EPI Blog: "Growing Trans-Pacific Trade Deficits Set the Stage for Growing Trade-Related Job Displacement"

December 09, 2014


U.S. trade and investment agreements have almost always resulted in growing trade deficits and job losses. Under the 1993 North American Free Trade Agreement, growing trade deficits with Mexico cost 682,900 U.S. jobs as of 2010, and U.S.-Mexico trade deficits and job displacement have increased since then. President Obama promised that the U.S.-Korea Free Trade Agreement would increase U.S. goods exports by $10 to $11 billion, supporting 70,000 American jobs from increased exports alone. However, in the first two years after that deal went into effect, U.S. exports actually declined, and growing trade deficits with Korea cost nearly 60,000 U.S. jobs.

[by Robert E. Scott | December 8, 2014 | Working Economics, The Economic Policy Institute Blog]

This is important to keep in mind as negotiations for the Trans-Pacific Partnership (TPP) resume in Washington this week. The United States has a large and growing trade deficit with the 11 other countries in the proposed TPP. This deficit has increased from $110.3 billion in 1997 to an estimated $261.7 billion in 2014, as shown in the figure below. With trade deficits already on the rise, it makes no sense to sign a deal that would exacerbate them further.

Meanwhile several members of the proposed TPP deal are well known currency manipulators, including Malaysia, Singapore, and Japan—the world’s second largest currency manipulator (behind China). Eliminating currency manipulation could reduce U.S. trade deficits, increase GDP, and create 2.3 million to 5.8 million U.S. jobs. The United States would be foolish to sign a trade and investment deal with these countries that does not include strong prohibitions on currency manipulation. Yet U.S. Trade Representative Froman has testified that currency manipulation has not been discussed in the TPP negotiations.



Trade and investment agreements negotiated in recent decades have been bad deals for working Americans. Fast track legislation would deprive Congress of the opportunity to amend proposed trade deals, leading to growing job displacement and downward pressure on American wages. It is time for Congress to take notice and assert its rightful role in providing advice and consent in the governance of U.S. trade and investment with other nations.



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  • Why are some lines crossed out? I meant what I typed!
  • Thank you Rob Scott for bringing attention to the trade deficits that measure all the US demand leaking out of the country. Those trade deficits represent American demand being satisfied by excessive imports. That is why we’ve lost so many American factories and manufacturing jobs.

    There will never be a trade treaty that will end our trade deficits or rebuild our manufacturing. Nor can the TPP be “fixed” with currency or any other language -it would still be a massive offshoring of not just our productive economy but our sovereignty and therefore our democracy itself. It would remove from Congress many other aspects of law that would become permanent international law based in unchangeable treaties. Maybe if we start calling these Free Trade treaties what they are —treaties- the public would wake up to the fraud that they can be ratified without 2/3 of the Senate approving!

    Its time to stop thinking of trade policy as being based on treaties. That’s not how this country became a great industrial power with a high standard of living. Its time to return to trade policy based on unilateral assertion of sovereignty by Congress, limiting imports and foreign access to our markets so that American demand can be satisfied by American production.

    Replacing Free Trade with a Balanced Trade policy, limiting our imports to the same value as our exports, would divert merchandise trade deficits (averaging over $715 billion per year) into that much more demand for US-made goods, creating over 8 million new US jobs and rebuilding our manufacturing base and re-shoring our tax base. Contrast that with the job losses and factory closings from the Free Trade treaties we already have!