Press Releases | Trans-Pacific Partnership

News from EPI The Trans-Pacific Partnership Will Likely Harm the Majority of American Workers

Though it is widely recognized that global integration and US trade policy over the past generation have contributed to the growing wedge between typical workers’ wages and economy-wide productivity, proponents of the Trans-Pacific Partnership (TPP)—a trade agreement whose precise aim is to accelerate trade expansion and globalization—claim that it will somehow benefit most American workers. In The Trans-Pacific Partnership Is Unlikely to Be a Good Deal for American Workers, EPI Research and Policy Director Josh Bivens illustrates the major ways in which the TPP is likely to harm the majority of American workers even if it leads to higher overall national income: its failure to contain a provision to stop currency management undertaken by U.S. trading partners will hamper economic recovery, its increased protections for corporate interests will redistribute income upwards and harm foreign consumers, and its acceleration of the reshuffling of domestic production will reduce wages for most American workers.

The TPP’s most obvious failure is that it does nothing to address currency management. Reducing the U.S. trade deficit is the most promising route back to full employment in the short term, and currency management undertaken by the United States’ trading partners makes reaching full employment more difficult. If the TPP was negotiated with the interests of U.S. workers in mind, it would not ignore this issue.

The TPP will lower the cost of trade by reducing both domestic and foreign tariffs, and it will provide greater protections to corporate interests by forcing foreign consumers to pay more for U.S. exports through strict enforcement of patents and copyrights. However, Bivens argues these provisions will further harm U.S. workers by reshuffling domestic production away from labor-intensive sectors to capital-intensive sectors, resulting in reduced demand for labor and lowering the wages of most American workers. Trade agreements like the TPP reduce the cost of trade, which in turn lowers prices for imports such as apparel, textiles, and electronics. These price reductions reduce income for domestic producers of importable goods, forcing production to shift out of labor-intensive, importable sectors to capital-intensive, exportable sectors. This reshuffling of production reduces demand for labor not only for workers in the importable goods sectors, but for workers with similar skills and credentials throughout the economy. Subsequently, wages are pulled down as workers in other sectors of the economy are forced to compete with those displaced by imports.

“Policymakers and pundits often recognize that expanded trade harms some workers, but they radically understate just how many workers are harmed,” said Bivens. “It’s not just those workers directly displaced by imports. Expanded trade harms everybody who has to compete with those workers for jobs in other sectors. Landscapers and waitresses don’t lose their jobs because of decreased import prices, but their wages are definitely hurt when they have to compete with laid-off manufacturing workers.”

The report notes that net national gains enjoyed as a result of expanded trade will be much lower than the gross losses suffered by workers on the losing end of the TPP—specifically, the roughly 70 percent of workers in the United States without a 4-year college degree. Despite any gains to GDP, the majority of U.S. workers are likely on the losing end of expanded trade. Fully compensating these workers for their trade-induced losses would require the winning group—that is, the one-third of Americans with a college degree—to surrender nearly all their gross gains.

“TPP proponents who highlight the net national gains while ignoring the likely regressive distributional outcomes are hiding the ball from policymakers and the public. Assurances that TPP will be all-gain-no-pain are deeply disingenuous,” said Bivens.

See related work on Trans-Pacific Partnership