Led by Betsy Warren, the protectionist Pasionara of the Senate, a disgrace to the Harvard Law School, Democrats have blocked fast-track authority the Administration sought in order to complete negotiations for the trade-freeing Trans-Pacific Partnership, TPP. This probably will also keep back the Transatlantic Trade and Investment Partnership, or TTIP, also requiring fast-track. Fast track has been used by all multilateral trade negotiations in my lifetime. It allows negotiators to strike a deal which legislators cannot unpick to remove details they do not like. They have to vote up or down on the whole treaty.
Another bill, also opposed by Sen. Warren, would give the government a generic “Trade Promotion Authority” which would apply to both deals which she claims would allow a future Republican Administration to remove the financial regulations passed since the global financial crisis by putting Dodd-Frank reform elimination into a trade bill which could not be fillibustered in Congress.
To believe that you have to believe that Republicans are demonic despots. I am ashamed to admit that I donated to Prof. Warren’s Senate campaign out of collegial and female solidarity. I will not donate to her again. Pres. Obama stated yesterday that her arguments “don’t stand the test of fact and scrutiny” adding that she’s being “a politician like everyone else.” She is “absolutely wrong.” I side with the President even if he did not teach at Harvard and even if he is a male.
There is nothing particularly left-wing about protectionism. But as US union leaders try to rally their beleaguered and diminishing members, holding back foreign imports sounds like a good platform. It isn’t. It is a stupid idea.
First of all, union members benefit from imports of goods the US no longer can produce economically. Countries, ours included, cannot be self-sufficient in all products. Countries at different levels of development with different natural resources should specialize.
In an interconnected world, the price of American-made goods has been made uncompetitive because the US market no longer has the necessary volume to cheaply produce building materials, shoes and clothing, furniture and fittings, electronics, household gizmos, bobby pins and eyeglass frames, whatever. The US worker gets imports of these things at low prices and would be able to afford still more if new trade talks cut tariffs further.
Another feature of all “fast-track” systems is domestic US help to adjust our economy and workforce for jobs lost because of trade flows. Even with high duty, some US factories will shut down. Their employees get help finding new jobs or learning new skills under trade agreements. This is a long-term solution; tariffs are short-term.
In traded goods, the TPP aims to globalize labor policies, to prevent sweatshops and child workers, something US unions (many of which have “International” as part of their names) cannot seriously oppose. The TPP also wants to require high environmental standards at foreign factories, another thing which union members (all of whom breath) should give their backing to
The US runs a trade deficit in merchandise which translates into lower prices for American shoppers buying foreign goods. We make up for this with a surplus in capital flows, not just investments, but also financial flows and royalties. Improved rules would actually boost these flows, economists say.
Lowering tariffs and closer integration also would apply to what the US does best, that which we export, be it intellectual property (like software and pharmaceuticals) or financial services. A key plank in the TPP would be lower tariffs on US food crops which are kept out of countries like Japan, Malaysia, and Vietnam. It would also end favoritism for domestic manufacturers using local commodities in countries like Indonesia.
The TPP also aims not just to make the rules fairer, but to make them visible so exporters know what they are up against. This will also highlight some tricks countries engage in, like Japanese and Thai rice buying bodies or India’s state and local tariffs. Bringing countries closer together in trade will also provide the US with diplomatic benefits in keeping down the pressure from the aggressive Pacific country which is not part of TTP: China. Despite or perhaps because of continued economic growth slacking, the PRC is claiming control of resources in the South China Sea where many TTP countries are under threat. Meanwhile monetary easing in China to spur flagging growth will increase the global edge Chinese goods get by pushing down interest rates and the Renminbi. However, the only currency losing value faster than the RMB is… the greenback dollar!
