How Minnesota would benefit — and how it would suffer — if Congress approves the Trans-Pacific Partnership

REUTERS/Kacper Pempel
Minnesota is the country’s top pork producer after Iowa, and Japan has a big appetite for pork.

WASHINGTON — This week, House Democratic and Republican leaders entered the final stretch to gather the 217 votes needed to pass Trade Promotion Authority (TPA), legislation that would pave the way for major international trade pacts, like the Trans-Pacific Partnership (TPP). That agreement — a longtime goal of President Barack Obama — would place the United States and 11 other Pacific Rim nations in an expanded free trade relationship, and it could have potentially huge impacts on Minnesota workers and businesses.

TPP is a complex pact that would do a number of things, and ambitiously aims to unite a diverse group of 12 countries into a system with shared standards on labor, environmental protections, and intellectual property. A key selling point for proponents — and point of contention for opponents — is that TPP would reduce export tariffs among signatories, much as the landmark North American Free Trade Agreement did in 1994.

That would have huge economic repercussions nationally, but it could also have a disproportionate impact on Minnesota. The state exported over $10 billion in goods and services to TPP countries in 2013 — nearly half its total — and it has deep economic ties to TPP signatories like Japan, which bought more than $2 billion in Minnesota goods and services last year. Comparatively, Wisconsin — whose economy is roughly the same size as Minnesota’s — did $1.4 billion worth of business with Japan. Vietnam, an emerging economy and key TPP signatory, bought $110 million in Minnesota exports, double those of Wisconsin and roughly triple those of Michigan.

Despite vocal opposition from congressional Democrats, complex negotiating hurdles, and the uncertain fate of TPA, TPP nevertheless remains a real possibility. If it goes through, here’s who’s likely to come out on top in Minnesota in the new trade order — and who might get left behind.

The winners

Bigger, export-oriented agriculture companies and producers
A common refrain of TPP supporters is that 95 percent of the world’s eaters live outside the United States, and that TPP would open up many foreign markets to U.S. food products. Major food and agriculture companies and interest groups, including Minneapolis-based Cargill, have been vocally supportive of TPP from the get-go. If TPP were established, those interests would undoubtedly benefit.

Minnesota, after all, is America’s fourth-biggest agricultural exporter, and agricultural products — from soybeans to poultry — make up a huge chunk of the state’s exports. Reduced tariffs would have a large impact on big-time agricultural operators in the state. Take pork products: Minnesota is the country’s top pork producer after Iowa, and Japan has a big appetite for pork: It’s the top destination for U.S. pork after Mexico. Right now, those products face export tariffs of up to 20 percent in Japan. Slashing such tariffs is key to the appeal of TPP for big companies.

As a result, some Minnesota ag trade groups have lobbied hard to pass TPA and TPP in Washington. In fact, the issue is such a big priority that National Pork Producers Council President Ron Prestage has promised retribution for members of Congress who threaten the deal. “If House lawmakers vote against TPA, we’ll hold them accountable,” he said in a statement.

High-tech manufacturing
In many ways, American manufacturing was significantly hurt by NAFTA, and opponents of TPP are worried that it will continue to chip away at low-skill manufacturing jobs in the U.S. Minnesota, however, is less reliant on those kinds of jobs than other states, and is a national leader in manufacturing of goods like medical technology and electrical equipment — products that require highly skilled workers that are unlikely to be threatened by TPP.

President Obama and other politicians love talking about re-fashioning the American economy in the mold of high-skill workers engaged in high-tech manufacturing. In Minnesota, that’s largely a reality already. That’s what makes some, like Robert Kudrle, an international trade expert at the University of Minnesota, bullish on the potential for positive outcomes from TPP for the state.

Kudrle calls Minnesota a “microcosm of the top end of the American economy,” and in a “really strong position” to benefit from TPP because of its high-tech manufacturing, agricultural strength, and strength in services. Medical equipment, for example, accounts for 13 percent of Minnesota exports.

Rep. Erik Paulsen, a leading free-trade advocate in the House, has spotlighted Minnesota manufacturers in making his case for TPP. He often cites the example of RMS, a Coon Rapids-based medical device manufacturing company that wrote to him urging support of TPA and TPP to open its products to foreign markets.

