Cato on TPP with Amb . Froman
Cato
Institute
“Should Free Traders Support the Trans-Pacific
Partnership?”
Thursday, June 30, 2016
Key Topics & Takeaways
·
Benefits of TPP: Froman highlighted that
the TPP would eliminated over 18,000 tariffs, and as a result, increase the
standard of living, improve consumer purchasing power, and expand economic
opportunities for Americans. He also warned against causing a “self-inflicted wound
to American leadership” by delaying ratification of the deal.
·
Congressional Ratification: Froman expressed
optimism that the TPP will be ratified by the end of the year, as he reiterated
that the cost of delaying the agreement is high. Froman maintained that members
of Congress are becoming a “receptive audience” and he expressed confidence
that there will be enough support to ratify the agreement. However,
speakers on the second panel were more skeptical about the prospect of the TPP
being ratified by this Congress.
·
Financial
Services Fix: Froman
explained that the Treasury and financial regulators have made substantial
progress in addressing data flow and localization issues for the financial
services industry, and he said the USTR is engaging with industry to “ensure we
are on the same page” in terms of the way forward. The Cato Institutes’
Daniel Pearson maintained that the data localization problems in the TPP stem
from the Administration’s desire to finalize the agreement in November before
it should have been concluded. While he recognized that the Treasury and
USTR seem to have a “paradigm to address [industry] concerns,” he argued that
it would have been better if the “Administration had done its homework in
advance.”
Speakers
·
Michael Froman, United States Trade
Representative
·
Clayton Yeutter,
Former United States Trade Representative
·
Daniel Ikenson,
Director, Herbert A. Stiefel Center for Trade Policy Studies, Cato Institute
·
Simon Lester,
Trade Policy Analyst, Cato Institute
·
William Watson, Trade Policy Analyst,
Cato Institute
·
Philip Levy,
Senior Fellow on the Global Economy, Chicago Council on Global Affairs
·
Daniel Pearson,
Senior Fellow in Trade Policy Studies, Cato Institute
·
Derek Scissors,
Resident Scholar, American Enterprise Institute
·
Geir Ulle,
Director of International Trade, JT International
Keynote Speech
Ambassador
Michael Froman, United States Trade Representative
In
his speech,
Froman explained that the TPP will eliminate over 18,000 tariffs on American
exports, increase the standard of living, support innovation and
entrepreneurialism, and help maintain competitiveness of American
manufacturers. He contended that the principles embodied in the TPP should
“mesh” with conservatives, liberals and libertarians alike. Froman highlighted
that the TPP will be the first agreement since the World Trade Organization’s
Uruguay round to address distortive trade practices beyond tariffs, such as by
prohibiting digital protectionism and imposing disciplines on state-owned
enterprises (SOEs).
Froman
further explained that studies from both the Peterson Institute, the
International Trade Commission (ITC) and the American Farm Bureau have all concluded
that TPP will add more well-paying jobs, improve consumer purchasing power, and
expand economic opportunities for Americans.
Froman
recognized that there is a “great deal of anxiety” among the American populous
regarding the outcomes of free trade agreements (FTAs). However, Froman argued
that most economists will attribute the changing nature of the workforce to
technology rather than globalization, but explained that – either way – he said
one “can’t put the genie back in the bottle” to reverse those inevitable
trends. Instead, Froman argued that “trade agreements allow us to shape
globalization to our advantage.” For instance, Froman suggested that the TPP
can level the playing field for American companies and increase export-related
jobs which pay up to 18% more than non-export jobs. He argued that America must
shape the rules for the global economy in a way that reflects our values and
interests. He also argued that if the U.S. turned to protectionism, the results
would be “economically devastating” as raising tariffs on other countries would
induce them to respond in kind and block our exports, beginning a trade war.
“No one wins in a trade war,” Froman cautioned. Instead, Froman disputed that
turning to protectionism will reduce employment, “retard” economic growth, and
possibly drive the economy into recession.
Froman
reiterated the importance of moving ahead with ratifying the TPP, and he warned
against causing a “self-inflicted wound to American leadership” by delaying the
deal. Froman explained that he has been meeting with Congressional
leaders about the appropriate time to submit the agreement for their
consideration, and he claimed that they are increasingly appreciative of the
benefits of the agreement and the cost of delay. In fact, Froman highlighted a
Peterson Institute study that found that a one-year delay in ratifying the TPP
agreement would “impose a $94 billion cost on the U.S. economy,” which he said
is equivalent to a $700 tax on every American household. He continued by stating
that the choice is not between the TPP and the status quo, but rather between
the TPP and what is likely to evolve in its absence (such as regional trade
agreements being led by China).
