Ask Harley-Davidson the Cost of U.S. Withdrawal from TPP
For anyone wondering what price the United States will pay for pulling out of the Trans Pacific Partnership (TPP) trade agreement, Harley-Davidson may have just provided the answer.
The Wisconsin-based motorcycle company announced earlier this week it is slashing jobs and closing a plant because of declining motorcycle shipments. Harley-Davidson is shuttering a plant in Kansas City. While it will be shipping some of the production to its plant in York Pennsylvania, the company expects to eliminate a net 260 jobs in the United States, just as a result of this one move.
What might have saved those jobs – and others in the Harley-Davidson chain that may be a lot more insecure than in the past? TPP – the very trade agreement that the current administration pulled out of a year ago. Harley-Davidson CEO Matt Levatich has made it clear that the agreement would have helped the motorcycle maker grow in Asian markets, where the upside potential for motorcycles is enormous.
Soon after the Trump administration pulled out of the TPP, the remaining members of the new trade alliance negotiated a new deal among themselves. Under its new name, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership would be the largest trade agreement in history, even without the United States. It would account for roughly one-sixth of world trade, and include major U.S. trading partners like Japan, Canada and Mexico.
However, U.S. companies like Harley-Davidson have been left out in the cold.
Harley-Davidson’s enthusiasm for TPP, and the fact the company is shedding U.S. jobs, is especially ironic given that President Trump met with executives soon after he took office, and predicted the company would expand in the United States. But Harley-Davidson sees opportunities in the Asian market – opportunities that are harder to tap for them since the United States pulled out of TPP.
“The big opportunity for Harley, growth-wise, is in Asia, and a lot of the work with the TPP addresses some of the barriers that are in the way of our growth in Asia,” Levatich told Fox Business in 2016. “We are a U.S. company manufacturing almost all of our products here in the United States, which is good for America when we can have freer trade.”
The TPP would have lowered barriers for Harley bikes in some of the largest motorcycle markets in the world, a fact that Harley planned to take advantage of by opening as many as 200 stores in emerging markets by 2020, focusing on large cities like Kuala Lumpur and Saigon.
What kind of potential is there for motorcycles in countries like these? In Vietnam, consumers buy 3 million motorcycles each year, six times the rate in the United States. Harley-Davidson has said that having an advantage in that kind of market is more valuable to the company than any disadvantages it may incur in the home U.S. market that would result from exports by Japanese companies.
The fact that the other 11 member-countries of TPP have moved forward with the agreement while the United States is sitting on the sidelines is just one example of a world that is opening markets even as the United States seems to retrench. The EU and Japan have launched a new trade agreement, China is pursuing a multilateral trade deal with fellow Asian countries, and the EU and Mexico are updating their own bilateral agreement. The United States is a party to just one bilateral negotiation, one with the European Union that has gone dormant. Instead, a new protectionist outlook in Washington can be seen in heavy tariffs that were slapped last week on imports of solar panels and washing machines. The Solar Energy Industries Association estimates roughly 23,000 U.S. solar jobs, especially among panel installers, will be lost because of the tax on solar imports.
Swagger and threats may seem tempting. But a robust economy requires robust trading relationships. If Harley-Davidson and other U.S. companies are going to move forward at full speed, they need access to growing markets.