Multinationals and large service companies
The international scale of the TPP means that companies big enough to export are poised to take the greatest advantage of the agreement. Minnesota is home to a number of large companies that export a great deal of goods and services abroad: According to an estimate by the consumer-rights advocacy group Public Citizen, 42 percent of medium-to-large companies in Minnesota export goods and services, while only 7 percent of small companies do.

Lowered tariffs mean that a large company like Maplewood-based 3M will rake in more dough in the overseas markets where it already operates. Currently, Vietnam places a 17 percent tariff on “self-adhesive plastic and tape rolls” from abroad. Given that, it’s not hard to understand why 3M is pro-TPP.

U of M’s Kudrle notes that barriers to service trade — like health care and IT — could also be removed under TPP, benefiting some Minnesota companies.

“There’s a tremendous advantage in that lots of business services in the state of Minnesota are eager to get into eastern markets,” he says, citing Minnetonka-based UnitedHealth Group, which has a large information processing division that could do work abroad.

Also important to note is the import side of the agreement: Under TPP, large retailers like Minneapolis-based Target will pay less for the host of goods — apparel, electronics and other consumer items — that it imports from overseas. U.S. companies, including Target, bought over $7 billion in apparel imported from Vietnam in 2012, and under an agreement like TPP that could further ease trade barriers, that number could rise.

The Losers

Small community farmers
While bigger agricultural companies are foreseeing big dividends from TPP, some small and community farmers in Minnesota are denouncing the deal as the latest in a series of blows against the economic viability of such operations — and potentially, a knock-out punch. TPP “would expand the NAFTA ‘trade’ pact model under which agricultural imports have surged, agricultural exports have slowed and family farms have disappeared,” according to a statement by the National Farmers Union.

The NFU points out that in Minnesota, agricultural exports declined under NAFTA and the 2011 free-trade pact with South Korea.

“Farmers were promised that the Korea [Free Trade Agreement] — the U.S. template for the TPP — would boost U.S. agricultural exports to Korea, particularly meat exports,” says the NFU. “But U.S. exports to Korea of pork, beef and poultry — all top agricultural exports for Minnesota — declined 15, 18 and 42 percent, respectively, in the first two years of the Korea FTA.” Total agricultural exports from Minnesota to Korea declined by 41 percent.

Of course, it’s difficult to definitively say that free-trade agreements undermine exports, and there are a number of factors that influence global balances of trade. But opponents of the trade deal, like Karen Hansen-Kuhn of the Minneapolis-based Institute for Agriculture and Trade Policy, say that in past trade deals, the prospect of increased export revenue has been held up to mitigate other concerns about food safety and public health. After NAFTA and other FTAs, Hansen-Kuhn says, “the actual experience is that those supposed benefits haven’t materialized. What has materialized is much greater corporate concentration in agriculture and fewer family farms.”

The IATP notes that since NAFTA, nearly a quarter of Minnesota’s small farms — about 15,000 — have shuttered. The farmers who remain are concerned now that the same will happen to them.

Low-income workers
A reality of trade — acknowledged by TPP supporters and opponents alike — is that not everyone is a winner, and some Americans will inevitably be hurt by a major trade deal. U of M’s Kudrle, who calls TPP a generally good deal for Minnesota, contends that most of the American jobs that will be lost to international trade have already gone. Still, he notes that those most likely to be hurt are low-income workers. “The sense that trade is bad for the least advantaged people in society is probably true,” he says.

So, while high-skilled workers at firms like the medical technology company RMS may benefit, Minnesota’s lower-skilled manufacturers could lose their jobs when the goods they produce are made more cheaply in TPP countries like Vietnam and Malaysia. Minnesota has lost nearly 50,000 manufacturing jobs since NAFTA took effect, according to Public Citizen. The group also contends that free-trade deals have contributed to income inequality, which has risen since NAFTA.

While proponents of free trade claim that job loss is mitigated by cheaper consumer goods, Public Citizen argues that “90 percent of U.S. workers would lose more to inequality increases than gained in cheaper goods.” It’s possible that the multinational companies that stand to benefit from TPP will create jobs thanks to trade-boosted revenues, but it’s unclear how much, and there’s virtually no getting around the fact that some jobs will be lost because of TPP.

