Trans-Pacific Partnership: Obama says China open to joining trade deal

President Obama sits down with Marketplace's Kai Ryssdal to discuss future trade agreements on Wednesday, June 3, 2015.
President Obama sits down with Marketplace's Kai Ryssdal to discuss future trade agreements on Wednesday, June 3, 2015.

Listen to story

Download this story 8.0MB

On Wednesday, Marketplace host Kai Ryssdal sat down with President Obama to discuss the future of international trade:

There's this thing that happens when you talk to the President. You kind of stop paying attention. I mean, you're paying attention, of course, but you're not really listening, if you know what I mean. You're thinking about what you should ask next, about how much time you have left — which is never enough — and a thousand other things.

Which is why — early in our interview today — he caught me up short.

I'd asked him about China, about how sure he is that once we and the other TPP countries write the trade rules for the region, that the Chinese will follow. Because it’s a pretty big deal that the second biggest economy in the world isn’t in the biggest trade deal the U.S. has had in a generation.

He started talking and I started thinking about where to take the interview next, and then he said, “Well, they’ve already started putting out feelers about the possibilities of them participating at some point.”

That would be a big (trade) deal.

Economists can, and do, argue about free trade all the time. But it’s pretty much accepted wisdom that in the aggregate — and that’s the key word here, aggregate — free trade is a net positive.

The catch, of course, is that with winners come not-winners, and so I asked the president about that.

“The question is, are there a lot more winners than losers, and the answer in this case is yes. But that doesn’t mean that there is not going to be some impact on some sectors of the economy, by definition,” he said.

A lot of the pushback against the TPP is coming from the President’s side of the aisle: Democrats who remember NAFTA and what it meant to a lot of their constituents — lower wages and lost jobs. Which the President gets. Kind of.

“The argument that I make to my friends, whose values I share, is that you can’t fight the last war.”

This time, he says, will be different. With tougher regulations and higher standards covering workers who make up almost 40 percent of the entire global economy.

“If we’ve got potentially hundreds of millions of workers who are now subject to international labor standards that weren’t there before, and now when we’re working with them, even if they’re not enforcing those standards 100 percent, we’ve got enough leverage to start raising those standards.”

And really, he said, it’s not like we’ve got a choice.

“We are completely woven into the global economy. We’re the hub to many, to a large extent of the global economy. The question is, how do we construct a set of rules and how do we make sure we’re adapting and using the incredible advantages we have to the best of our ability?”

Interview transcript

KAI RYSSDAL: Mr. President, good to talk to you again, sir.

PRESIDENT OBAMA: Great to be here.

RYSSDAL: So, you spent the first couple of years of your presidency, as you say, trying to drag the economy out of a ditch. Here we are now. Recovery's five years old. Jobs are back, growth is back. And yet you have chosen an issue where you are arm-wrestling members of your own party, you're aligning with the GOP, who’ve spent six years throwing everything they can at you to stop you. Why this issue now?

OBAMA: Well, keep in mind that we started this issue four or five years ago, and in my trips to Asia, what became very clear is this is the fastest growing part of the world economy, the most populous, the most dynamic. And, if we are not there helping to shape the rules of the road, then U.S. businesses and U.S. workers are going to be cut out, because there's a pretty big country there, called China, that is growing fast, has great gravitational pull and often operates with different sets of rules. 

So, we started this negotiation, the Trans-Pacific Partnership, recognizing that a third of our recovery's been driven by exports, that typically export industries pay higher wages, and if we want to make sure that we're selling American products, American services into not just the next decade, but the next several decades, then we've got to have high standards, high labor protections, high environmental protections, in that part of the market, that part of the world, where we need to do business.

RYSSDAL: I get all that, and I understand it, but you brought up China, so I'm going to go there. China is the 800-pound gorilla that is not in this deal. You say you want to write the rules of trade for the global economy so that the Chinese don't. On the theory that this agreement is about our place in the global economy, how confident are you that the Chinese, who, as you know, do what they want, when they want, the way they want to do it, how confident are you that they're going to follow?

OBAMA: Well, they've already started putting out feelers about the possibilities of them participating at some point.

RYSSDAL: To you?

OBAMA: To us, to Jack Lew, the Treasury Secretary. The fact is that if we have 11 of the leading economies in the Asia-Pacific region, who have agreed to enforceable labor standards, enforceable environmental standards, strong I.P. protections, non-discrimination against foreign firms that are operating access to those markets, reduced tariffs, then China is going to have to at least take those international norms into account. And, we are still pursuing strong bilateral economic relations with China, we still pressure them around issues like currency, or the subsidies that they may be engaged in, or theft of intellectual property.

