Business & Real Estate

Trump’s cancellation of Pacific trade deal could hurt California

White House: TPP was not putting U.S. interest first

White House press secretary Sean Spicer provided President Donald Trump's reasons for signing an executive order to withdraw the U.S. from the Trans-Pacific Partnership, on Monday, Jan. 23, 2017.
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White House press secretary Sean Spicer provided President Donald Trump's reasons for signing an executive order to withdraw the U.S. from the Trans-Pacific Partnership, on Monday, Jan. 23, 2017.

President Donald Trump said his decision to scrap a major international trade agreement will protect American jobs against imports.

Much of California, though, wasn’t in a mood to thank him. Already bracing for a fight with Trump over issues such as climate change and immigration, California largely found itself at odds with Trump just four days into his presidency over a topic with major implications for the state’s economy.

Trump’s executive order Monday withdrawing from the 12-nation trade deal known as the Trans-Pacific Partnership, or TPP, could hurt exports of Silicon Valley computer and electronics products, as well as Central Valley farmers looking to grow their markets overseas. The film and music industries, hoping for stronger trademark protections, could suffer, too.

Along with Trump’s recent declaration that he would attempt to renegotiate the quarter-century-old North American Free Trade Agreement, experts said they expect to see fewer goods move in and out of California.

“I think it’s calamitous for California,” said Jock O’Connell, a Sacramento economist and international trade consultant.

Among the likely victims is one of Sacramento’s major employers, almond cooperative Blue Diamond Growers, which has built a $1.6 billion-a-year empire in part by making major inroads in Pacific Rim countries such as Japan. Blue Diamond declined comment, but others in agriculture said TPP would have eased access to foreign markets guarded by high tariffs.

“We see a burgeoning middle class around the world; they’re hungry for what we produce here,” said Paul Wenger, a Modesto almond and walnut grower and president of the California Farm Bureau Federation. The Almond Board of California said TPP would have meant “the elimination of tariffs on all tree nuts, including almonds, in several important Asian markets.” Exports take up about one-third of California’s agricultural production.

TPP, which was former President Barack Obama’s signature trade agreement, involved the United States and 11 countries bordering the Pacific Ocean, including Mexico, Canada, Japan, Australia, New Zealand, Vietnam, Chile and Peru. The pact essentially created a free-trade zone among countries representing about 40 percent of the world’s economy. It called for gradually eliminating tariffs on 18,000 products, and imposing stringent labor and environmental standards on U.S. trading partners. It also would have provided protections against intellectual property theft, for the benefit of the film and entertainment industries.

The diverse reactions to Trump’s decision underscore how California’s economic interests can sometimes differ from other parts of the country. In the industrial Midwest, where free trade and globalism are seen in terms of cheap imports, outsourced labor and shuttered factories, the order brought cheers from leading Democratic politicians.

In California, trade is considered a way to open up overseas markets for electronics, wine and other homegrown products, and a source of jobs when goods are brought into the state’s major ports.

Canceling TPP “will mean fewer jobs, everything from truck drivers to longshoremen,” said economist Sung Won Sohn of California State University, Channel Islands. “California is really the focal point of TPP. Most of it has to go through California.”

California in 2015 exported $69 billion worth of goods to countries in the TPP, including $27 billion to Mexico and $17 billion to Canada, according to the latest data from the U.S. Commerce Department. California imported $146 billion worth of goods from TPP countries. O’Connell said the Commerce Department’s state-by-state statistics can be misleading because they often include goods that pass through a state’s ports, regardless of where they were manufactured or where they’re ultimately consumed.

Computers and electronics goods represent the largest exports from California to TPP countries. California sent $16 billion worth of computers and electronics to Canada, Mexico, Japan, Singapore and Australia in 2015.

Carl Guardino, president of Silicon Valley Leadership Group, estimated that 105,000 jobs in Santa Clara Valley depend on international trade.

“This is bad news. ... The only entity that ought to be smiling at the (TPP) news is the Chinese government,” he said, referring to China’s plans to forge ahead with trade agreements with many Pacific Rim nations. China wasn’t part of the TPP negotiations, which Obama pursued in part to counter China’s influence in Asia.

At tiny Ensemble Designs Inc., a 45-employee Nevada City manufacturer of high-tech equipment for TV broadcasters, half of the yearly revenue comes from sales overseas. Some of its key customers include Japan, Mexico and other TPP partners.

“If the United States shifts toward a more restrictive and less open trade stance, that’s going to have an adverse effect,” said David Wood, chief executive of Ensemble.

Not all Californians believe that TPP would help. The California Labor Federation joined labor groups across the country in opposing TPP, arguing it would force workers to compete against peers abroad who are paid little and afforded few workplace protections.

“We’re pleased that the TPP is no longer on the table,” said Steve Smith, the federation’s spokesman. He called for Trump to negotiate trade deals that are not “tilted toward the interests of multinational corporations.”

Tim Johnson of the California Rice Commission said the cancellation of TPP won’t be a major setback so long as Trump pursues trade deals with specific countries such as Japan, a major importer of Sacramento Valley rice.

Dale Kasler: 916-321-1066, @dakasler

Trade impact

California exports to Trans-Pacific Partnership signatories in 2015, in billions:

Country

Exports

Mexico

$26.787

Canada

$17.263

Japan

$11.744

Singapore

$3.926

Australia

$3.437

Malaysia

$1.823

Chile

$1.513

Vietnam

$1.247

New Zealand

$0.569

Peru

$0.561

Brunei

$0.007

TOTAL

$68.877

Source: U.S. Department of Commerce

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