Alan Wm. Wolff, a senior trade negotiator in both Republican and Democratic administrations, wrote a good commentary for Fortune today on “Why Mitch McConnell Should Move Ahead on the Pacific Trade Deal.” It gave four specific reasons that passing TPP is in the U.S. national interest, including: safeguarding America’s stake in Asia, boosting the U.S. economy, constructing 21st century trading rules, and maintaining U.S. credibility.
However, the statement that “U.S. trade and investment barriers are already low” needs some clarification. We’ve shown previously that average tariffs on imports from TPP countries can be quite high. Those taxes are paid by the end consumer, whether they are U.S. manufacturers trying to remain competitive in the global marketplace or families trying stretch paychecks as far as possible. And it is possible for barriers to be low but still very costly.
In fact, companies importing from TPP countries currently pay about $17 million per day in tariffs. That is nearly double the amount paid in 2009, as shown in the chart below.
In fact, the daily tariff cost has increased every year since 2009. This is true despite ever-lower tariffs on imports from countries with previously signed FTAs. For example, the U.S.-Australia FTA went into effect in 2005 but U.S. tariffs on some products are subject to 18-year phaseouts. While those products will not be duty free until 2022, the face a slightly lower rate every year. And yet cost for American importers continues go grow.
The fact that U.S. importers pay significant tariff costs does not undercut any of the arguments made by Wolff. Indeed, they strengthen the argument that Congress should consider the TPP agreement this year, as they are another cost to American companies, workers, and families for every day of delay.