We still directly deal with them on those issues, but it sure helps if they are surrounded with countries that are operating with the same kinds of high standards that, by the way, we already abide by. So, part of what we're doing here is we're leveling up, as opposed to a race to the bottom, which means no labor protections, no environmental protections. We want to make sure that there is a level playing field that's going to allow us to be successful, and will help to shape trade and commerce, not just in the region, but in the world for a long time to come. 

RYSSDAL: Let me get back to the American economy here, for a minute. Economists generally — generally agree —and, I'll get some push-back here from economists who will hear this — but, they generally agree that in the aggregate free trade, is a net plus. 25 years ago, 20 years ago, the last time this country dealt with a big free trade agreement, it didn't work out well for a whole lot of people. Wages were lost, jobs were lost. Do you understand the push-back on that, that you're getting?

OBAMA: Absolutely, and I've said repeatedly, publicly, there is a reason why you've got labor unions, and some of my best friends in the Democratic Party concerned about any trade agreement, because the truth is, is that globalization, advances in technology, big cargo containers shipping goods in that are sold through the distribution and logistics networks in this country, over the last 20, 30 years, played a role in reducing the leverage that workers had, played a role in outsourcing, but the argument that I make to my friends, whose values I share, is that you can't fight the last war. The truth is, today, if there is a company in the United States that wants to find low-wage labor – if that's their business model, I think it's a mistake, but if that's their business model – they can do it now, under existing rules. NAFTA did not have labor protections or environmental protections that were enforceable; that was a side-letter.

So, part of what I'm saying to our folks is that precisely because the existing rules oftentimes disadvantage U.S. workers and U.S. businesses, for us to create new rules that raise standards in an important part of the world — including, by the way, the two countries that were signatories to NAFTA, Canada and Mexico, so that now, suddenly, they've got to have stronger labor rules — if we've got potentially hundreds of millions of workers who are now subject to international labor standards that weren't there before, and now, when we're working with them, even if they're not enforcing those standards 100 percent, we've got enough leverage to start raising those standards, that is good for us. So just because past experience raised concerns around outsourcing, we've got to think about the future and where our economy is now going. It's not going to be based on low-wage work. It's going to be based on high-skill, high-value-added, high-wage work, which we're good at. But that allows — that means that we've got to be able to access those markets to sell those goods.

RYSSDAL: Which is based on a change in the American economy, and we all know that, right? Now it's moving towards knowledge-based, it's moving toward innovation and away from manufacturing, but there's still a huge manufacturing base in this country. So, that brings up this question: You know, last week, or a couple of weeks ago, I guess, in Oregon, you went out to Nike, and you gave a long speech on the TPP, and you said, when the rules are fair, we win every time. We win every time. And, I get that you're using the presidential 'we' here, the national 'we.' But, what do you say to the blue-collar worker who's lost wages over the past decade, who's lost, perhaps, a job, to the small business owner who's had to shut down. How do you say to that person, listen, this is really for the greater good, here.

OBAMA: Well, no, no, no. Keep in mind that this is important not just for the Boeings of the world. This is important for small businesses and medium-sized businesses. They constitute the majority of exporters, and we know that wages are higher for firms that also are accessing international markets. And even the large firms like a Boeing have hundreds, maybe thousands, of suppliers all across the country, many of them small- and medium-sized businesses who benefit and who are able to hire more workers because they have access to these new markets. Nike's actually a great example. The truth is, is that the footwear industry in the United States got decimated. Now, part of that was technology, part of it was globalization, and much lower labor costs elsewhere. The reason I went to Nike is because they said that if this passes, they're in a position to bring 10,000 new jobs to the United States, partly because technology is now advancing, essentially, 3-D printing for footwear, where the labor costs per shoe are inherently lower because of technology. On the other hand, the need for knowledge, skills, reliability, all those design, all those things have increased. This is part of the reason why since I came into office we've seen the strongest growth in manufacturing since the 1990s. Part of that is we made some good decisions around the auto industry, but part of it is, generally, we're actually seeing insourcing, as opposed to outsourcing. There are a bunch of manufacturers who are saying, you know what? It's actually smart for us to be in the United States. Low energy costs, great workers, great infrastructure, access to the largest market.

So, manufacturing has been growing faster during my presidency than at any time since the 90s and faster than the overall growth of the economy. But, even manufacturing's changed. It's not--you know, if you go into an auto company where it used to take a thousand workers in a factory, now it might a hundred. Those jobs aren't coming back regardless of where we go, because, really, it's due to technology. What we can do, though, is continue to expand our markets, and 95 percent of the world's marketplace is outside of the United States; we've got to have access to it.

