{"id":8387,"date":"2016-11-22T06:28:13","date_gmt":"2016-11-22T06:28:13","guid":{"rendered":"http:\/\/www.lifeandnews.com\/articles\/?p=8387"},"modified":"2016-11-25T19:01:51","modified_gmt":"2016-11-25T19:01:51","slug":"why-trump-is-right-and-wrong-about-killing-off-the-tpp","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/why-trump-is-right-and-wrong-about-killing-off-the-tpp\/","title":{"rendered":"Why Trump is right, and wrong, about killing off the TPP"},"content":{"rendered":"

Elizabeth Thurbon<\/a>, UNSW Australia<\/a><\/em> and Linda Weiss<\/a>, University of Sydney<\/a><\/em><\/span><\/p>\n

President-elect Donald Trump is right: The Trans-Pacific Partnership<\/a> (TPP) is a damaging deal and deserves to be killed off. <\/p>\n

But he tells a half truth about why the trade accord among a dozen Pacific Rim nations is a bad deal. In Trump\u2019s view<\/a>, trade agreements like NAFTA have allowed<\/a> developing countries to \u201csteal\u201d American manufacturing jobs and decimate the well-waged middle class. This is why he says that America should reject the TPP. <\/p>\n

But shifting the blame for American joblessness and stagnant incomes obscures the more complex, largely home-grown pressures that led U.S. companies to offshore manufacturing production to low-wage jurisdictions. Promising to tear up certain trade deals and impose tariffs on imports (chiefly from China and Mexico) will do very little if anything to reverse the problem. <\/p>\n

The real problem is that these agreements don\u2019t actually do enough to support freer trade. We\u2019ve been studying trade agreements<\/a> and the political foundations of industrial competitiveness in the United States<\/a>, East Asia<\/a> and beyond – for decades. We have witnessed how so-called \u201cfree trade deals\u201d have become less and less about opening markets and more about entrenching monopolies. Australia, where we\u2019re based, is also a member of the proposed TPP and, like America, stands to benefit from the deal\u2019s abandonment. <\/p>\n

Who\u2019s really to blame for America\u2019s manufacturing decline?<\/h2>\n

When Trump blames globalization<\/a> for having \u201cwiped out our middle class,\u201d he misses the point that the main actors behind successive waves of globalization since the 1990s have been U.S. corporations themselves. And when Trump blames China (or Mexico) for stealing American jobs, he misses the point that it is U.S. companies that have been most aggressively downsizing their labour force and distributing production abroad. <\/p>\n

Blame shifting also misses the point. It\u2019s American corporations themselves, the key drivers of globalization (which have been the chief beneficiaries of this \u201cdownsize and distribute\u201d approach) racking up \u201csuper profits\u201d from what is effectively rent-seeking. They do this by exploiting – and aggressively seeking to extend – generous monopoly rights granted to them through intellectual property laws. <\/p>\n

While Trump rails against America\u2019s growing trade deficit with China, the reality is that the largest category<\/a> of imports from that country (about 28%) is electrical equipment (for example information technology (IT) products) very often generated (designed, outsourced or contracted) by U.S. companies. These companies, like Apple, hold the patents, copyright and trademarks. <\/p>\n

This has paved the way for some serious distortions in accounting<\/a>. For example, recent research<\/a> has shown that the full value of the sale of iPhones in the United States (which are assembled in China) are counted against China\u2019s trade deficit with America. <\/p>\n

In reality, China contributes only around 3.6% of the value of iPhone sales in parts and labor, itself importing the remainder of the more (and less) technologically advanced parts (from Japan, Germany and South Korea and beyond). U.S. companies contribute only 6% to the total parts and labor of an iPhone, but Apple takes the lion\u2019s share of the final sale price thanks to its patent and trademark ownership. <\/p>\n

\n \"\"
\n Apple still takes a big share of the profit even though the parts and labor for an iphone mostly don\u2019t come from the U.S.<\/span>
\n Sergei Karpukhin\/Reuters<\/span><\/span>
\n <\/figcaption><\/figure>\n

So when an iPhone sells in the United States for about $500, only $159 of this reflects content imported from China<\/a>. The rest goes to American firms. And while that $159 is counted against China\u2019s deficit with the United States, China itself only accounts for $6.50 of that value. <\/p>\n

Seen in this light, we should not be surprised that 55% of the price U.S. consumers pay for goods imported from China actually goes to U.S. companies<\/a>. Following from this, were Trump to make good on his promise to slap tariffs on imports from China, this would effectively penalize many U.S. companies. <\/p>\n

