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April 2016, Volume 22, Number 2

Trade: TTIP, Water

TTP. The Trans-Pacific Partnership was formally signed by negotiators February 4, 2016. Congress is expected to vote on TTP before the end of 2016.

US economists have reached opposite conclusions about TTP's likely effects in the US. One report, entitled "Trading Down: Unemployment, Inequality and Other Risks of TTP," projects that US incomes would decline slightly under TTP and that almost 450,000 US jobs would disappear. Another report used the Global Trade Analysis Project (GTAP) model to project slight US income and job gains as a result of reducing especially non-tariff barriers to trade.

US workers who lose their jobs because of TTP can receive Trade Adjustment Assistance benefits in the form of extended unemployment benefits and retraining. Created in 1975 to win support for free-trade agreements, TAA now has $450 million a year for manufacturing and service sector workers who lose their jobs because of increased outsourcing or importing to any country, regardless of whether it has a trade deal with the US.

Critics of TAA say that the 130 weeks of benefits for retraining gives workers a two-year paid vacation, and that most displaced workers would be better off finding new jobs immediately, even at lower wages. They advocate wage insurance, a program that fills some of the gap between old higher wages and new lower wages.

President Obama and leading Republicans in Congress expect TPP to be approved, but not until after November 2016 elections. Front-runners Hillary Clinton and Donald Trump oppose TPP.

US manufacturing employment fell from a peak of 20 million in 1979 to 12 million today, even as nonfarm payroll employment rose from 90 million to 141 million. Manufacturing went from 20 percent of US employment to eight percent in 35 years.

How much of the decline in manufacturing employment is due to automation and how much is due to freer trade? Most economists say that labor-saving automation is much more important than trade, but this assumption is changing in light of new studies that show that, after China entered the WTO in 2001, the loss of US manufacturing jobs was concentrated in sectors where tariff reductions were greatest, including apparel, leather goods, plastic plumbing fixtures and surgical and medical equipment. Economists now say that up to half of the loss in US manufacturing jobs may have been due to freer trade with China and other nations.

Water. Some industrial countries export scarce water from arid regions via exports of high-value commodities, such as nuts from California and wine from Australia, the driest inhabited continent. Precipitation in Australia averages 700 mm or 27.6 inches of rain a year, but there is wide variation.

Australia's Water Act 2007 allowed landholders to use the water on their property or sell it, giving Australia one of the world's most advanced water markets. There are frequent water sales?some 4,444 gigaliters worth $3 billion in 2009-10?but rising fears of foreign owners of Australian water rights. There are 15,100 gigaliters of water rights in New South Wales, followed by 6,700 in Victoria, 6,035 in Queensland, and 3,200 in Western Australia.

Agriculture uses over 60 percent of Australia's water, and a sixth of farm water rights are owned at least partially by foreign investors, raising questions about the fate of Australian farmers who are outbid for water by foreign-linked growers producing high-value crops.

GMOs. The US planted 181 million acres of biotech crops in 2014; 94 percent of US soybeans and 92 percent of US corn is fro GMO seeds that have been modified to include resistance to pests and herbicides. Brazil planted 104 million acres of biotech crops in 2014, followed by Argentina with 60 million acres, India and Canada with 29 million acres each, and China and Paraguay with 10 million acres each.

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