RYSSDAL: I understand that when you say things have grown over your administration and that manufacturing is still solid in this country, one of the things I don't understand, though, and this is a larger free trade debate, which we've been having in this country for decades now, it is generally acknowledged to be a good, as I said before. And yet, one never hears from proponents of free trade, yourself included, that there are losers, full stop. There are losers.

OBAMA: The truth is, Kai, if you look over my interviews, you'll see I've said there are losers. And, we have to take account of those losers. The question is, are there a lot more winners than losers? And, the answer in this case is yes. But, that doesn't mean that there is not going to be some impact on some sectors of the economy, by definition. That's going to be true anyway, by the way. But, it may be that as a consequence of this trade deal, there are particular markets, there are particular niche parts of the economy, where we've got to provide help to transition, and to re-tool and adapt. That's part of the reason why part of this package includes trade adjustment assistance. But, one of the basic premises for me in pursuing this, is that we can't just draw a moat and pull up the drawbridge around our economy. We are completely woven into the global economy. We are the hub to many, to a large extent, of the global economy. So, the question is, how do we construct a set of rules, but then, also, how do we make sure that we're adapting and using the incredible advantages we have to the best of our ability. And so when I talk to labor leaders, for example, I say, you are absolutely right that there's been growing inequality, and some of that has to do with globalization and technology.

The answer's not to not trade anymore. The answer is, how do we upgrade our skills? How do we make sure that the laws, and the tax rules, and how companies compensate their workers versus their CEOs, how are those rules fair? And, if we do that well, then we can address those issues. But, we're not going to address those issues by not trading with Japan. We're not going to address those issues by pretending that the global supply chain doesn't exist. The same is true when it comes to environmental issues. If we want to solve something like climate change, which is one of my highest priorities, then I've got to be able to get into places like Malaysia, and say to them, this is in your interest. What leverage do I have to get them to stop deforestation? Well, part of the leverage is, if I'm in a trade relationship with them, it allows me raise standards. Now, they have to start thinking about how quick they're chopping down their forests and what kinds of standards they need to apply to environmental conservation. So, we have to engage, not withdraw. And, I think the big mistake that some of my progressive friends make when it comes to trade, is not the values they're pursuing, or the very legitimate concerns they have about some past trade deals.

The issue is, are you now identifying what's going to make the biggest difference in helping American workers compete and prosper? And, that's not to shut off trade, that's designing good trade agreements, and then doing the things that are fully in our control in this country, like raising our minimum wage, like making sure that we are providing job training and apprenticeship programs, making sure that our education system works, making sure we're investing in R&D, making sure we've got a fair tax system and we're closing corporate loopholes that allow us to fund things like infrastructure; all that stuff has to be at the center of our agenda. 

RYSSDAL: Last thing, sir. There are a lot of issues in this free trade debate that play directly into the election next fall, right? Economic inequality, opportunity, the wealth gap. What do you figure the average American's economy looks like to them right now? The person making the median income, $53,000 a year.

OBAMA: I think they feel better than they did when I came into office. I think that they feel somewhat more stable. But they are still traumatized by seeing their home values drop as fast as they did, by seeing their 401k’s shrink, even though they've now more than recovered their value, if they left those 401k’s untouched. So they still have those memories of instability, and that's made them cautious. I also think that the long-term trend that predates the last economic crisis and predates my administration, which is incomes and wages flat-lining at a time when corporate profits and the stock market have all been booming and the winner-take-all elements of our economy have been entrenched, I think that continues to concern them. And my hope is that next year part of what we discuss is how to combine a competitiveness and growth agenda with an inclusive, broad-based middle-class economics agenda. And, those things I do not believe are contradictory. Sometimes they get framed as, either you're for free trade or you are for a strong worker voice. Either you are for the unfettered market, or you are for a higher minimum wage. And, my attitude is that we have to be for both. We have to compete in the world's stage. The world is not slowing down. Technology is not stopping, and technology's probably had a bigger displacement effect on the economy than anything like trade has.

So we've got to continually adapt; we've got to be nimble. We've got to be efficient, but we also have to be fair, and we have to give everybody access, and we've got to make sure that those at the very top are not using their economic wealth to influence the political process in ways that disadvantage middle-class and working-class folks. And, if we do these things simultaneously, think about fairness, but also about growth and efficiency, that turns out to be the best recipe for growth and prosperity, and that's part of what has always been the hallmark of the American economy. When the middle class grows, and there are ladders into the middle class, and everybody's participating, and income inequality and wealth inequality is not too skewed, that tends to be when we've got all cylinders clicking, and we can compete against anybody.

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

OBAMA: I really enjoyed it. Thank you. 

This story has been updated.