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Trans-Pacific Partnership: Old Fallacies Return

Posted By Kyle Niewoehner On May 10, 2012 @ 6:30 pm In Economics | Comments Disabled

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With negotiations over the Trans-Pacific Partnership (TPP) between the U.S. and eight other countries set to resume this week in Dallas, opponents are dusting off the same old discredited arguments against international trade. In a recent Huffington Post article [2], Leo Hindery of the New America Foundation dismissed the TPP as “deeply flawed.”

His article repeats the oft-heard argument that trade is responsible for American job losses and advances the notion that the unfair practices of other nations (abetted, of course, by U.S. trade agreements) have “cost America millions of manufacturing jobs in just the last decade.” There is not a shred of truth to this assertion.

As Heritage Foundation research shows [3], trade has had little effect on overall manufacturing employment. Rather, trade has forced a reallocation of jobs to the firms and industries that use labor most efficiently, resulting in higher U.S. living standards.

The overall decline in manufacturing jobs is mostly attributable to the advance of technology, not “unfair” trade. Contrary to popular perception, U.S. manufacturing production has grown considerably over the last few decades, rising 46 percent [3] from 1987 to 2010 even while employment in the sector dropped by a third.

This was made possible by the extraordinary growth in worker productivity, which increased an incredible 115 percent [3] over the same period. Productivity growth, in turn, was generated largely with technological advances, as demonstrated by a 500 percent expansion in the use of information processing technology and a nearly 100 percent increase in capital employed per hour of work [3] from 1987 to 2007.

Trade is not guilty of killing American jobs. In fact, this is actually one of the few politically controversial issues on which virtually all economists agree. In a recent poll of 41 prominent economists [4] by the IGM Economic Experts Panel, not a single one disagreed with the premise that the benefits of free trade outweigh the costs.

The TPP would give U.S. companies expanded access to the markets of Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. Japan, Canada, and Mexico are also eager to join. Even without Japan and the NAFTA duo, TPP nations account for almost 200 million people. Expanding trade access to these countries offers a rare opportunity to boost the struggling U.S. economy.

As the negotiators convene in Dallas, the U.S. team should not allow 18th-century trade fallacies to derail the expansion of mutually beneficial trade links with our partners around the Pacific Rim.

Kyle Niewoehner is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/internships-young-leaders/the-heritage-foundation-internship-program [5]


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URL to article: http://blog.heritage.org/2012/05/10/trans-pacific-partnership-old-fallacies-return/

URLs in this post:

[1] Image: http://blog.heritage.org/wp-content/uploads/shipping.jpg

[2] article: http://www.huffingtonpost.com/leo-hindery-jr/free-trade-run-amok-the-t_b_1467232.html

[3] shows: http://www.heritage.org/research/reports/2010/10/technology-explains-drop-in-manufacturing-jobs#_ftn3

[4] recent poll of 41 prominent economists: http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_0dfr9yjnDcLh17m

[5] http://www.heritage.org/about/internships-young-leaders/the-heritage-foundation-internship-program: http://www.heritage.org/about/internships-young-leaders/the-heritage-foundation-internship-program

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