O'Neill: Trans-Pacific Partnership benefits all parties
"Dumping" was a frequent accusation employed by protectionists in Congress in the 1980s and 1990's. When our trading partners sold their products in our market at prices lower than their own markets, protectionists would protest that our trading partners were "dumping" their products on our market.
Indeed, selling an export at a price lower than in the home market is the definition of "dumping" in a nutshell. But retaliatory measures are frowned upon by world trade rules unless the "dumping" is predatory, meaning that it eliminates competition in the export market and/or the products are being sold at a loss by the exporting country.
But protectionists in Congress seem to have abandoned "dumping" as their main buzz word in favor of a different term: Currency manipulation. And what is currency manipulation? Protectionists in Congress seem to believe any devaluation of currency undertaken by our trading partners constitutes currency manipulation. This is also their main grievance in their opposition to the Trans Pacific Partnership (TPP) which will be voted on in Congress later this year.
TPP includes the United States along with eleven other countries: Canada, Mexico, Peru, Chile, Australia, New Zealand, Brunei, Singapore, Malaysia, Japan, and Vietnam. President Barack Obama is resisting congressional efforts to include a clause against currency manipulation as part of TPP. Obama has accurately noted that grievances over currency manipulation are best handled in the World Trade Organization (WTO), rather than made an explicit section of a trade agreement. Such a clause could also backfire by hampering our own Federal Reserve in the event the Fed needs to devalue the dollar.
To be sure, many of our trading partners devalue their currencies to make their products cheaper in the export market (and make their imports more expensive in the home market). Whether this is artificial devaluation, which amounts to currency manipulation, should be left up to the WTO.
It's also important to note that when it comes to currency manipulation, the worst offender is China. And it is none other than China hoping for TPP to collapse so it can fill the void by creating its own Asian trading bloc.
Moreover, protectionist complaints about currency manipulation are made as if the nations implementing such policies are benefitting. But currency manipulation is inflationary and does the most harm to those countries that practice it.
TPP will eliminate tariffs between the 12 signatory countries. This is to everyone's benefit. Far from the scenario painted by protectionists that lower tariffs under TPP will result in an export of jobs, the reality is just the opposite. When our trading partners lower and/or eliminate tariffs, our own industries have less incentive to export production.
The irony surrounding the debate over TPP is that most of its opponents are Democrats who are sabotaging a Democratic president looking to seal his legacy. Just as ironic is the fact that the Democrats were once the party of free trade.
But more important than irony or the president's legacy is the simple truth that TPP is in the best interest of both America and the other eleven countries. TPP embodies the words of President John F. Kennedy, who said of free trade that "a rising tide lifts all ships."
John O'Neill is a freelance writer from Allen Park.