Why it will be almost impossible for the TPP to help U.S. workers
The Trans-Pacific Partnership is a tale of two cities. Or perhaps two different but overlapping worlds, to be more specific. Understanding how those worlds interact, who gets to move between them, and who does not, is key to assessing the deal's merits.
The Trans-Pacific Partnership (TPP) is the massive free trade arrangement being put together between the U.S. and 11 other Pacific Rim nations. Word broke on Monday that the Obama administration has finished negotiations with the other players, meaning all the moving parts are now in place. It will be another month before the text of the thing is made public, and Congress won't vote on it until sometime in 2016.
So, however hard the Obama administration has been pulling for the TPP, if Americans decide it doesn't look like a good deal, they still have the opportunity to kill it. If they want to.
That brings us back to the two worlds.
The first world is the world of real, concrete economic activity: this particular factory that produces these goods or services, or that particular sector, or this particular community where these specific human beings work. The second world is a good deal more abstract: It's the world of aggregate economic growth, stock markets, capital ownership, and money flows.
The second world of capital sits atop the first world of concrete activity. Obviously, they perform symbiotic roles. But the world of capital is a lot less fractured. The relatively small, elite portion of the American population that operates in it can move freely — if one particular piece of the concrete world goes down, they can rely on the continued flow of money from all its other parts to keep things humming smoothly.
But for people who operate mainly in the concrete world — which is to say, most Americans — things are different. If their corner of the world — their industry, their factory — shuts down, they often can't just hop to another part. Human beings are not fluid, abstract, interchangeable economic widgets. They might not be able to move to a new place, or to leave family behind, or to take on an entirely new set of skills.
So what does this have to do with the TPP? A fundamental thing to understand about international trade is that countries do not compete with one another. They cooperate. If Japan is better at making cars than the U.S., and we're better at growing wheat than they are, then instead of us making our own cars and them growing their own wheat, we'll trade. This is what's called "comparative advantage," and at the aggregate national level it's a win-win. The overall economic performance of both sides goes up.
Because people in the upper world of capital live off the aggregate performance of the economy, the TPP and other free trade deals look great from their perspective. But people in the concrete world live off their particular part of it. So if you're a worker in a part of the economy in which the other country does your good or service better, you're toast.
This dynamic is extremely important to understanding how globalization has played out. The relatively egalitarian economy we enjoyed mid-century was built on a network of public investment, union power, and job benefits — all entangled with the companies in big middle-class industries like manufacturing. That network ensured that, when money flowed up from the concrete economy into the world of capital, a lot of it flowed back down again. That didn't make both worlds equally free and fluid, but it did bring them closer together.
But that network was also fragile, built on the assumption that the concrete world would remain as it had always been. As soon as globalization and free trade started picking off various parts of the concrete economy, everything fell apart. Money kept flowing up, but it stopped flowing down; inequality spiked, and incomes for the middle- and working-class stagnated. The only other way to ensure a strong downward flow of money from the world of capital was to bypass the market proper entirely: Use the government to distribute money to the world of concrete economic activity. Other Western countries have gone that route. But the American welfare state was never that robust, and obviously a rewrite of it is not in the cards.
Now, in fairness to the TPP, it's not obvious how much more damage it can do in this regard. The U.S. places duties on just 20 percent of the exports from the other 11 countries in the deal, and the TPP will phase out around 18,000 hurdles they've put on our exports. It will also establish consistent rules across all 11 countries for everything from collective bargaining, minimum wages, and excessive hours, to unsustainable logging and protections for endangered species.
On the flip side, the most optimistic estimates are that the TPP will increase aggregate American economic growth by a paltry 0.03 percentage points a year. That the U.S elite are still gung-ho about the deal suggests they're pretty confident they can capture every last dollar from that extra 0.03 percent. And the history of free trade deals suggests they're right. There's also the apparent lack of any serious rules about currency manipulation in the TPP, which will make full employment harder to reach and thus keep inequality up.
Finally, you could argue for the TPP on the grounds that it will help poor people in other countries. Even that's not a slam dunk. The deal extends patent monopolies on drugs to five or eight years for all the countries involved. That would actually be an improvement for the U.S., where it's currently 12 years. But it would worsen the situation for most other countries, leading to a boondoggle for big pharmaceutical companies at the cost of those countries' workers.
But even if the argument on behalf of the global poor was a slam dunk, you'd still be offering Americans themselves something between "nothing" and "martyrdom." Which isn't exactly the world's greatest sales pitch.