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March 10, 2016

A Trade Deal that Would Be “Devastating” for Manufacturing

Bill Hickey argues that five years of talk and the signatures of 12 Pacific nations have produced “insanity.”

 

The Trans-Pacific Partnership, signed by a dozen nations representing some 40% of the world’s economy may be historic if only for the broad spectrum of enemies it has. From Donald Trump to Hillary Clinton—who liked it before she didn’t—it’s tough to find many who endorse the TPP these days aside from the men and women who sat around the table in New Zealand to sign it in early February.

Even President Obama has conceded that “some manufacturing jobs” would be lost as the agreement spins out. The administration argues the losses would be offset by gains in higher paying, export-dependent jobs.

Bill Hickey bluntly told the MSCI Tubular Conference earlier this year that all the promises that TPP supporters are making for job and export growth are simply nonsense. Hickey, president of Lapham-Hickey Corp., the century old steel company, is a veteran political advocate for the industry. “Our manufacturing base is shrinking every day and moving to countries that do not play by the rules,” Hickey said. “And this trade agreement, like all the others the U.S. has ratified, does nothing to stop that decline.”

He pointed to our highly hyped trade agreements with Korea and Mexico in NAFTA as perfect examples. “We were promised 70,000 jobs and a $10 billion to $11 billion increase in exports with the Korea deal,” Hickey said. “Our exports with Korea today are at virtually the same level they were in 2011 just after the agreement was signed, but our trade deficit with Korea has jumped from $13 billion a year to nearly $29 billion.” Government numbers show steel exports to that country have been flat over this same period.

“After all these years of NAFTA,” Hickey said, “Our trade balance with Mexico is a negative $54 billion. And Mexico’s GDP per capita, $3,350 per year after 20 years of trade agreements, is second lowest of all the TPP countries. Only Vietnam is worse.”

There are a couple major problems with the TPP, Hickey explained, aside from the fact that “it is 5,600 pages and no one understands it really”:

It contains no restrictions on currency manipulation. “Its Rules of Origin in the auto parts section are so loose they are really frightening,” he said. “They will destroy the auto parts industry in this country. This is an agreement that will allow Japanese auto parts manufacturers to take over the parts industry in the U.S.”

The agreement does nothing to control unfair government subsidies for the state owned and state sponsored enterprises that have allowed Chinese companies to gut global steels markets. “Compliance rules are so vague, there is no way to tell if they are being enforced,” Hickey said. “This TPP is just one more example of why our trade policies, for manufacturing, are just insane.”

At this point, TPP has a very slim chance of ever taking effect. Although the 12 nations did sign it in February, the TPP won’t likely be ratified by enough countries, including the United States, to be enacted. At least six countries, representing 85 percent of the combined GDP of the signatories, must ratify it over the next two years. That means, because their economies are such a large percentage of the 12, that both the U.S and Japan would have to ratify.

“You’ve got to get involved and tell your representatives that this is a bad deal,” Hickey declared. “How many of you have actually talked to your congressman in the last two years?” he asked. “We can’t grow this economy if we don’t produce things here. We have to make it here in order to raise our standard of living.” 

Hear the latest on global political issues affecting metals at the MSCI Annual Meeting. 

Learn more about the Trans Pacific Partnership from a recent Edge infographic.