TPP trade deal pits Pittsburgh against Philadelphia
January 3, 2016 10:11 AM
Shipping containers rest on a barge in the Delaware River as the city of Philadelphia is seen in the background.
By Tracie Mauriello / Post-Gazette Washington Bureau
WASHINGTON — Pittsburgh manufactures the products. Philadelphia ships them around the world.
One city stands to gain from expanding trade into the Pacific Rim while the other has much to lose, their mayors say.
That’s why Philadelphia’s outgoing mayor, Michael Nutter, has been helping the White House stump for the Trans-Pacific Partnership while Pittsburgh Mayor Bill Peduto stands opposed.
On a recent press call arranged by the White House, Mr. Nutter told reporters the deal is good for his city and, as a whole, for Pennsylvania. He said the agreement would expand market access for services, software, telecommunications and more — resulting in higher-paying jobs. It also would reduce tariffs and ensure that trading partners are following the same environmental and labor rules as the U.S., he said.
“The status quo puts our workers and businesses at a competitive disadvantage. [It causes] higher costs for American goods, more barriers to trade and poorer standards for workers and the environment abroad than we have here,” he said.
Mr. Peduto acknowledges that the trade deal might be good for some industries, but says any benefits are outweighed by harm it would do to the steel industry. That’s why he’s at odds with President Barack Obama, who considers the mayor a strong ally worthy of more than a dozen White House invitations, including one to the First Family’s residence.
“He thinks I’m wrong, but I’ve watched several international treaties hurt the city and this absolutely would hurt, too,” Mr. Peduto said in an interview. “We’ve worked together on a lot of different issues but this is one we don’t stand together on.”
Still, some Pittsburgh companies, such as PPG Industries, stand to gain from eliminated or reduced tariffs, faster customs processing and increased access to global markets.
“We’re a net exporter, so these tariff cuts are very important,” said Gabe Pellathy, PPG’s managing director of governmental affairs. Some PPG exports are subject to tarriffs as high as 77 percent, putting the company at a competitive disadvantage overseas, he said.
That, of course, is the point of a tariff. Countries use them to inflate the price of imported goods in order to protect domestic producers. When tariffs are reduced or removed, the biggest beneficiary is the consumer, said Matt Rousu, professor of economics at Susquehanna University.
“Products from the foreign market become available to consumers and that pushes the price of products down. That benefits the consumer but it also has a spillover effect because if we’re spending less on products then we have extra money to spend on other things,” Mr. Rousu said.
“Among economists there’s overwhelming consensus among economists that freer trade benefits society,” he said. “It lets the U.S. produce what we’re best at producting and lets the other countries do what they do best, and that benefits everyone,” he said.
Not a ‘fair trade-off’
Mr. Peduto has heard those arguments, but says benefits to other industries don’t outweigh the harm the agreement would cause to the steel industry. Statewide, the industry supports 80,000 jobs and generates more than $9 billion a year in econmic activity, according to the Allegheny Conference on Community Development.
“It doesn’t seem to be a fair trade-off. There hasn’t been an international trade agreement that has benefitted from Pittsburgh, and this one in particular — with the steel industry on its last breath — isn’t going to help,” Mr. Peduto said.
United Steelworkers couldn’t agree more.
“The U.S. steel industry is in a fight for its survival right now,” spokesman Gary Hubbard said.
Steelworkers president Leo W. Gerard calls the agreement a “bad trade scheme” pushed by “self-dealing corporations.” He has said that it will lead to job losses. He has argued that it puts American companies at a competitive disadvantage by failing to mandate a minimum wage and by allowing too much of a product's parts to be manufactured in countries not covered by the agreement.
Mr. Hubbard said, “These countries will be able to sell products to our market without abiding by the same rules of labor and environmental standards we do. All these undeveloped countries will have access to our market but they don’t have to follow our rules.”
The industry already is being threatened by foreign competitors who are “dumping” steel, he said. That is, selling at a loss in order to put American competitors out of business.
Industry leaders fear the trade agreement will bring even more of that because it will give China more access to American markets.
Although China isn’t among the 12 countries in the accord, it stands to benefit by creating components for products exported to the U.S. by other countries covered by the Trans-Pacific Partnership.
The agreement litmis the percentage of an export’s components that can be manufactured by non-TPP countries, but some believe the limits, which vary by product, are too high.