Questions and Answers
Regulatory
Sovereignty
In a
response to a question, Froman explained that regulatory sovereignty is
important for all countries and that no country would sacrifice it. However,
Froman said that the U.S. has a process that is open and transparent to the
public and therefore, raising the standards through the TPP will help encourage
other countries to adopt more open and transparent processes as well. He also
stated that Europe – for its own reasons – has been trying to improve
transparency and accountability, which are similar to the American system, and
hehopes that the TPP can help to institutionalize them.
Impact
of Brexit on TTIP
In
a response to a question Froman stated that while Europe is facing many issues,
such as Brexit, the migrant crisis, and the rising level of euro skepticism, he
hopes that the EU remains focused and maintains the political will to complete
the Transatlantic Trade and Investment Partnership (TTIP) agreement, hopefully
by the end of the year.
Addressing Outstanding Issues
Froman explained that
the Treasury and financial regulators have made substantial progress on
addressing financial services data flow and localization issues, and is
engaging with industry to “ensure we are on the same page” in terms of the way
forward.
Political Environment
In response to a question regarding the challenge posed by the 2016
presidential candidates’ anti-trade agenda, Froman recognized the challenging
political environment but said that members of Congress will make decisions
based on the impact that the agreement has on their constituents. As they learn
more, Froman said, Congress is becoming a “receptive audience” and he expressed
confidence that there will be enough support to ratify the agreement.
Panel I Discussion: Grading the TPP: What’s to Like and Not to
Like about the Agreement?
Daniel Ikenson, Director, Cato Institute
Ikenson provided
an overview of the Institute’s forthcoming
paper on the benefits and setbacks of the TPP. He noted
that trade agreements used to aim to reduce traditional market access barriers
(such as tariffs), but he explained that the nature of international
competition has changed, so modern trade agreements have evolved to try to
address newer forms of discrimination. He argued that the whole point of trade
is to expand access to markets, which was traditionally accomplished by
lowering tariffs. He added that integration will also be hindered if
enterprises have to deal with two sets of standards and have to comply with
different structures of governance, which he said is the aim of 21st
century trade agreements and is also why the TPP is so controversial. As such,
he argued that the TPP would not pass a “free trade test,” because it is a “managed
trade agreement.” Ikenson concluded that the TPP, on net, delivers
liberalization.
William
Watson, Trade Policy Analyst, Cato Institute
Watson explained that free
trade agreements ought to expand market access, but maintained that there is
still a lot of work to do to get rid of tariffs and quotas. Watson assigned
positive scores to most of the TPP’s market access chapters, noting that 90
percent of tariffs will immediately be eliminated upon implementation of the
agreement. However, he pointed to several weaknesses in the agreement where
certain sectors remain protected since they are more politically sensitive than
others.
Simon Lester, Trade Policy Analyst,
Cato Institute
Lester concluded that the liberalization provisions in TPP are “pretty
good.” However, he highlighted several doubts about the certain rules
that will actually require more regulation, such as the e-commerce chapter,
intellectual property protections, and labor and environmental standards.
Further, Lester criticized the investor-state dispute settlement (ISDS)
mechanism, arguing that it is “more about litigation than liberalization.”
Derek Scissors, Resident Scholar, American
Enterprise Institute
Scissors portrayed the TPP agreement is “modestly positive” but
criticized several aspects of the agreement, including the ISDS, intellectual
property provisions, nonconforming measures, and rules governing SOEs. Overall,
he argued that the negative list is “too large to have meaningful
liberalization” under the agreement, and that the ISDS would “make little
difference” in practical terms.
Panel II Discussion: Obstacles to Ratification: If Not Now, Then
When?
Daniel Pearson, Senior Fellow in
Trade Policy Studies, Cato Institute
Pearson maintained that the financial services industry’s data
localization problems in the TPP stem from the Administration’s desire to
finalize the agreement in November before it should have been concluded.
He claimed that the Treasury left the US Trade Representative (USTR) in the
“uncomfortable” position of returning with an agreement that prohibited data
localization only for some sectors. While he recognized that the Treasury
and USTR seem to have a “paradigm to address [industry] concerns,” he argued
that it would have been better if the “Administration had done its homework in
advance.”
