encourage these companies to hire more low-skilled American workers to manufacture these expanded exports,” argues Jon Hartley in an article for the National Review.
The downside in this part: pharmaceutical companies are included in this section, meaning their monopolies in several countries could grow.
5. You could face more local taxes
To see this effect play out, it will take several years. But the American Federation of Labor and Congress of Industrial Organizations, which represents 56 unions and 12 million workers in the U.S., says that communities suffer when factories shut down because of outsourced labor or undercut prices.
In small towns and cities, local governments tax companies at a higher rate than homeowners, which funds schools, small governments, and more. When that goes away, local governments either have to make large cuts, increase individual taxes, or both. “When a factory closes down in the community, the tax base goes away, the high-paying jobs go away. They’re replaced with either low-paying jobs or no jobs at all. That means there’s less revenue for government to operate on, less services for the general public, and the entire community loses,” said Richard Trumka, the AFL-CIO’s president in an interview with PBS.
Follow Nikelle on Twitter @Nikelle_CS