Mining
The mining industry in Minnesota and elsewhere would probably be more hurt than helped by an agreement like TPP. Eighth District Rep. Rick Nolan has been vocal in his opposition to TPP on the grounds that it would have disastrous effects on his district’s mining industry. Key to his concerns is distrust of overseas companies — and several TPP signatories — who could potentially flood the U.S. market with steel and other products subsidized by their governments, putting U.S. products at a disadvantage.

In an op-ed in the Mesabi Daily News, Nolan explained,  “Australia — one of our so-called ‘partners’ in this venture — is already in the process of doubling the amount of iron ore on the world market today. If the Trans-Pacific Partnership is approved, we can expect a flood of cheap Australian iron ore to enter our marketplace — costing us thousands more good jobs and very possibly the collapse of America’s steel industry as we know it.” Minnesota taconite operations have laid off more than 1,000 workers in the last year because of that practice, which industry advocates refer to as “steel-dumping.”

Republicans and others in favor of TPP have noted the flexibility of the agreement, and sought to assuage concerns like Nolan’s by emphasizing the role of negotiation. However, there is precedent for cheap commodities from abroad hurting production at home. The U.S. sugar industry, for example, took a major hit when cheap Mexican sugar hit the market after NAFTA.

Comments (7)

  1. Submitted by Frank Phelan on 06/10/2015 - 04:42 pm.

    High Skilled Who-Ha

    It’s time to ditch this myth of a high skill level saving American workers. The case of Boeing and Google et al disprove the myth.

    The Washington state workforce of Boeing is one of the most highly skilled workforces in the world. Boeing has rode those skills to great profitability. Rather than sharing in thew spoils of it’s employee-created wealth, Boeing has delivered a two fisted beat down. Just a couple years ago, Boeing leaned on their workers hard enough to eliminate their defined benefit pension. They didn’t claim poverty or hard ship. They couldn’t without lying. When the employees voted that down, the Washington state politicians and media made it clear they weren’t happy about it. In an embarrassing example of business unionism, the international office of the Machinists forced a 2nd voted.

    Second, Boeing has made no secret of their desire to move their operations to South Carolina, where tea Party governor Nikki Haley has made it clear she favors a non-union work force so that a low wage structure can attract employers.

    Goolge Apple and other similar employers have conspired to suppress the wages of their engineers. They agreed not offer applicants a wage higher than what their current employer paid. So much for all that free market competition right wingers claim to love.

    They have also abused the HB-1 visa program. Why hire Yanks for $100K/year when you can import Asians for half that price? If it leads to Americans losing their jobs, who cares? They can deploy those high wage skills at Wal-mart stocking shelves.

    TPP is by the 1%, for the 1%. That’s true whether it’s pushed by corporate Democrats like Clinton and Obama or plutocrats like Mitt Romney or JEB.

  2. Submitted by John Appelen on 06/10/2015 - 05:25 pm.

    Excellent Summary

    The trade offs are very interesting. Our society can continue to pay more for domestic steel and protect those jobs. Or we can pay less for steel and save the ore for later when mining it is more cost effective here.

    Personally I think fewer trade barriers are better, since I have faith that Americans can compete globally pretty well. Of course the challenge is that we need all American’s helping to row the boat by doing well in school, continuously improving and working to support themselves.

  3. Submitted by Keith Kuckler on 06/10/2015 - 07:18 pm.

    free trade

    I suggest that folks read a book that I just read. It is called Factory Man, I can not remember the author’s name It details the destruction of the wooden furniture business by cheap Asian imports. It shows what happens to small rural towns when the only source of jobs that pay a living wage are destroyed by cheap imports. Now the wonderful hardwood lumber that used to be crafted into quality furniture is shipped to asia, and, cheap furniture is shipped back to the US. Not everyone wants, a high tech job, sitting in some cubicle in front of a computer screen. Some of us still take pride in making quality products. This trade agreement will just put more wealth and power into the hands of the big multinational corporations, who, do not give a damm about the communities they destroy when they move around the world in search of the cheapest labor.

    • Submitted by John Appelen on 06/11/2015 - 10:58 am.

      Your theory is then that the “big multinational corporations” somehow forced American Consumers to buy these lower cost similar or higher quality products, thus putting the American businesses / workers who offered higher cost similar or lower quality products out of business?