Clayton Yeutter, former U.S. Trade
Representative
Yeutter expressed enthusiastic support for the TPP, and argued
that the 2016 presidential candidates that are opposed to the TPP are “dead
wrong.” Yeutter remained circumspect about the prospect of the TPP being
ratified during the lame duck session, explaining that it depends on general
election outcomes and that the lame duck session is “too short” to take up such
a complex bill. Yet Yeutter cautioned that delaying efforts to ratify the
TPP may let it “die on the vine” and would likely frustrate TPP partner
countries.
Philip Levy, Senior Fellow on the Global
Economy, Chicago Council on Global Affairs
Levy expressed skepticism about the prospects of this Congress
passing the TPP. For instance, he noted that the Trade Promotion
Authority granted by Congress requires 45 legislative days for members to
review the agreement before bringing it to a vote, but explained that the House
of Representatives is not scheduled to be in session for that length of time in
this session. Levy recalled that the TPA passed the House narrowly in 2015,
with little Democratic support, and explained that it is unlikely to change
when the agreement is presented for a vote.
In addition, Levy pointed out that both 2016 presidential
candidates disapprove of the TPP. He criticized Hillary Clinton for her views
on the currency manipulation provisions that she claimed she would need in
order to support the bill. Additionally, he suggested that if she emerges from
the election unscathed, she only has 18 months to do the big things she wants
to do, and she may not prioritize the TPP, considering it will alienate labor
groups and unite the Democrats in opposition. He also expressed his concern
that Donald Trump will press her on the sincerity of her opposition, and
explained that she is moving towards further going against the TPP in order to
beat him in the industrial Midwest.
Geir Ulle,
Director of International Trade, JT International
Ulle maintained that the tobacco provisions included in the TPP
are “not based on science and evidence.” He explained that the tobacco industry
is not included in many important provisions in the TPP, including those
protecting against expropriation and ensuring companies can repatriate
profits. He also countered claims that the tobacco industry is poised to
abuse the ISDS system.
Additional information about this event can be accessed here.
,Blog Tags:,Blog Categories:,Blog TrackBack:,Blog Pingback:No,Hearing Summaries Issues:International/Trade,Hearing Summaries Agency:Special Event,Publish Year:2016
Cato
Institute
“Should Free Traders Support the Trans-Pacific
Partnership?”
Thursday, June 30, 2016
Key Topics & Takeaways
·
Benefits of TPP: Froman highlighted that
the TPP would eliminated over 18,000 tariffs, and as a result, increase the
standard of living, improve consumer purchasing power, and expand economic
opportunities for Americans. He also warned against causing a “self-inflicted wound
to American leadership” by delaying ratification of the deal.
·
Congressional Ratification: Froman expressed
optimism that the TPP will be ratified by the end of the year, as he reiterated
that the cost of delaying the agreement is high. Froman maintained that members
of Congress are becoming a “receptive audience” and he expressed confidence
that there will be enough support to ratify the agreement. However,
speakers on the second panel were more skeptical about the prospect of the TPP
being ratified by this Congress.
·
Financial
Services Fix: Froman
explained that the Treasury and financial regulators have made substantial
progress in addressing data flow and localization issues for the financial
services industry, and he said the USTR is engaging with industry to “ensure we
are on the same page” in terms of the way forward. The Cato Institutes’
Daniel Pearson maintained that the data localization problems in the TPP stem
from the Administration’s desire to finalize the agreement in November before
it should have been concluded. While he recognized that the Treasury and
USTR seem to have a “paradigm to address [industry] concerns,” he argued that
it would have been better if the “Administration had done its homework in
advance.”
Speakers
·
Michael Froman, United States Trade
Representative
·
Clayton Yeutter,
Former United States Trade Representative
·
Daniel Ikenson,
Director, Herbert A. Stiefel Center for Trade Policy Studies, Cato Institute
·
Simon Lester,
Trade Policy Analyst, Cato Institute
·
William Watson, Trade Policy Analyst,
Cato Institute
·
Philip Levy,
Senior Fellow on the Global Economy, Chicago Council on Global Affairs
·
Daniel Pearson,
Senior Fellow in Trade Policy Studies, Cato Institute
·
Derek Scissors,
Resident Scholar, American Enterprise Institute
·
Geir Ulle,
Director of International Trade, JT International
Keynote Speech
Ambassador
Michael Froman, United States Trade Representative
In
his speech,
Froman explained that the TPP will eliminate over 18,000 tariffs on American
exports, increase the standard of living, support innovation and
entrepreneurialism, and help maintain competitiveness of American
manufacturers. He contended that the principles embodied in the TPP should
“mesh” with conservatives, liberals and libertarians alike. Froman highlighted
that the TPP will be the first agreement since the World Trade Organization’s
Uruguay round to address distortive trade practices beyond tariffs, such as by
prohibiting digital protectionism and imposing disciplines on state-owned
enterprises (SOEs).
