Benefits of trade, and TPP specifically, are often concentrated in unexpected places

Diffuse benefits and concentrated losses. Those two characteristics supposedly make free trade hard to defend. Senator Jeff Flake (R-AZ), one of the most vocal supporters of trade generally and TPP specifically, made that point in a Politico article last week.

Yet the benefits of trade – or potential benefits from changes in trade policy – often are very concentrated in unexpected places. Looking at which states import specific products from TPP countries, and how TPP would impact tariffs on those products, shows how.

Take U.S. imports of arc-welding equipment from New Zealand. These products faced about $53,000 in tariffs in 2015, which the TPP would eliminate immediately. It is hard to imagine hundreds of arc-welding equipment importers across the United States rallying for TPP to save a few hundred dollars each (i.e., if the benefits are diffuse).

However, 100% of U.S. imports of those products last year went to Colorado. Based on this, it seems likely that a single company would benefit from TPP tariff cuts on arc-welding equipment from New Zealand, and that the company is located in Colorado. This example is hardly unique.

Nearly all states are the dominant importer of at least one product that stands to benefit from significant tariff cuts under TPP (see table below). In 2015, U.S. imports of fishing nets from Japan went exclusively to Alaska ($70,000 in tariffs paid), while plastic toilet seats from Malaysia went to Georgia ($800,000 in tariffs paid), and wool fabrics from Vietnam went to Vermont ($100,000 in tariffs paid). Less surprisingly, nearly all mufflers and exhaust parts from Malaysia went to Michigan ($250,000 in tariffs paid). As the Alaska and Vermont examples show, even small states are often the top beneficiaries for specific products.

All of the imports above would become duty-free immediately under TPP. Unlike the diffuse benefits case, it is easy to understand the motivation for sole-importers of products facing $50,000 or $100,000 or even $800,000 annually to support TPP.

So why aren’t they? Many – in particular small businesses – appear unaware of the potential benefits of TPP. They lack of time to pore through a 5,000-page document in search of the two to three lines impacting their business (in an agreement that may not even come up for a vote). Perhaps just as importantly, the resources dedicated to educating exporters about potential TPP benefits simply do not exist on the importer side.

At least as it relates to engaging importers in support of TPP, it appears that lack of education may be a bigger problem than a lack of concentrated benefits.

The table below shows an example of U.S. imports from TPP countries that are concentrated in each state, along with the estimated tariffs paid on those imports into that state and how TPP would lower those tariffs. 

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