New interactive map shows potential import benefits from TPP by state

Posted on by Dan Anthony

Today we launched a new interactive map featuring first-of-its-kind research on the potential impacts of US tariff cuts under TPP for employers in all states.

The research is unique in several ways. First, it quantifies estimated tariffs paid on import from the so-called “new TPP” countries (i.e., Brunei, Japan, Malaysia, New Zealand, and Vietnam). Second, it uses the proposed US tariff reductions to show how those taxes could be reduced for employers in every state over the first five years of TPP implementation. Third, the research provides multiple examples of specific products imported into each state of products whose tariffs would be eliminated immediately upon implementation (e.g., Alabama’s imports of textile finishing dyes from Japan or Michigan’s imports of mufflers from Malaysia).

The interactive map highlights the top-line data for each state in terms of import taxes paid and potential tax cuts. For example, employers importing into Kentucky from new TPP countries paid an estimated $117 million in import taxes in 2015. If TPP were in effect, tariffs on those same products would be reduced by 90 percent by year five, potential saving Kentucky employers over $500 million along the way.tpp_state_imports_map

tpp_state_imports_kentuckyIn addition to the “fast facts,” clicking on the map also provides an option to download the corresponding one-page fact sheet for each state (pictured). The fact sheets include addition details, such as how the tariffs paid would fall over time, the list of key products eligible for duty-free treatment, and the top sources for products currently facing import taxes.

Using Kentucky again: most tariffs would be eliminated immediately and the majority of tariffs paid are on imports from Japan. Numerous raw materials and components used by American manufacturers – such as metal-working machinery from New Zealand, wiring sets (auto parts) from Vietnam, and rubber gaskets from Malaysia – are among the Kentucky imports that would go duty-free immediately.

Perhaps surprisingly to many, there is tremendous variation between the states – and those differences are not just based on import volumes. For example, while more than 95 percent of imports into Alaska and West Virginia could be duty free by year 5, just 28 percent of imports into Hawaii could be eligible. we’ll be publishing several blog posts daily for the rest of the month to highlight some of the research for each state.

 

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

Posted on by Dan Anthony

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. 

tpp_unique_products

Kasich supports TPP that could save Ohio importers hundreds of millions of dollars

Posted on by Dan Anthony

On Friday, Ohio Governor John Kasich joined a bipartisan group of political and business leaders at the White House to talk about the importance of passing TPP this year. Kasich also penned an op-ed in the Wall Street Journal, which noted:

With 40 million American jobs dependent on trade, the U.S. economy is already interconnected with the rest of the world. So TPP is not about something “new” as much as it is about helping existing U.S. companies—large and small—find growth opportunities in Japan, Australia, Canada, Chile, Malaysia, Singapore, Vietnam and four other Pacific Rim nations that want to increase trade with America.

There is little doubt that Ohio is an export powerhouse and that the TPP countries are very important export markets. According to the Business Roundtable:

  • Ohio exported more than $30 billion in goods and services to TPP countries in 2014;
  • TPP countries accounted for nearly 60 percent of the State’s goods exports, and
  • U.S. trade – exports and imports of goods and services – with TPP countries supported about 560,000 jobs in Ohio.

The last bullet contains a key, but often overlooked, point: those 560,000 jobs in Ohio rely on exports and imports. And the TPP provides significant potential benefits for the Ohio companies that import from TPP countries, their workers, and their customers.

In 2015, the United States collected an estimated $357 million in tariffs on imports into Ohio from the TPP countries with which the United States does not have an FTA already (i.e., Brunei, Japan, Malaysia, New Zealand, and Vietnam). That is nearly $1 million per day. Among all states, only imports destined for California and New Jersey paid more.

tpp_top_5_states_tariffs_paid_2015
Much of the tariffs were assessed on apparel from Vietnam, but a number of industrial products used by U.S. manufacturers also faced millions of dollars in tariffs. For example, Ohio imports of:

  • wire harnesses – the electrical connectors that make auto blinkers blink and windshield wipers wipe – from Vietnam alone faced about $5 million in tariffs;
  • machining centers and lathes – factory equipment used for metalworking by American manufacturers – from Japan faced $5 million in tariffs, and
  • the windshield wipers and blinkers mentioned above from Malaysia faced nearly $500,000 in tariffs.

The TPP would eliminate each of those tariffs immediately, making products manufactured in Ohio with those parts that much more competitive in global markets. Products accounting for about half of the tariffs paid ($177 million) on Ohio imports from new TPP countries would get immediate duty-free treatment under TPP.

For those gains to occur, Congress must first pass TPP. Kasich summed up the choice facing Members of Congress later this year:

Saying “yes” to TPP makes possible the economic growth American businesses and their employees want and need. Saying “no” is not a neutral or beneficial move—far from it. Turning down TPP slams the door on a way forward for job creation, and it will have a choking effect on the jobs, companies and communities that are now sustained by trade.

This is particularly true for jobs, companies and communities in Ohio with strong trade ties to the TPP countries.

If your company would benefit from U.S. tariff cuts under TPP, please add it to our free TPP importers list here. You can learn more about potential TPP import benefits here.