White House Study: China Trade Deal Worsens Damage from TPP Failure

The Obama administration issued a fresh warning on Thursday about the dangers of Congress failing to pass its Asian trade deal, saying that millions of U.S. jobs could be at risk if a rival China-led trade pact is enacted.

As they gear up for one last push to persuade Congress to pass the Trans-Pacific Partnership (TPP)in the two months following Tuesday's elections, senior administration officials said 35 U.S. industrial sectors would lose substantial ground to Chinese competitors in the Japanese market alone.

In a new study, the White House Council of Economic Advisers estimated that China's Regional Comprehensive Economic Partnership (RECAP) trade deal would likely lower Japanese tariffs on Chinese goods by five to 10 percentage points. If TPP is shelved, U.S. companies would be stuck with Japanese tariffs averaging twice as high as their Chinese competitors.

Obama administration officials have long argued that China would seize economic leadership in Asia and write lower-standard trading rules for the region if TPP fails. The White House study seeks to quantify the argument by examining the effect of likely RCEP tariff cuts by Japan.

China is negotiating RCEP with 16 Asian countries, seven of which are also signatories to the TPP agreement: Japan, Australia, New Zealand, Vietnam, Malaysia, Singapore and Brunei.

"If TPP is not passed and RCEP is enacted, which is what all these countries say they are planning to do, then U.S. businesses would face a direct loss of competitive position," said Jason Furman, the chair of the Council of Economic Advisers.

This would displace U.S. goods and be worse than simply maintaining the trade status quo, Furman said. The study identifies 35 industrial sectors employing 4.7 million people with $5.3 billion in sales to Japan that would face such a disadvantage.

A broad manufacturing sector stretching from sporting goods to office supplies could see $720 million in annual sales to Japan at risk, the study said.

The administration faces an uphill battle to get a vote for TPP in Congress' post-election "lame duck" session, due to strong anti-trade rhetoric in the presidential campaign and House Speaker Paul Ryan's recent comments that the trade deal lacks the votes for passage.

But U.S. Trade Representative Michael Froman said he is continuing to press the TPP case with individual members and working with Senate Finance Committee Chairman Orrin Hatch to ease his concerns about patent protections for biologic drugs.

Froman said these efforts have been met with "a lot of receptivity".