      I agree that it is too bad that some businesses and personnel can not compete. And it is a bummer that raw materials can be shipped half way around the world, worked on and then sent back here to be sold to American customers for less than Mom and Pop can do it.

      I just think that you are blaming the wrong group of people. It is the American Consumers who decide which businesses succeed or fail, not some big boogeyman company. A Walmart comes to town, the consumers choose to save money rather than pay more Downtown. Hyundai offers a similar car for the same price with a perception of better quality, the consumers buy the Hyundai rather than the Ford.

      By the way, the cold reality is that American companies must compete on features, cost and quality or the American Consumers will buy from a foreign company. If the Apple Iphone was made here and cost twice what the Samsung cost, do you really think Apple would still be in business?

      • Submitted by Dave Eischens on 06/11/2015 - 10:55 pm.

        The high cost of low prices

        John, there is validity in what you say regarding buying decisions, it’s definitely part of the problem and you’ve brought this up before. It’s not as simple as you make it of course, but valid and worthy of further discussion.

        In light of that, and staying focused on the topic of this article, that’s where these trade agreements are failing both consumers and American workers. Example: COL – Country of Origin Label. So the American taxpayer is being sued for wanting “Product of Mexico” or “Product of Canada” on the label of meat products. How can American consumers decide which businesses they’ll patronize (succeed or fail) if they don’t know this piece of information? Same with GMO’s. Same with Pharma. Same with many other not-nice aspects of business hidden from the American Consumer through secret trade deals and other means. Really the litmus test is if it’s so good for us, why not make it public? Obama, either the most-liberal or worst-president-ever is tied in pretzels trying to push this thing. Why? History recalls Ross Perot’s “giant sucking sound” analysis of trade deals. Now proven correct, why is this one different?

        Credit to Anthony’s down-thread comment.

        I do disagree with your characterization of Keith’s comment, you’re injecting a bogeyman into it. Which interferes with rational discussion. What I would ask you is to defend why “big multinational corporations” have not earned the negative perception they currently own? Why should we trust them as authors of these trade deals?

  4. Submitted by Anthony Walsh on 06/10/2015 - 08:00 pm.

    “Half A Loaf” Summary

    This article is missing a thing or two or thirty in the loser category, like the Investor State Resolution.

    TPP lets corporations sue governments in an extra-governmental “court” for laws and regulations that cause them to be less profitable. This is why we can’t have “dolphin-safe” tuna, or meat labeled with Country Of Origin. Next it will be our environmental laws, food safety laws.

    Enabling companies to move $30/hour jobs to countries with $.60/hour wages so a few investors can pocket the difference is not trade.

    And no, it will not help that much that cheaper goods may be available when so many will lose.

    America does not owe the rest of the world control over its markets just because some investors would like to get wealthier.

  5. Submitted by DavidEH Smith on 06/11/2015 - 12:21 am.

    TPP, TTIP, CETA & Global Treaties/’Arrangements’.
    Corporations Cut Costs & Dramatically Increase flat Profits by Not Suing each Other & by Suing the Little Guy (via ‘your’ Gov’t.) who’s ‘Guilty’ even Prior to Tribunals & All of the Time.

    Teaching the Gordon Gekkos’ of Wall St., Congress, et al, some Humility & Integrity via Quantifying?
    ‘Obama’s’ (Corporate America’s) Self-Exploding SECRECY.

    If Not ‘Treason’, then, there are very compelling arguments for concluding that the corporations, whether they be, foreign, domestic, &/or, a blend, that do not respect the ‘lesser’ jurisdictions, ie. individual provinces, territories, &/or, states, or, municipalities, are not good corporate citizens of the host countries & thus, can be treated as ‘persona non grata’.

    The Global Treaties/’Arrangements’ with their Secret ‘Death-Star-Chamber’ Tribunals that The Global (non BRICS) Corporate Economy is in the Process of Secretly Passing will Finally Legitimize its Ability to secretly move money around, ie. ‘launder’ without Fear of Legal/government Regulation. It’s their Own Jurisdiction & they Insist that you Pay for & Not them.

