Please note: the purpose of this diary series is not an argument for or against the Trans-Pacific Partnership (TPP).
There have been a great number of diaries written on this topic, and my only goal here is to provide more information regarding what TPP does, and what it doesn't do.
Full disclosure before we start: My career is in international trade. The global economy isn't a mystery or source of anxiety for me; it's my livelihood and I love it. It's a complicated and constantly changing industry so it keeps me on my toes. It's challenging, requires a lot of critical thinking, reading, research, and, yes, creativity. In short, it suits me.
That being said, I don't have a strong opinion about free trade agreements in general. They don't make my job any easier- in fact, in order to get any benefit from a FTA, I have to do more work, not less. (We'll get to that shortly.) So, as I stated at the top, this will not be an argument for or against the TPP or FTAs. It's not an opinion piece.
The purpose of this series is purely educational. Many people are misinformed or completely uneducated about the topic and I hope to bring something to the table that will help others form an educated and informed opinion.
Okay, now that all of that's out of the way, let's do the jump and geek out on international trade.
The Basics
Here are a few things of note regarding FTAs:
Number one is that FTAs do not create a free-for-all trade environment between nations. NAFTA, for example, doesn't allow all goods to be exported tariff-free between Canada, the U.S., and Mexico. In order to be eligible for free-trade status, the commodity is required to have a certificate of origin from a government agency. What this means is that if a U.S. company wants to buy grain from Canada tariff-free, the Canadian exporter has to obtain a certificate from the Canadian Food Inspection Agency (CFIA- the Canadian equivalent of the FDA) stating that the country of origin of the grain is Canada.
However, that also doesn't mean that anything that is certifiably, 100% grown and/or produced in Canada gets into the U.S. tariff-free, because the one thing that all trade partners have in common is the desire to protect their own global interests. That's why negotiations for FTAs are rarely without tension.
That is also why when a commodity lands at any given North American border, the Customs officials at each border have the ability to reclassify the product and render null and void any preferential treatment offered by NAFTA. That is, of course, unless the importer and/or exporter can prove that it qualifies, which it sometimes won't. This can be because A) the U.S. doesn't want the specific commodity competing with our own homegrown commodity, B) Canada doesn't want the U.S. buying it on the cheap from them without paying some cash for it, or C) the customs official is having a bad day and just doesn't like the way your export documentation was presented.
Inside each FTA are clauses upon clauses, with exceptions and quotas for each country. Sugar is pretty good example of this. Mexico had provisions written into NAFTA that protected its sugar crops, so U.S. exporters have to certify that the commodity they're exporting to Mexico won't interfere with Mexico's sugar industry.
(In a past life, I exported dairy products and when I exported to Mexico, I had to sign documents that attested that there were no sugars present in the product that aren't naturally occurring. If this was found or even perceived to be untrue, the customs officials could quarantine the product and I would have essentially no way to remedy that.)
Because of this, Mexico was able to flood our sugar market thanks to the provisions it negotiated in NAFTA, and Canada is still facing high tariffs on imports and exports of sugar regardless of the country of origin.
Is this is a feature of free trade, or a bug? Well, it's a little bit of both.
And this is also why I said above that in many ways, free trade agreements are more of a headache for me than anything else.
Second, FTAs get a lot more credit than they deserve from friend and foe alike.
Remember when I said above that I'm mostly agnostic about them? It's because the reality is that neither side has made a compelling case for or against them.
Let's talk India and China, for example. These are possibly the most notable nations for the purposes of this discussion.
We have an enormous trade deficit with China, and we don't have a free trade agreement with them. What we do have is a Most Favored Nation status with them. That is a topic that would require a completely different diary, so I don't want to get too far into the weeds on that. But it has allowed China to become more-than-competitive with us in the manufacturing field.
At the same time, most of our offshored technical jobs land in India, and we have a quite tense trade relationship with India.
We can all agree that neither of the above scenarios are healthy for America's economy, yet these two glaring facts are often overlooked when someone blames free trade agreements for our offshored jobs.
Friends of FTAs often claim that they give us a competitive advantage by removing tariffs and encouraging trade. The reality is that trade is more complicated than that, and tariffs aren't the bogeyman that some seem to think they are.
As I mentioned above, every country protects their own interests (i.e., natural resources) when they're in negotiations. Only a fraction of our exports are traded tariff free, yet it doesn't stop other nations from buying commodities from us, and that will continue to be true because of outside factors. (In my very humble opinion, it will very soon be the case that climate change drives international trade far more than anything else. This is another topic that I love to geek out on, but, again, that's for a completely different diary.)
So, those are the basics. There's a lot more ground to cover and we'll get to all of that in upcoming diaries.
A few more notes before I hand the floor to you:
A) Anyone (including me!) who tells you they know everything about exports is lying to you. There are literally infinite amounts of variables. Imagine a chart that has a list of every nation on the planet at the top and every physical product imaginable down the side. Each corresponding box that lines product with country is going to be a novel in and of itself.
And that's just for the US, because if I'm shipping wine from the US to Australia, it's going to matter whether it's white or red, what the alcohol content is, what ingredients are involved, etc. But if I'm shipping the exact same wine from Korea to the Australia, there are going to be different rules.
B) I am open to any and all criticism, debates, etc. I do ask that everyone remains civil; free traders aren't necessarily against the working people of the US, and anti-free traders aren't necessarily isolationists. This is a complicated topic and I ask that we all respect it as such.
C) Please ask me questions! Give me feedback! I truly want the people who read this series to feel more educated on the topic and it's hard for me to gauge what needs to be covered or where people feel out of their depth. If there is something specific you'd like me to cover in this series please say so!