President Obama talks trade

The full interview: President Obama defends the TPP

Kai Ryssdal Oct 6, 2015
President Obama talks trade

The full interview: President Obama defends the TPP

Kai Ryssdal Oct 6, 2015

Kai Ryssdal: Mr. President, good to talk to you again, sir.

President Barack Obama: Great to talk to you, Kai.

Ryssdal: On the theory that the TPP is a legacy thing for you, right, along with the Affordable Care Act and the stimulus program from what seems like a really long time ago now, how involved were you with this thing at the very end? Were you making phone calls? Were you working other leaders?

Obama: Yes, and the reason is not because it’s a legacy item for me. Because it’s a legacy item for America. Keep in mind Kai that we started this five years ago, with the basic proposition that the Asia-Pacific region is the most populous, fastest-growing region in the world. And since 95 percent of the world’s market is outside our borders, we’ve got to make sure that we’re selling in other countries’ goods made in America and services designed and produced here in the United States. And so we gathered together these 11 countries. It was a very difficult, contentious negotiation. Our team did a great job. At the very end you always have a few things that you’ve just got to get over the hump.

And so yes, I made calls to prime ministers, I made calls to presidents, I made calls to U.S. businesses, I made calls to a lot of stakeholders, environmental groups, to explain to them why it is so important for us to make sure that we’ve got a high-standard set of rules governing trade and commerce in this region. Because if we don’t set those standards, if we don’t have strong labor standards, environmental standards, transparency, making sure that our companies are being treated fairly, if we don’t set them, then China will set them, and our businesses and our workers will be disadvantaged, so we put a lot of effort into this thing. Now our goal is to make sure that everybody here in the United States is informed about it. We will be posting every dotted I and crossed T on a website. And Congress and the American public and all the constituencies that are interested are going to be able to review this thing and see that in fact this is the most progressive, high-standard trade deal ever crafted.   

Ryssdal: When are you going to post it? Soon?

Obama: Soon.

Ryssdal: Since you mentioned China, last time you and I spoke, you said that they had reached out. I’m assuming you spoke with President Xi about this when he was in town 10 days, two weeks ago. Where are they on the list of countries No. 13 through 15 looking to join this thing?

Obama: Here’s what I’m confident about. We get this ratified and we start implementing, we will strengthen the hand of reformers inside of China who recognize that the model that they’ve been operating under is not going to work forever. Part of what’s happening in China right now is that they have an old-style model of cheap labor, exporting manufacturing goods, not a lot of high-value-added, not a lot, a big, strong domestic market. If they’re going to sustain the growth that they’ve had over the last 20 years, if they hope to match the growth levels that they’ve seen, they’ve got to open up their markets, they’ve got to provide protection for patents and intellectual property, they’ve got to end the subsidies to these state-owned enterprises. So there are a lot of things that they’re going to have to do. And if they see that all their neighbors are operating at a high level, then I am confident that ultimately they will adapt to the rules that we’ve set up as opposed to us adapting or being locked out of these markets because they’ve set rules that advantage the old style of doing business.

Ryssdal: Seems to me a little bit like you’re betting on the come on this one, right? Because as we’ve seen the past four months, the Chinese are not afraid to get their hands in there and mess around with their own economic gears, right? With currency manipulation, with trying to prop up their stock market. Currency manipulation, in fact, was a big point of contention between you and the Congress when you were negotiating fast track on this one. What do the Chinese have to do that will prove to you they’re going to do this because—

Obama: Well, keep in mind, Kai, if you look at the data, the peak of Chinese currency manipulation was taking place 10 years ago, five years ago, 15 years ago. Right now, actually, the most recent intervention they did in the markets probably propped up the RMB — their currency. It’d probably be even lower had they not intervened.

Ryssdal: But it scared the bejesus out of everybody.

