How will Maine fare with the TPP? So far, more questions than answers

The Trans-Pacific Partnership — the sprawling trade agreement being negotiated among the U.S. and 11 other nations — has been at the center of a high-profile debate in Congress over granting President Barack Obama “fast track” authority to sign a final agreement with limited congressional interference. But on the ground, …

Published June 12, 2015, at 10:09 a.m.     |    

How will Maine fare with the TPP? So far, more questions than answers

Posted June 12, 2015, at 10:09 a.m.

The Trans-Pacific Partnership — the sprawling trade agreement being negotiated among the U.S. and 11 other nations — has been at the center of a high-profile debate in Congress over granting President Barack Obama “fast track” authority to sign a final agreement with limited congressional interference.

But on the ground, there’s an endless list of questions about the TPP and few solid answers. Negotiations have been going on in secret for nearly six years, so six years later little is known for sure about what the agreement will include, much less its broader effects on the U.S. economy and, more specifically, Maine.

The TPP is likely to be one of the biggest free-trade agreements to be negotiated since the two-decade-old North American Free Trade Agreement. But many of its major effects likely will have little to do with reduced or eliminated tariffs, especially because tariffs, in many cases, already are low or nonexistent among TPP nations. Rather, the labor and environmental standards and intellectual property provisions being negotiated could be the more significant elements of the final deal.

That all makes it especially difficult to assess the trade agreement’s potential impact on Maine’s economy, but there are several clues to glean from Maine’s current trade relationships with TPP nations and what those nations reportedly are seeking to secure from negotiations.

What Maine trades: According to the Congressional Research Service, about one-third of the world’s trade is conducted among the U.S. and the 11 other TPP nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Maine’s exporters depend on TPP nations for two-thirds of their business, primarily paper and electronics exports.

According to the U.S. Department of Commerce, the value of Maine exports shipped around the globe in 2014 was $2.7 billion; more than $1.8 billion went to TPP nations.

Three of the biggest importers of Maine goods are Canada ($1.4 billion in 2014), Malaysia ($105 million) and Japan ($97 million), all of which were among the top five destinations for Maine exports last year. Mexico ($53 million in Maine exports), Australia ($36 million) and Singapore ($25 million) also have notable trade relationships with Maine.

Any change in tariffs or trade relations with these countries — more specifically Japan or Malaysia, with which the U.S. doesn’t have existing free trade agreements — could further open these markets to Maine exporters.

Fish and marine products: Fish and marine products are one of Maine’s fastest growing export categories. Just last year, fish and marine product exports totaled more than $433 million, $256 million more than in 2004. Canada — with which the U.S. already has a free trade agreement, NAFTA — and Japan buy a lot of Maine fish and marine products, $323 million and $24 million, respectively. In Canada, the market for Maine fish products increased each year between 2004 and 2014.

Computers and electronics: Maine exports in computers and electronics were worth $260 million last year, with Malaysia the biggest market for made-in-Maine semiconductors. The Southeast Asian nation accounts for nearly half of Maine’s exports in that category — $100 million. Australia, Japan, Mexico and Singapore also import millions of dollars in Maine computer and electronic products.

Paper, another top performer: Trade in paper was the top category for Maine exports last year, totaling $483 million. But those exports peaked in Maine in 2010 and have been falling ever since.

Maine exported the most paper to Canada ($190 million last year), Australia ($25 million), and Mexico ($15 million). Other big buyers are TPP partners Peru, Chile, New Zealand and Japan.

A Japanese decline: Maine has seen exports of several products slip in the last several years. Most telling for the purposes of the TPP is the fall in several exports to Japan. Maine paper exports to Japan reached a peak of $45 million in 2006 but steadily fell afterward to $16.5 million last year. While fish and marine exports to Japan are significant, they peaked in 2012 at $27 million and declined in 2013 and 2014.

Between 2012 and 2014, total Maine exports to Japan fell by $29 million. Reversing that pattern is part of the idea behind Gov. Paul LePage’s planned trade mission there later this year. The role the TPP could play is an unanswered question looming over the trip.

The most dramatic slide occurred with Maine exports to Malaysia, which have fallen $233 million over the last decade. Most of this change is attributable to the decline in computer and electronic products that are central to Maine-Malaysia trade. Whether the TPP could salvage this trade is another open question.

U.S. jobs impact? One topic that’s top of mind when discussing TPP is its impact on U.S. jobs. In a 2003 legislative report, an independent consultant determined Maine lost as many as 800 jobs as a result of NAFTA. Now many are raising those same concerns as TPP negotiations continue. New Balance, which has sneaker manufacturing facilities in Norway, Norridgewock and Skowhegan, as well as two in Massachusetts, has said a tariff reduction or elimination for athletic footwear imports could put its U.S. jobs at risk.

Some winners, some losers: While there’s hope a liberalization of trade — specifically with Japan — could boost U.S. agricultural exports, not every U.S. farmer stands to win. When Japan joined TPP negotiations in 2013, the thinking was that this would bring about growth in U.S. agricultural exports because Japan imports about 61 percent of its food, according to the U.S. Department of Agriculture. Even though the U.S. is the source for 53 percent of Japanese food imports, its share has been in decline since the 1990s as food imports from other nations, including China, face lower tariffs in tapping into the Japanese market. So the elimination of protective tariffs could mean an increase in U.S.-Japan agricultural exports. The biggest winners in this deal likely are U.S. beef producers.

At the same time, U.S. dairy producers are worried the TPP could open the floodgates to dairy imports from New Zealand, which is the third largest dairy exporter in the world and has been adamant the U.S. market be open to its exports. The worry in the U.S. — including in Maine, where struggling dairy farmers have limited export opportunities — is that an influx of New Zealand dairy, especially powdered milk, may drive down prices and make the dairy business that much more untenable.

 

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