Global Trade and the Trans-Pacific Partnership – by Deborah Levine

While President Trump reconsidered the Trans-Pacific Partnership (TPP)?  Many American cities, like Chattanooga, have built their economies on international industries, their vendors, and outdoors sports competitions including Ironman.  Before the halt to our participation in the TPP, there was a well-attended panel discussion on the controversial TPP  at the Small Business Incubator with moderator Jim Frierson, who was Chief of Staff in the Office of the US Trade Representative (USTR) during the Reagan Administration. The cabinet agency is responsible for developing international trade policy for the President and negotiating with our trading partners. America’s first bilateral free trade agreements — with Israel and Canada — were initiated, negotiated, and implemented during his eight-year tenure. As intense competition from Japanese autos and semiconductors appeared to threaten the US and then receded, the seeds of an ambitious Pacific regional trade compact were planted in exploratory meetings by the USTR himself, Ambassador Bill Brock, a Chattanooga native.

It’s fitting that the first presenter at this International Business Council (IBC) program was Chris Pascarella, Controller of the American Bicycle Group, LLC. The company is the corporate parent of prestigious brands Litespeed and Quintana Roo. Many professional Ironman triathletes are high-profile users of its titanium and carbon fiber racing models. About 40% of the local company’s bikes are exported, so the company’s growth depends upon both international suppliers and markets. Pascarella described his two decades of experience with global sourcing of critical components and export financing tools.

For American Bicycle Group and many other locally headquartered companies, international trade is of necessity a two-way street. It follows that the goal of the IBC is to promote international business investment in Chattanooga while helping local businesses compete in world markets. The second presenter, David Steele, is Vice President of Policy and Education at the Chattanooga Area Chamber of Commerce. As Chief Marketing Officer for the Florida Department of Citrus, he had implemented a global rebranding program for the state’s most competitive agricultural export product, orange juice. Citrus industry leaders have advocated for greater international market access, seamless logistics, and rapid customs clearance of perishable food products. Arbitrary non-tariff regulatory barriers to trade have long been priorities for US negotiators and are covered by tough new provisions in the TPP.

The TPP discussion began with an overview by Jim Frierson of “how we got to here.” In 1983, the U.S. looked closely at the “Asian Tigers” of Southeast Asia, where enlightened leaders favored more open trade policies as a spur to their own competitiveness. The twelve countries that have signed the TPP account for forty percent of global GDP and more than 800 million consumers. They include major US trading partners Canada, Mexico and Japan; fast-growing Asian nations Malaysia and Vietnam; and important South American markets such as Peru and Chile. TPP is even more comprehensive than existing free trade agreements and establishes higher standards of fairness.  In 2014, $18.3 billion (56%) of Tennessee exports went to TPP countries.

Ironman and TPP
Quintana Roo Athlete riding the company’s PRsix model during an Ironman

Pascarella reviewed both the pros and cons of trade agreements, citing strict rules of origin that require a threshold 50 percent of value for products to be classified as “made in America.” He then noted the commercial benefits of previous free trade agreements with Canada and Mexico that have phased out import duties on his products. Immediate tariff reductions by Malaysia and other Pacific Rim nations will benefit his company, as will stronger enforcement of contracts and trademarks. TPP eliminates 18,000 tariffs that member countries place on each other’s products and sets higher standards for services, investments and regulation.

Steele described the Chamber as the non-partisan voice of local business. Trade agreements, he suggested, are not just reflections of economic policy but are a manifestation of pathologies within contemporary domestic politics. He offered this perspective:

“Let’s face it: both of the major party presidential nominees are on record opposing TPP – and there’s not much on which the two of them agree. The vulnerability of TPP is an example of how dysfunctional public discourse has become. When we took up NAFTA years ago, we saw another counter-intuitive alliance, between President Bill Clinton and the GOP, in support of it.
There are contradictory reasons to support such an agreement and contradictory reasons to oppose it. That’s why we end up with “strange bedfellows” on both sides of the issue. Some support TPP because they are philosophically committed to anything that advances free trade – but classical free traders will describe the agreement as defective in many, many ways. Others support TPP because they see it as a way to spread what they might think of as American values such as human rights, protection of the environment, and rule of law – but critics as diverse as Donald Trump and Bernie Sanders fault TPP for not sufficiently protecting American values and interests.”

“TPP is what it is – it’s not going to be renegotiated any time soon. But whether or not Congress approves it will have a lot to do with whether or not members can reconcile the sentiments of their constituents with the abundant flaws embedded in any agreement of this scale.”

Friers & TPP
Jim Frierson, moderator

Frierson summarized the session by underscoring that conflicting political views are not a new or surprising phenomenon. In shaping trade agreements, the U.S. Trade Representative involves hundreds of security-cleared business advisors from every economic major sector and region; with additional provisions in TPP beyond trade policy, more congressional committees will have jurisdiction and hearings. Yet the final agreement addresses current and future economic barriers, pivoting from a traditional focus only on tariffs on manufactured goods to services, intellectual property, e-commerce, investment, government transparency, anti-corruption, labor rights and environmental protection.

He was optimistic that Congress would ultimately vote to affirm US leadership on global trade, especially if the leaders and employees of our globally competitive companies stood up as advocates. While the TPP wasn’t going to include the U.S., maybe there’s still hope for global trade.

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