How the White House Slices 18,000 Tax Cuts From Trade Deal

  • Administration counts up all the tariffs by TPP partners
  • Duties would fall on cherries, beef, cars, dump trucks

Do you like swelled cereals? Or do you preferred unroasted flakes? Either way, there’s a tariff for that.

To sell the 12-nation Trans-Pacific Partnership trade pact, which was announced Monday in Atlanta, the Obama administration is leaning heavily on “18,000 tax cuts” that will be afforded U.S.-made goods exported to the other countries in the deal.

Getting the deal to cut those duties was a milestone for President Barack Obama, who made it central to his strategic shift to Asia. But the final push is yet to come. The agreement has to be ratified by all the nations involved and that means Obama has get a less-than-cooperative U.S. Congress to go along. And what sells better than tax cuts?

The “taxes,” otherwise known as tariffs, are imposed on products from tires to tractors to king crab. Finding 18,000 means slicing each down to minute detail as only international bureaucracy and trade law can provide.

Here are some questions and answers about what this means:

Q. How do you get 18,000 tax cuts?
A. Each country has thousands of tariffs that they charge on imports from other nations, making local products more attractive. The World Trade Organization lists every one. The administration arrived at its 18,000 figure by totaling the number of tariffs from Japan, Malaysia, New Zealand, Vietnam and Brunei, according to Matthew McAlvanah, a spokesman for the Office of the U.S. Trade Representative. The U.S. already has agreements that eliminated most duties on goods traded with other countries in the Trans-Pacific Partnership such as Canada and Mexico.

Q. What goods get caught by tariffs?
A. A broad spectrum of products and the constituent parts of those products. Each country publishes a tariff schedules that break traded goods into categories. The U.S.’s list is as arcane as “prepared foods obtained by the swelling or roasting of cereals or cereal products” versus “prepared foods obtained from unroasted cereal flakes or from mixtures of unroasted cereal flakes and roasted cereal flakes or swelled cereals.” (These are actual examples, and the second category is further subdivided into those that are “in airtight containers and not containing apricots, citrus fruits, peaches or pears.”)

The agreement will immediately cut in half and eventually eliminate Japan’s 8.5 percent tariff on imports of fresh cherries and will reduce tariffs on beer in TPP countries that are as high as 47 percent, U.S. Trade Representative Michael Froman told reporters on a conference call. Tariffs also will fall on copper wire, organic soap and headphones.

Q. Why call them taxes instead of tariffs?
A. Although tariff is the standard term in the trade world, the White House use of taxes is something of a marketing strategy. That may be to appeal to congressional Republicans, whose support they will need to pass the agreement, said Fred Bergsten, director emeritus of the Peterson Institute for International Economics and an assistant treasury secretary during President Jimmy Carter’s administration. 

Former U.S. Representative Phil English, who represented Pennsylvania as a Republican, is skeptical. While the 18,000 figure may be accurate, it’s not going to win over political moderates that the administration needs to ratify the deal.

“I want to give them an A for effort, but as somebody who pitched a trade position to a very blue collar district, the argument of consumer benefits, which is essentially what they are making, is never one that has resonated,” said English, who’s now co-chairman of government relations at Arent Fox LLP in Washington. “This is going to be a very difficult sale.”

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