Obama: Well, it did, and I think it also concerned President Xi, recognizing that you can’t — in an interconnected global economy — continue to operate at the scale they’re operating with old rules that maybe applied when they were a backwater economy. Now, they’re a major player and a major engine of economic growth, and they’ve got to be more transparent, more professional, more in sync with best practices. That, I think is going to help. When it comes to currency manipulation, one of the things we have in the Trans-Pacific Partnership — and this is the first time we’ve been able to get all these countries to agree on it — there are a set of principles in terms of how you measure and what constitutes currency manipulation. Now it is not an enforceable provision in the same way that for example, violations of labor standards or environmental standards will be, but keep in mind that when it comes to setting up these trade rules internationally, our goal is constantly to raise the bar, and you’re never going to get 100 percent of what you want right away.

As a consequence of this deal, Vietnam is not going to suddenly have U.S. labor standards. On the other hand, by us for the first time getting Vietnam to agree that they have to prohibit child labor, they have to prohibit forced labor, they have to allow for unions to be able to form inside of Vietnam — that introduces a principle inside their economy that will ultimately not only make workers in Vietnam benefit, but it’s going to be good for our workers because they’re not going to be competing against child labor or forced labor. And that is enforceable. NAFTA labor provisions weren’t enforceable. We raised the bar. The same is going to be true with currency. Over time, what you do is you keep on chipping away at this thing until you get a high-standard deal for everybody that is creating the kind of level playing field that allows American businesses to succeed.

Ryssdal: Let’s talk about the impact back home for a minute. I get that if I’m Big Pharma or if I’m a dairy farmer in this country, this deal has immediate ramifications for me. But if I’m just some person out there in the regular economy, how am I going to see this? What’s it going to mean to me?

Obama: Well, here’s what it’s going to mean: If you have eliminated 18,000 taxes that other countries in this region effectively place on U.S. goods and services when we try to sell there — so it makes them more expensive and it makes them less attractive — if we eliminate those taxes, now U.S. goods and services are more competitive. That means we’re selling more. If U.S. companies are selling more to these countries, then that means that those companies can hire more people and put more people to work. And by the way, if we’re able to reduce these tariffs, these taxes that are imposed, it means that companies who might have been thinking, you know what, if we want to access the Vietnam market, we’ve got to produce in Vietnam. Now they’re saying to themselves, “You know what, we can produce here in the United States, we don’t have to offshore, we don’t have to ship out. Instead, we can make things here and sell them there, and we know that we’re going to be able to have access to those markets.”

And keep in mind that a lot of people say, “Oh, it’s the big corporations that are all benefiting from this.” Companies like a Boeing or a GE, they’ve got supplier chains that go from Maine to California. They’ve got companies that may only have 50 employees that produce one particular part. You’ve got wine growers in Oregon, you’ve got tea producers, small internet companies and small businesses that are producing for export today, partly because it’s powered by the internet. In fact, this trade agreement for the first time has an entire chapter just devoted to making sure that small businesses have access to these export markets, not just the big companies.

Ryssdal: Let me ask you a question about individuals in this economy. We’ve been doing some economic polling. It’s going to be out in a couple of weeks. What we are finding is a tremendous sense of people being stuck, of economic anxiety. And that’s not to say that this is jobless recovery, because as we know and as you know, jobs are coming back in this country.

Obama: Right.

Ryssdal: What we have here though is a wageless recovery…

Obama: Yes.

Ryssdal: ‘Cause they’re going nowhere.

Obama: Yeah.

Ryssdal: The question then is, is that the new normal? Should we just get used to that?

Obama:  No, I think we shouldn’t get used to it. And I think there’s some very specific things we can do to finally start seeing more accelerated wage growth to match the job growth, and I’ve talked about some of these things before. Raising the minimum wage makes a difference for millions of workers, making sure that we have a tax code that doesn’t incentivize short-term thinking on the part of companies and quarterly reports but instead gives them incentive to invest in their workers and make sure that they’re being treated fairly. That can make a difference. Making sure that we’re investing in the continuing education and training of our workers, so that they have more skills and that means that they can get higher wages. That makes a difference. Making sure that we have the laws that allow collective bargaining and unions. That makes a difference.

