Now that Trump scuttled TPP, how might it impact Maine?
President Trump signed an executive order on Monday ending the United States' participation in the Trans-Pacific Partnership, a sweeping trade pact negotiated by the Obama administration with 11 other nations on the Pacific Rim. The proposed agreement with countries representing close to 40% of the world’s economy was never ratified by Congress during Obama’s final term.
The death of the TPP is good news for New Balance, the Boston-based shoemaker that assembles more than 4 million pairs of athletic footwear per year in the United States and has 900 employees working at its Maine factories in Norridgewock, Skowhegan and Norway. The company also has 500 employees working at its two factories in Massachusetts.
The company, despite having shoe factories in Vietnam that would have benefited from the TPP’s aggressive phase-out of footwear tariffs, had been on record stating that if TPP was approved it would have put its American jobs at risk.
New Balance’s anti-TPP position put it at odds with Nike Inc. (NYSE:NKE), which has made a considerable investment in its Vietnam production facilities and was a staunch supporter of eliminating the footwear tariffs.
What comes next?
In a statement issued Monday, U.S. Sen. John McCain, R-Arizona, warned that Trump’s action jeopardized the United States’ strategic position in Asia and would leave a void for China to fill.
“This decision will forfeit the opportunity to promote American exports, reduce trade barriers, open new markets and protect American invention and innovation,” he said. “It will create an opening for China to rewrite the economic rules of the road at the expense of American workers. And it will send a troubling signal of American disengagement in the Asia-Pacific region at a time we can least afford it.”
He added, “Abandoning TPP is the wrong decision. Moving forward, it is imperative that America advances a positive trade agenda in the Asia-Pacific that will keep American workers and companies competitive in one of the most economically vibrant and fastest-growing regions in the world.”
Reuters reported today that Australia and New Zealand hoped to salvage the TPP by pursuing a trade pact with China and other Asian nations.
Other impacts on Maine
A 2016 Trade Policy Assessment prepared for the Maine Citizen Trade Policy Commission by the University of Maine’s Margaret Chase Smith Policy Center concluded TPP’s potential impact on Maine “would likely generate slight increases in overall measures of Maine’s economy in 2032. The benefits would be small and spread across the population. Underlying those overall gains, some sectors would experience a reduction in growth in terms of jobs, output and exports.”
The report notes that Maine’s food exports have increased significantly in the last decade, more than doubling from $288 million in 2007 to $588 million in 2015. Exports of live lobster accounted for most of that growth, with additional contributions from farmed salmon, sea urchins, sea cucumbers, and elvers.
“Exports are a growth area for Maine food producers,” the report stated, adding that the TPP potentially could have boosted the already hot export commodity of Maine lobsters to Asia by eliminating tariffs as high “as 34% in Vietnam, 8% in Malaysia, and 5% in Japan and New Zealand, depending on how it is processed and shipped.”
“Tariff reductions on Maine potatoes and blueberries could expand the reach of those foods as well,” the report added. “Japan, Malaysia, and Vietnam would eliminate their tariffs on fresh, frozen, and prepared potatoes, which range from about 8.5% in Japan to as much as 34% in Vietnam. Tariffs on categories that include blueberries range from as high as 17% in Japan to 30% in Malaysia and Vietnam.”
Its bottom line assessment, citing U.S. International Trade Commission estimates for the TPP’s impact on the country’s economic growth through 2032: “Maine’s share of these gains would be small: real income would increase by approximately $163 per capita, real GDP would increase by approximately $106 per capita, and there would be about 554 additional FTE jobs in 2032. “
Based on the USITC national estimates, the report concluded that total Maine exports to TPP countries would increase by about $143 million under the trade deal. Accounting for sales diverted from non-TPP countries, total Maine exports would increase by about $47 million.
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