18,000 Tax Cuts

In a pitch clearly aimed at Republicans, the Obama Administration has begun advertising that the Trans-Pacific Partnership includes 18,000 tax cuts.  This is welcome rhetoric—tariffs are taxes and taxes are bad.  Lowering tariffs is the core function of trade agreements, and the positive impact of the TPP will depend in large measure on how deeply and quickly it eliminates these artificial barriers to trade.  

But they’re actually praising the wrong tax cuts. 

The administration’s new “guide” to the TPP notes that the agreement “will cut over 18,000 taxes that other countries impose on American exports,” and claims this is good because it’s “18,000 ways TPP helps American workers, farmers, and businesses win.” 

There’s nothing wrong with touting the elimination of 18,000 foreign tariffs.  It will help U.S. exporters who want to sell more cherries in Vietnam, and it will help foreign consumers, who will benefit from lower prices and greater variety. 

By limiting the number to 18,000 however, the president gave up a genuine opportunity to advocate free trade, choosing instead to rely on mercantilist rhetoric about level playing fields and winning.   

In addition to cutting 18,000 foreign tariffs, the TPP will also eliminate thousands of U.S. tariffs on goods from TPP countries.  Those tariffs are taxes that the U.S. government imposes directly on American consumers and businesses who buy imported products.  The losers from American protectionism are a much larger group than the winners from increased access to foreign markets.

It’s a shame, but not surprising, that the President didn’t include U.S. tariffs in his list of TPP tax cuts.  Lauding the elimination of thousands of U.S. tariffs would require the administration to admit that American protectionism exists and that it harms the U.S. economy.  Unwilling to recognize the true benefits of free trade, the President is forced to sell the TPP to the American public by talking about how good it is for business.

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