Hardware Sales Inc. of Bellingham, Washington, does about 25 percent of its online business outside the United States. But going global can be frustrating. Overzealous Australian customs inspectors sometimes confiscate perfectly legal knives. Canada imposes duties that can double the cost of a hammer.
And then there’s the paperwork required to export:
“I don’t like to have an employee go through 2,000 pages of rules to ship a drill,” says Steve Douge, director of e-commerce for Hardware Sales, which sells over eBay, Amazon and its own website.
A solution may be coming.
The United States is negotiating an ambitious trade agreement with 11 other Pacific Rim countries that’s meant to ease barriers to fast-growing Asia-Pacific markets and streamline customs rules that can bedevil exporters like Hardware Sales.
Yet the Trans-Pacific Partnership, or TPP, is also stirring opposition. Critics say it will destroy U.S. jobs, allow multinational corporations to sidestep laws they don’t like and let drug companies use stricter patent protections to drive drug prices beyond the reach of patients in poor countries.
Trade, of course cuts two ways. Take Pete Kappelman, a Wisconsin dairy farmer who supplies milk for Land of Lakes’ cheddar cheese. He’d welcome easier access to Japan and Canada. Yet Kappelman also fears lower-cost competition from New Zealand.
The trade accord is one of the few things President Barack Obama and Republican leaders in Congress seem to agree on. Visiting Tokyo last month, Rep. Paul Ryan, the Wisconsin Republican who leads the House Ways and Means Committee, predicted that Congress would vote this spring to empower the president to negotiate trade deals like TPP and send them to Congress for an up-or-down vote — no nitpicking allowed.
The 12 countries involved have been negotiating this week in Hawaii and appear to be moving toward a deal.
“We are very much in the endgame,” U.S. Trade Rep. Michael Froman says.
Some questions and answers:
— WHAT WOULD THE DEAL DO?
The TPP would erase most tariffs and other barriers to trade and investment among the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Combined, these countries supply 40 percent of the world’s economic output.
The deal would also clarify and standardize trade rules, thereby making it easier for companies such as Hardware Sales to sell goods and services in the Pacific Rim.
— WAIT. WHERE’S CHINA?
China, the world’s No. 2 economy, is conspicuously missing. In fact, the trade deal reflects Washington’s attempts to counter Chinese influence in the Pacific Rim. China, for its part, is trying to round up countries, including TPP prospects Brunei, Malaysia, Singapore and Vietnam, for its own Asia-Pacific trade bloc. Rival U.S. and Chinese negotiating teams sometimes pass each other on their way in and out of government offices in the region.
Still, it’s possible China could eventually join the TPP.
— WOULD THIS BE BETTER THAN PREVIOUS DEALS LIKE NAFTA?
TPP is being negotiated in the shadow of 1994’s North American Free Trade Agreement. NAFTA, a deal with Mexico and Canada, failed to deliver the big job gains its supporters had predicted. And it’s blamed by critics for the loss of many U.S. manufacturing jobs. In his State of the Union address in January, Obama conceded that “past trade deals haven’t always lived up to the hype.”
Administration officials insist that TPP would improve upon the agreements that preceded it. They say it will, for example, include stronger measures to block countries from gaining a competitive edge by weakening environmental and labor rules.
Some environmental groups say they’re enthusiastic. Oceana, a nonprofit dedicated to protecting oceans, supports TPP provisions that would reduce government fishing subsidies that encourage unsustainable overfishing.
— SO WHAT’S THE CASE AGAINST IT?
Critics, led by major trade unions, complain that the deal is being negotiated in secret and that it favors multinational corporations over workers and consumers.
The administration counters that any deal would require private negotiations before the final proposal goes public and faces approval from Congress. It says it’s briefed members of Congress or their staffs hundreds of times on the deal and allowed lawmakers to view the work in progress.
Critics are troubled, in part, because they say the deal so far:
— Does nothing about countries like Japan that give their exporters an edge by devaluing their currencies to make their goods cheaper on world markets. Such unfair competition could cost American jobs, critics say.
— Would let companies challenge government laws and regulations on the ground that they inhibit trade. The cases would be decided by private tribunals, a system that critics say bypasses democratic accountability.
The Swedish power company Vattenfall, for instance, appealed to a trade tribunal in 2012 when Germany decided to phase out nuclear power after the 2011 Fukushima nuclear meltdown in Japan.
Supporters of the Pacific trade deal argue that such concerns are overblown. Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, notes that business appeals have been upheld in only 29 percent of cases. In the United States, he says, companies have never won.
— Strengthens patent protections that could bar cheaper generic drugs from reaching patients in poor countries. Researchers from George Washington University and three Australian universities predicted that TPP could reduce, from 83,000 to 37,000, the number of Vietnamese HIV patients with access to antiretroviral medicines.
The reason: By blocking some low-priced alternatives, they calculated, the trade accord would drive the annual cost of the medicines to as high as $501 — nearly quadruple today’s $127.
Supporters of TPP note that the agreement is still being worked out. They say it will likely include provisions to help Vietnam, the poorest of the TPP countries, maintain access to lower-cost medicines, at least for a while.
— SO WOULD TPP LIKELY CREATE OR KILL U.S. JOBS?
Probably neither. The jobs created by greater access to Asia-Pacific markets would likely be offset by U.S. jobs lost to increased competition. And the deal would increase U.S. incomes only $77 billion a year — 0.4 percent — by 2025, according to calculations by Peter Petri, professor of international finance at Brandeis University.
“The numbers won’t knock your socks off,” Petri says.
For one thing, trade isn’t so vital to the U.S. economy: Exports account for just less than 14 percent of U.S. economic activity, one of the lowest shares among major nations. For another, the United States already has free trade agreements with six of the TPP countries. So the effects of another deal would be limited.
Still, jobs created by expanded export opportunities pay up to 18 percent more than the average job does. Moreover, economists say, intensified competition would make companies in the United States and its Pacific Rim trading partners more efficient by compelling them to focus on what they do best.
— WILL CONGRESS COMPLY?
Maybe. The politics of trade are complicated. If TPP is going to happen, Obama will probably have to persuade Congress to give him the so-called “fast-track” authority: The president would send the deal to Congress for an up-or-down vote with no amendments allowed. Without that presidential power, lawmakers could pick the deal to death — a risk that might discourage other countries from agreeing to TPP in the first place.
Though Republican leaders like Ryan have signaled their support for fast track and TPP, tea party Republicans have been reluctant to cede any power to Obama. They’ve formed an odd-bedfellows alliance with pro-union Democrats who oppose TPP.
AP Writers Charles Babington and Martin Crutsinger contributed to this report.
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