Here's how the Trans Pacific Partnership could impact Chattanooga businesses

Staff Photo by Dan Henry / The Chattanooga Times Free Press- 8/29/16. Judy R. Reinke, deputy director general of U.S. Foreign and Commercial Service for the Trans-Pacific Partnership, speaks during a panel at Baker Donelson in downtown Chattanooga, Tenn., on Monday, August 29, 2016.
Staff Photo by Dan Henry / The Chattanooga Times Free Press- 8/29/16. Judy R. Reinke, deputy director general of U.S. Foreign and Commercial Service for the Trans-Pacific Partnership, speaks during a panel at Baker Donelson in downtown Chattanooga, Tenn., on Monday, August 29, 2016.
photo Staff Photo by Dan Henry / The Chattanooga Times Free Press- 8/29/16. Judy R. Reinke, deputy director general of U.S. Foreign and Commercial Service for the Trans-Pacific Partnership, speaks to Jim Frierson during a panel at Baker Donelson in downtown Chattanooga, Tenn., on Monday, August 29, 2016.

What is TPP?

The Trans Pacific Partnership is a trade and investment agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.The 12 countries account for nearly 40 percent of global trade. The U.S. already has trade agreements with most of the countries, but TPP would open new partnerships with the powerhouse of Japan and an emerging Vietnam. China is not included, but might join later.President Obama says the accord would eliminate or phase out 18,000 tariffs that other countries place on American products and goods and and also set standards and regulations that govern some services and investments.

Fillauer is one of America's biggest producers of orthotic and prosthetic devices, but the Chattanooga manufacturer sees an even bigger future in foreign markets, if it can gain access and avoid costly import fees and trade barriers.

That's why Fillauer, like most Chattanooga exporting companies, is eager for the trade deal between the United States and 11 Pacific Rim nations to be ratified and quotas and tariffs reduced or eliminated among such countries.

"The Trans Pacific Partnership (TPP) would be great for us, and we certainly hope it will get ratified and implemented," said Jeremy Crowell, export manager for Fillauer LLC, which faces tariffs of up to 30 percent on some of its health products. "Tariffs are always an issue in getting our products into other countries, and removing those restrictions will help us expand our market and sales and help put more Chattanoogans to work making our products to be shipped around the world."

But getting Congressional ratification of the trade deal in the United States is still uncertain, especially since both major presidential candidates are opposing the trade deal. GOP presidential nominee Donald Trump called the TPP "a rape of our country" and Democrat Hillary Clinton, who backed the trade deal when she was secretary of state, now opposes it.

A vote on the trade pact may not even come until a new Congress is seated in January. Senate Majority Leader Mitch McConnell said the current form of the TPP "has some serious flaws and will not be acted upon this year."

Economists project that opening up the 11 Pacific Rim countries to free, unrestricted trade would help U.S. industry. A study by the Peterson Institute for International Economics estimates the TPP will increase annual real incomes in the United States by $131 billion, or 0.5 percent of the GDP, and boost annual exports by $357 billion, or 9.1 percent, by 2030 when the agreement is nearly fully implemented.

In Tennessee, exports to countries covered by the trade deal already exceed $18 billion a year, including nearly $2 billion to Japan, and the trade deal would make it easier for more businesses to sell their goods and services to Asia, TPP backers say.

"TPP eliminates 18,000 foreign taxes - in the form of tariffs - so American farmers, ranchers, manufacturers and small businesses can compete and win," Judy Reinke, deputy director general of the U.S. Foreign and Commerce Service, told a group of Chattanooga business leaders during a seminar on TPP earlier this week. "Nine-eight percent of industrial and consumer goods exports to the five new trade agreement partner countries will be duty-free immediately when the TPP enters into force."

John Boyd, a principal in the site-selection and legislative advisory firm The Boyd Co., said Tennessee businesses and consumers "will be big winners here as lower import tariffs mean lower prices for all of us on the goods and services we buy."

But labor leaders remain skeptical of the trade pact, fearing it could encourage more businesses to move offshore to low-wage countries that can then more easily ship goods back to the United States.

"I'm for free and fair trade, but this opens the door once again for unfair trade," said Billy Dycus, president of the Tennessee AFL-CIO. "There is no way that we can continue to send work out of this country and drive manufacturing out and expect us to have a middle class."

As a former worker and union president for Bridgestone Tire Co. in Warren County, Tenn., Dycus recognizes the advantages of foreign investments in Tennessee. Last year, Tennessee ranked No. 1 in the nation in attracting the most foreign investment of any state.

In 2015, the state attracted 43 commitments from foreign-owned businesses, 7,880 jobs and $2.2 billion in capital. Over 900 foreign-based companies, such as Nissan, Volkswagen, and Bridgestone, now employ more than 123,000 Tenneseans.

But Dycus fears TPP will make it easier for such companies to operate in low-wage countries, rather than the United States, in what he said "is a race to the bottom."

Critics of TPP say similar promises of better times were offered in the 1990s to sell the North American Free Trade Agreement, or NAFTA, which ended up weakening most of the American textile and apparel industry as businesses moved their operations offshore to save money.

U.S. Sen. Bob Corker, R-Tenn., the chairman of the Senate Foreign Relations Committee, said he supports free trade but said the TPP treaty has problems.

"In general, expanding markets for Tennessee businesses and setting proper rules for how trade will be conducted are good for our economy and national security," said Corker. "However, the details of TPP are incredibly important, and there are problems that the administration is fully aware of that must be addressed if a productive debate is to occur after the November election."

U.S. Sen. Lamar Alexander, R-Tenn., said Tennessee has benefited by foreign investments, but in a statement last week he stopped short of endorsing the measure.

"We should be doing more to create an environment where job creators come to our state and country to invest and expand," Alexander said. "When the agreement is submitted to Congress, I will listen closely to Tennesseans and carefully review this complex trade agreement to determine whether it's good for Tennessee and the United States."

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.

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