California Forum

California should capitalize on global trade with TPP

Roger Niello
Roger Niello

As Herbert Hoover’s presidency came to a close, he made mistakes that turned an economic downturn into the Great Depression. One was a populist appeal to protect our domestic economy by impeding imports through the Smoot-Hawley Tariff Act of 1930. Not to be trite, but if we don’t learn the lessons of history, we’re doomed to repeat them.

The Tariff Act added 890 tariffs to increases made eight years earlier by the Tariff Act of 1922. The bill completely soured trade relations with much of the rest of the world. The resulting impediments to international trade helped turn the Great Depression into a worldwide calamity.

More than 1,000 economists petitioned Hoover not to sign it. Many bankers sided with them, as did scores of editorialists. It only squeezed through the U.S. Senate, 44-42. But populist support, driven by individual economic self-interests and emotional reaction to economic forces, pushed protectionism to victory and our economy to defeat.

Today, we face a mirror image of Smoot-Hawley.

We have the opportunity to adopt the Trans-Pacific Partnership, a trade agreement with 11 other countries that will strengthen our competitiveness in global markets.

The partner countries – many in the Asia Pacific region – encompass two-thirds of the world’s economy. It is a market of nearly 500 million consumers with a combined GDP of nearly $12 trillion.

According to the Economist magazine, the Trans-Pacific Partnership proposes to reduce 18,000 tariffs on American goods to this huge market to zero. Agricultural barriers, usually among the most heavily defended, will start to come down. And significantly, the TPP promises to give greater access to these markets for more service providers, a particular strength of our economy.

The Trans-Pacific Partnership provides particular opportunity to California and the Sacramento region. California is the largest exporting state to the Asia Pacific region, $67 billion in 2015. That translates into high-paying jobs for more than 1 million Californians. Imagine what this can become with much freer access to a $12 trillion market.

The potential for the Sacramento region is tremendous. According to the Northern California World Trade Center’s Capital Region Export Plan, the capital region has unique regional trade assets, including a deep-water channel seaport in West Sacramento, proximity to ports in Stockton and Oakland, an international airport, and access to major markets through interstate highways and rail.

The issue is playing out in this year’s political campaigns. It is a different kind of debate that doesn’t fall along partisan lines. I find myself with expected friends but also opponents among fellow Republicans, and rare allies who are Democrats including, yes, at least in this case, President Barack Obama.

The reality is that the Trans-Pacific Partnership includes the strongest labor provisions of any trade agreement in history. The Economist wrote recently: “There are clauses that attempt to slow deforestation and overfishing. All parties will also be compelled to follow the International Labour Organization’s basic principles on workers’ rights. They will be required to set a minimum wage and regulate working hours.”

California long has been a leader on the world stage. Political, business and, yes, labor and environmental leaders cannot ignore the growing influence of the Asia Pacific region. Rather than fear competition and try to hide from it, we should capitalize on global trade to grow our economy and benefit American workers and consumers. We should not repeat the sorry history that led to the disastrous trade policies of 80 and 90 years ago.

Roger Niello is former president of chief executive officer of the Sacramento Metro Chamber, and a former assemblyman. Contact him at rwniello@niello.com.

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