The related problem is that decades of downsizing the manufacturing workforce and moving production overseas have gradually denuded America\u2019s industrial ecosystem whereby the networks of equipment makers, suppliers and manufacturers needed to turn innovative ideas into products are disappearing. As one of us has shown in research<\/a>, extreme offshoring is not only undermining skilled employment in the U.S. but also putting at risk the innovation that has underpinned American technological dynamism since the end of World War II. <\/p>\n

Consequently, it\u2019s increasingly difficult to find workers with the skills necessary to make the technologically sophisticated goods associated with the better-paid jobs of yesteryear. For example Silicon Valley, the home of most U.S. technology companies, is now a misnomer since very few semiconductors, which are primarily made of silicon, are produced there. Indeed, a more appropriate name today would be \u201cApp Valley\u201d \u2013 and apps are not exactly the basis for a vibrant economy. <\/p>\n

So why abandon the TPP?<\/h2>\n

Here\u2019s where free trade deals do come into it. <\/p>\n

Successive American administrations have further reinforced this extreme downsizing process by pushing trade agreements like the TPP that pay lip service to market access (free trade). In reality, these agreements entrench monopolies and tie the hands of governments that would otherwise take a more proactive approach to building new advanced industries and upgrading existing ones with new technology. <\/p>\n

The creation of the World Trade Organization in 1995 marked the first major shift in international trade deals away from those that prioritize freer market access and towards those that entrench monopolies through the award of generous intellectual property provisions \u2013 even at the expense of economic and social goals like encouraging innovation and protecting human health. <\/p>\n

Subsequent reforms to the WTO\u2019s intellectual property agreement (for example the trade-related aspects of intellectual property rights<\/a>) gave governments at least some scope to redress the organisation\u2019s most economically<\/a> and socially<\/a> distorting impacts. And the WTO\u2019s Doha round of trade negotiations<\/a> sought (albeit unsuccessfully) to focus attention on the primary issue of trade liberalization rather than further extending monopoly rights. <\/p>\n

But the improvements being made at the WTO level are sorely missing from most bilateral and regional trade deals, especially those being driven by the U.S. Many of these – from the Australia-U.S. Free Trade Agreement<\/a> to the now defunct TPP \u2013 have sought to further extend the monopoly rights of IP-protected firms. These are the very corporate actors that most aggressively pursue the \u201cdownsize and distribute\u201d approach.<\/p>\n

From Apple and Dell in the IT space to Pfizer and Merck in pharmaceuticals and Nike and Gap in clothing, America\u2019s patent, copyright and trademark-rich businesses reap major rewards for their shareholders by aggressively reducing labor costs through outsourcing. They also do it through extracting monopoly rents from their patented and trademarked technologies and designs. As recent research<\/a> revealed, this also has major, negative implications for corporate investment and wage levels in the United States. <\/p>\n

A better approach to trade<\/h2>\n

Obviously, the promotion of rent-seeking by entrenching monopoly rights has nothing to do with free trade. But the reality is that, for the United States at least, this has become a primary goal of its \u201cfree trade\u201d agreements. <\/p>\n

This is why the United States should abandon the TPP \u2013 and why Australia should support its abandonment. Abandoning the TPP, and requiring our governments to focus their efforts on trade deals that take a prudent approach to market access and a tough line on rent-seeking – would be beneficial for both our countries.<\/p>\n

\"The<\/p>\n

Elizabeth Thurbon<\/a>, Senior Lecturer in International Relations \/ International Political Economy, UNSW Australia<\/a><\/em> and Linda Weiss<\/a>, Professor of Political Science, University of Sydney<\/a><\/em><\/span><\/p>\n

This article was originally published on The Conversation<\/a>. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Elizabeth Thurbon, UNSW Australia and Linda Weiss, University of Sydney President-elect Donald Trump is right: The Trans-Pacific Partnership (TPP) is a damaging deal and deserves to be killed off. But he tells a half truth about why the trade accord among a dozen Pacific Rim nations is a bad deal. In Trump\u2019s view, trade agreements […]<\/p>\n","protected":false},"author":43,"featured_media":8388,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[277,296,4],"tags":[201,1560,1003,1559,13,1556,1558,1561,104],"_links":{"self":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/8387"}],"collection":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/users\/43"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/comments?post=8387"}],"version-history":[{"count":1,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/8387\/revisions"}],"predecessor-version":[{"id":8389,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/8387\/revisions\/8389"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media\/8388"}],"wp:attachment":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media?parent=8387"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/categories?post=8387"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/tags?post=8387"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}