“China is not part of the agreement but it is the phantom bad boy,” Mr. Hubbard said. “China doesn’t have to be held to all the parts of the agreement that we agreed to but they get all the advantages, and China is the Numero Uno bully on the global playground.”
That concerns Mr. Peduto too.
“Pittsburgh is still a manufacturing center so I can’t support [the trade deal]. I’ve seen several other international treaties hurt the city and this absolutely would, too,” he said.
Meanwhile, Philly is eager
Across the state, Mr. Nutter is hearing from constituents like Tim Flynn, CEO of Allied Wire & Cable, who says tarriffs and trade regulations are hurting the business he started in his parents’ basement and spent the last 25 years growing into a $100 million company.
“The only thing holding us back from being even more successful is the artificial trade barriers we face around the world,” Mr. Flynn said. “It is a real crime when we give the best price and delivery out there but still lose to a foreign company due to costs such as added-value taxes on American-made products.”
The Trans-Pacific Partnership agreement would remove tarriffs averaging 30 percent on wire and cable products, he said.
Pittsburgh and Philadelphia are similar blue-collar cities but what’s good for one isn’t necessarily good for the other, Mr. Peduto said.
“Our economies are vastly different. Philadelphia deals with international trade. Pittsburgh is based more on a domestic economy,” Mr. Peduto said.
Sure, they’re both blue-collar cities with similar median income and job growth, but only one, by virtue of its port and distribution centers, is becoming a major logistical hub for international trade.
“The Philadelphia area is much more involved with overseas trade, while we think of Pittsburgh as much more involved in domestic manufacturing,” so it makes sense for mayors Peduto and Nutter to take opposite sides, said historian James Broussard of Lebanon Valley College in Annville. “The more trade there is, the better it is for the people involved in shipping stuff in and out, and the less good it is for the people who are making the things because they might face new competition.”
There’s something else different about the two cities, too: their mayors. Pittsburgh’s needs the support of labor to retain his seat in the 2017 election. Term-limited, Philadelphia’s leaves office Monday as Jim Kenney steps in.
Muhlenberg College political scientist Chris Borick put it plainly: “Nutter is a lame duck and Peduto isn’t.”
Mr. Peduto has to consider political ramifications from unions that have historically contributed both money and manpower to his campaigns, Mr. Borick said.
The final say: Congress
Of course, it’s members of Congress, not mayors, who have the final say over the agreement. They, too, are looking out for parochial interests in casting their votes.
Among the local delegation, U.S. Rep. Mike Doyle, D-Forest Hills, opposes the trade deal while U.S. Rep. Tim Murphy, R-Upper St. Clair, and U.S. Rep. Keith Rothfus, R-Sewickley, have concerns and are still analyzing the 5,000-page agreement.
“Among the issues I am reviewing is whether the TPP could result in backdoor regulations hitting the economy, especially the energy sector, which creates jobs for tens of thousands of Western Pennsylvanians,” said Mr. Rothfus, who also is concerned about expanding trade with countries known for egregious human rights violations.
As chairman of the congressional steel caucus, Mr. Murphy said he is deeply concerned about the future of the industry. He has to weigh the concerns of the steel industry against the impact of local companies that stand to benefit.
Pennsylvania’s U.S. senators have much to weigh, too. They represent both Pittsburgh and Philadelphia and must consider each, along with many rural and suburban regions with varied economies in between.
Sen. Bob Casey, a Democrat, and Sen. Pat Toomey, a Republican, both still are reviewing the 5,000-page agreement and haven’t decided whether to support it, although Mr. Casey said he is leaning toward a no vote.
“I have significant concerns,” he said Thursday. For example, he said, eight of the 11 countries in the agreement have lower minimum wages that the U.S. including seven where workers can be paid less than $3 an hour.
“The ability of these countries to undercut U.S. wages will impact workers throughout Pennsylvania and across our nation,” Mr. Casey said. “In analyzing trade agreements I’ve focused on the impact that these deals would have on incomes and jobs, and I believe the TPP falls short on both counts.”
It’s unclear when a ratification vote might occur. Senate Majority Leader Mitch McConnell, R-Ky., has said he wants to wait until 2017 when a new president is in office but House Speaker Paul Ryan, R-Wisc., has said a vote in his chamber could come much sooner.
Washington Bureau Chief Tracie Mauriello: email@example.com; 703-996-9292 or on Twitter @pgPoliTweets.
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