    Will TPP be Okay if ‘US’ corporations can Prove that they Won’t Benefit from Partnerships that Try to Disguise that Corporate USA is Circumventing Other ‘Lesser’ Jurisdictions (State/Municipal)?
    ie. Corporations Need Proof of Non Circumvention of ‘Lesser’ Jurisdictions, or else, ‘Non Good Corporate Citizens’, &/or, ‘Persona Non Grata’

    What is Governors’ Rationale for not Defending Taxpayers; States Colluding with Feds?

    Corporate America’s Last Chance to Fleece the Little Guy (95% – 99% of U.S.) Before Tanking the Global (non BRICS) Economy? Exploitable ‘Vulnerabilities’, Holes & Back Doors to Close.

    2 Republican Senators Admit that They Have read the TPP.
    Should Congressmen & Parliamentarians Have to Sully Their ‘Beliefs’ & Sales Pitches with
    ‘Sordid’ Facts that Come from Actually Reading & Understanding Global Treaties/’Arrangements’?
    Congress; Deluded, or, Deluding; ‘IGNORAMUS et IGNORABIMUS’ (I do not know & I will Not Know)?

    Can ‘your’ Federal Representatives Willingly Answer ‘your’ Questions below If They haven’t Read the TPP & other Global Treaties? All You have to do is Ask them ‘For Your Record’ & then Share Their Inability with Others.
    Don’t Forget to Demand Your Money Back for ‘Supplementing’ Fed Rep’s Wages & Future Considerations at Incompetency Tribunals.
    How many ‘Preferred’ Shares are You Selling Your Right to Sue The Global Corporate Economy for?

    TPP, TTIP, CETA & Global Treaties;
    Corp.’ U.S.’ Need to Fast Track TPP & Global Treaties.
    TPP & Global Treaties part of corp. US’s attempt to Increase $17+ Trillion
    Debt ‘Earning$’ & to Legitimize Hidden Earning$ in Untouchable Foreign Banks.
    Time to REPATRIATE ‘Earnings’; NO FOREIGN Accountants, Banks, Services, etc.
    NO Trickle Down from Hiding ‘Earnings’ in Secret Off-Shore Accounts.

    Global Treaties Not about How Much Trade, but, How to & Who to Trade with to ‘Undermine’ AIIB.
    Shifting Costs to harmless Non Shareholders to Inflate ‘Profits & Dividends’.
    Is it Time to Cool off the ‘Stockbrokers’ again; Buy Gold?
    ‘Schadenfreude’ & the Public; Too ‘Unenlightened’ to Figure out ‘The Global Sleight of Mind’ Illusion.
    – David ‘Copper’ Smith

    Will Individual States Jump at Opportunity to: Refuse, or, ‘Over Charge’ Business Licenses, Raise Targeting State Taxes, ‘Road’ Taxes, etc. to Recoup Global Treaties’ Suits (plus Earn Lucrative ‘Punitive Damages’) from Non Good Corporate Citizens (non-Compliant of State laws), Associated/Support Corps., Securities Exchanges, et al?

    Are TPP & Global Corporate Treaties/’Arrangements more about Tort ‘Abolishment’ than Tort ‘Reform’?
    But, Do YOU know the various different ways to Make the leaders of TPP, Shareholders, et al, ‘Persona non Grata’; Shareholders’ Meetings I.D. Toxic Neighbors, In-laws, et al?

    Corporate Canada’s, via PM Harper, Perilous Deprivation of TPP, C-CIT, CETA, et al, Signatories of Due Diligence Info (The WAD Accord/Compensation), May Hurt Corp.Can & Shareholders More than the Rest (95% – 99%) of citizens of Canada, US, EU, Trans Pacific nations, or, may not…

    But, If Not PUTIN; ‘The WHITE KNIGHT’, then Who Do YOU Want to Bankroll the Saving of the harmless NON shareholders of the World from Fast Tracking TPP’s, CETA’s (TTIP) Secret ‘Death-Star-Chamber’ Tribunal Penalties?
    Will Iran, China, the Muslim World, et al, Support Putin in Suits?
    How about Warren Buffett, &/or, the ‘coveted’ Hong Kong investor, et al?
    ***
    FULL Articles, see; Google, David E.H. Smith
    ***
    Please consider sharing the enclosed information & questions with 10 friends who will share it with 10 others…

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