Froman
further explained that studies from both the Peterson Institute, the
International Trade Commission (ITC) and the American Farm Bureau have all concluded
that TPP will add more well-paying jobs, improve consumer purchasing power, and
expand economic opportunities for Americans.
Froman
recognized that there is a “great deal of anxiety” among the American populous
regarding the outcomes of free trade agreements (FTAs). However, Froman argued
that most economists will attribute the changing nature of the workforce to
technology rather than globalization, but explained that – either way – he said
one “can’t put the genie back in the bottle” to reverse those inevitable
trends. Instead, Froman argued that “trade agreements allow us to shape
globalization to our advantage.” For instance, Froman suggested that the TPP
can level the playing field for American companies and increase export-related
jobs which pay up to 18% more than non-export jobs. He argued that America must
shape the rules for the global economy in a way that reflects our values and
interests. He also argued that if the U.S. turned to protectionism, the results
would be “economically devastating” as raising tariffs on other countries would
induce them to respond in kind and block our exports, beginning a trade war.
“No one wins in a trade war,” Froman cautioned. Instead, Froman disputed that
turning to protectionism will reduce employment, “retard” economic growth, and
possibly drive the economy into recession.
Froman
reiterated the importance of moving ahead with ratifying the TPP, and he warned
against causing a “self-inflicted wound to American leadership” by delaying the
deal. Froman explained that he has been meeting with Congressional
leaders about the appropriate time to submit the agreement for their
consideration, and he claimed that they are increasingly appreciative of the
benefits of the agreement and the cost of delay. In fact, Froman highlighted a
Peterson Institute study that found that a one-year delay in ratifying the TPP
agreement would “impose a $94 billion cost on the U.S. economy,” which he said
is equivalent to a $700 tax on every American household. He continued by stating
that the choice is not between the TPP and the status quo, but rather between
the TPP and what is likely to evolve in its absence (such as regional trade
agreements being led by China).
Questions and Answers
Regulatory
Sovereignty
In a
response to a question, Froman explained that regulatory sovereignty is
important for all countries and that no country would sacrifice it. However,
Froman said that the U.S. has a process that is open and transparent to the
public and therefore, raising the standards through the TPP will help encourage
other countries to adopt more open and transparent processes as well. He also
stated that Europe – for its own reasons – has been trying to improve
transparency and accountability, which are similar to the American system, and
hehopes that the TPP can help to institutionalize them.
Impact
of Brexit on TTIP
In
a response to a question Froman stated that while Europe is facing many issues,
such as Brexit, the migrant crisis, and the rising level of euro skepticism, he
hopes that the EU remains focused and maintains the political will to complete
the Transatlantic Trade and Investment Partnership (TTIP) agreement, hopefully
by the end of the year.
Addressing Outstanding Issues
Froman explained that
the Treasury and financial regulators have made substantial progress on
addressing financial services data flow and localization issues, and is
engaging with industry to “ensure we are on the same page” in terms of the way
forward.
Political Environment
In response to a question regarding the challenge posed by the 2016
presidential candidates’ anti-trade agenda, Froman recognized the challenging
political environment but said that members of Congress will make decisions
based on the impact that the agreement has on their constituents. As they learn
more, Froman said, Congress is becoming a “receptive audience” and he expressed
confidence that there will be enough support to ratify the agreement.
Panel I Discussion: Grading the TPP: What’s to Like and Not to
Like about the Agreement?