So part of what’s happened when it comes to wages as opposed to job creation is that as a consequence of globalization but also because of automation and technology, increasingly workers have had less leverage. And so even if the jobs are being created, companies don’t feel obliged to give people raises as demand for their products go up. They can say to themselves, “You know what, we’ll just invest in more automation instead of hiring more workers, or if we do hire more workers, we’ll tell them,’This is how much we can afford, and if you want more, then we know that there’s a bunch of other people that we can get.'” And we have to make sure that the middle class and workers have more leverage and the laws that we set up in this country can make a difference. And here’s what we know. There are countries like Germany where wages typically are higher but they’re still competitive, and it has to do with the arrangements they make and how big of the pie that’s growing goes to middle-class families and workers as opposed to just shareholders and financial firms.

Ryssdal: Last time we talked, I pushed you a little bit on how jobs inevitably when trade agreements get done, they inevitably go away, and nobody who’s in favor of free trade ever says, “You know what, you’re going to lose some jobs, get used to it.” And you pushed back a little bit. Do you think people believe you when you say this will be good for us? Do you think my 17-year-old can believe you that in 20 years, this is going to wind up being a net positive?

Obama: I think the starting point is skepticism when it comes to trade, because the story that people associate with trade — the story I associate with trade, I mean, remember I’m a progressive Democrat who came out of a —

Ryssdal: I remember.

Obama: — manufacturing state and saw plants close down in small towns, and people who had worked there all their lives suddenly are left in the lurch. So I’ve seen the negative effects of trade, but the argument that I’ve made, and I make this especially to my union friends because they support me on everything else but on this one —

Ryssdal: Yeah, they talking to you on this one?

Obama: — we have a difference. What I‘ve said to them is that companies in the United States who are pursuing a low-wage strategy and have decided that the way for us to compete and make a profit is to find the lowest wages possible, they’ve already left. They’re already gone.

And the question now becomes, how do we position ourselves so that we don’t lose in the future? This trade deal doesn’t make up for all the offshoring that’s happened over the last 20, 30 years. I’m the first one to acknowledge that. But I can tell you that under my administration, manufacturing has grown faster than any time since the 1990s. And that’s not just autos, that’s across sectors. And part of the reason is because there are some things we’ve done to make ourselves more competitive, and we have also made sure that other countries are not taking advantage of us as much when it comes to the rules of the road. This is part of that overall strategy.

We’re not going to bring back all the manufacturing jobs that were lost. The economy is dynamic and is changing. More of it is in the service sector than it used to be. Unions have become weaker, and, frankly, companies have moved to a much more short-term approach to quarterly profits as opposed to long-term investment. All those trends have conspired to make it tougher on a lot of middle-class families, and the way to reverse that is to invest in education, invest in things like infrastructure that can’t be exported, train our workers so that they continue to be the best in the world, make sure we’re investing in research and development so that we can continue to innovate. And part of that is also making sure that we have access to markets and a reciprocal system of trade so that, since these folks are all selling to us, we better be darn sure that we’re selling to them. And if you are fighting the last war, which typically happens in these debates, where people say, “Well, look at what happened with NAFTA.”

What I say to them is, “Well, we should have learned some lessons from NAFTA, and in fact that’s what we’ve done, which is why now we have enforceable environmental provisions and enforceable labor provisions.” And as I said before, Vietnam is not going to suddenly have the same standards that we do. Malaysia is not going to suddenly enforce environmental provisions exactly the way we do, but we will have raised the bar for them, and if in fact they have these higher standards, which means that they have responsibilities and costs for operating in those countries that are higher than they currently are, then I’m confident that we can compete and we will continue to see insourcing of jobs moving here, moving back. What we can’t do is think that somehow, if we draw a moat around this country, that we’re going to be able to avoid globalization and technology, because frankly when you look at job loss and lost leverage, automation and technology has probably contributed more than trade has to that problem. The anxieties are real, the concerns are real, but the prescription is not for us to try to look backwards. The prescription here is for us to look forward, and that’s what this trade deal does.

Ryssdal: Mr. President, thanks very much for your time, sir.

Obama: Great to talk to you, Kai. Thank you, always a pleasure.

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