Daniel Ikenson, Director, Cato Institute
Ikenson provided
an overview of the Institute’s forthcoming
paper on the benefits and setbacks of the TPP. He noted
that trade agreements used to aim to reduce traditional market access barriers
(such as tariffs), but he explained that the nature of international
competition has changed, so modern trade agreements have evolved to try to
address newer forms of discrimination. He argued that the whole point of trade
is to expand access to markets, which was traditionally accomplished by
lowering tariffs. He added that integration will also be hindered if
enterprises have to deal with two sets of standards and have to comply with
different structures of governance, which he said is the aim of 21st
century trade agreements and is also why the TPP is so controversial. As such,
he argued that the TPP would not pass a “free trade test,” because it is a “managed
trade agreement.” Ikenson concluded that the TPP, on net, delivers
liberalization.
William
Watson, Trade Policy Analyst, Cato Institute
Watson explained that free
trade agreements ought to expand market access, but maintained that there is
still a lot of work to do to get rid of tariffs and quotas. Watson assigned
positive scores to most of the TPP’s market access chapters, noting that 90
percent of tariffs will immediately be eliminated upon implementation of the
agreement. However, he pointed to several weaknesses in the agreement where
certain sectors remain protected since they are more politically sensitive than
others.
Simon Lester, Trade Policy Analyst,
Cato Institute
Lester concluded that the liberalization provisions in TPP are “pretty
good.” However, he highlighted several doubts about the certain rules
that will actually require more regulation, such as the e-commerce chapter,
intellectual property protections, and labor and environmental standards.
Further, Lester criticized the investor-state dispute settlement (ISDS)
mechanism, arguing that it is “more about litigation than liberalization.”
Derek Scissors, Resident Scholar, American
Enterprise Institute
Scissors portrayed the TPP agreement is “modestly positive” but
criticized several aspects of the agreement, including the ISDS, intellectual
property provisions, nonconforming measures, and rules governing SOEs. Overall,
he argued that the negative list is “too large to have meaningful
liberalization” under the agreement, and that the ISDS would “make little
difference” in practical terms.
Panel II Discussion: Obstacles to Ratification: If Not Now, Then
When?
Daniel Pearson, Senior Fellow in
Trade Policy Studies, Cato Institute
Pearson maintained that the financial services industry’s data
localization problems in the TPP stem from the Administration’s desire to
finalize the agreement in November before it should have been concluded.
He claimed that the Treasury left the US Trade Representative (USTR) in the
“uncomfortable” position of returning with an agreement that prohibited data
localization only for some sectors. While he recognized that the Treasury
and USTR seem to have a “paradigm to address [industry] concerns,” he argued
that it would have been better if the “Administration had done its homework in
advance.”
Clayton Yeutter, former U.S. Trade
Representative
Yeutter expressed enthusiastic support for the TPP, and argued
that the 2016 presidential candidates that are opposed to the TPP are “dead
wrong.” Yeutter remained circumspect about the prospect of the TPP being
ratified during the lame duck session, explaining that it depends on general
election outcomes and that the lame duck session is “too short” to take up such
a complex bill. Yet Yeutter cautioned that delaying efforts to ratify the
TPP may let it “die on the vine” and would likely frustrate TPP partner
countries.
Philip Levy, Senior Fellow on the Global
Economy, Chicago Council on Global Affairs
Levy expressed skepticism about the prospects of this Congress
passing the TPP. For instance, he noted that the Trade Promotion
Authority granted by Congress requires 45 legislative days for members to
review the agreement before bringing it to a vote, but explained that the House
of Representatives is not scheduled to be in session for that length of time in
this session. Levy recalled that the TPA passed the House narrowly in 2015,
with little Democratic support, and explained that it is unlikely to change
when the agreement is presented for a vote.
In addition, Levy pointed out that both 2016 presidential
candidates disapprove of the TPP. He criticized Hillary Clinton for her views
on the currency manipulation provisions that she claimed she would need in
order to support the bill. Additionally, he suggested that if she emerges from
the election unscathed, she only has 18 months to do the big things she wants
to do, and she may not prioritize the TPP, considering it will alienate labor
groups and unite the Democrats in opposition. He also expressed his concern
that Donald Trump will press her on the sincerity of her opposition, and
explained that she is moving towards further going against the TPP in order to
beat him in the industrial Midwest.
Geir Ulle,
Director of International Trade, JT International
Ulle maintained that the tobacco provisions included in the TPP
are “not based on science and evidence.” He explained that the tobacco industry
is not included in many important provisions in the TPP, including those
protecting against expropriation and ensuring companies can repatriate
profits. He also countered claims that the tobacco industry is poised to
abuse the ISDS system.
Additional information about this event can be accessed here.