As if either President Obama or Hillary Clinton needed a reminder that the most powerful person in the Democratic Party is now Massachusetts Senator Elizabeth “I’m a Cherokee” Warren, on Tuesday Senate Democrats followed the lead of the scourge of capitalism by filibustering “fast-track” trade promotion authority (“TPA”) legislation designed to allow the Obama administration to negotiate and more easily enact international trade agreements, particularly the Trans-Pacific Partnership (“TPP”) which would liberalize trade between the United States and eleven Asia-Pacific region nations.
Both the policy and the politics are complex.
Left-wing groups including labor unions and environmentalists oppose most free trade treaties, particularly with developing nations, the former arguing that it leads to moving American jobs overseas and the latter demanding more protections for air and water along with provisions aimed at combatting so-called climate change. (They seem not to recognize that the best way to minimize a nation’s likelihood to pollute — not that carbon dioxide is pollution — is by that nation becoming wealthier, something that free trade helps them do.)
A few conservative groups oppose TPA as unconstitutional, perhaps also looking for an excuse to deny President Obama a victory of any sort — a laudable sentiment if the cost were not so high.
Senator Jeff Sessions (R-AL) — historically a supporter of free trade — offered a list of critiques of fast-track including its circumventing the Senate’s constitutional authority over treaty ratification.
Sessions has other concerns, including perhaps the most important criticism of the TPP (which TPA would be used to enact): the administration, in true “pass it to find out what’s in it” style, has not made the agreement public.
In what sounds like a Douglas Adams-based parody of government (make sure you watch!), the Hill reports that in March, the U.S. Trade Representative’s Office “put a copy of the TPP agreement in a security office in the Capitol where lawmakers can view the developing pact along with a member of their staff as long as they meet a certain security requirement.” Senator Rand Paul has said that the requirement includes not being able to take notes about the agreement, though a USTR spokesman disagrees with that assertion. Perhaps Senator Paul will take a walk, read the treaty, and report back on its benefits and pitfalls.
One section of the TPP defines the plan as a “living agreement.” When you hear the word “living” from the same people who believe in a “living Constitution” — code for “the law is whatever we say it is” — it is very troubling indeed.
Until we know how foreign governments and international institutions can use a “living agreement” to impose costs on Americans, hesitance about the TPP is not unreasonable — even for those of us who unflinchingly support free trade. A trade treaty must not become a Trojan horse for international organizations’ (or domestic labor unions’) goals being given priority over Americans’ freedom or being given a claim on our tax dollars.
Barack Obama is no free trader at heart. He has long worked to subordinate and diminish the United States and supports arm-twisting other nations toward meaningless goals such as “fairness.” Therefore, TPP almost certainly is a Trojan horse. The question is whether its still-secret contents are harmful enough to the United States to justify opposing the treaty.
One of Senator Sessions’ less valid concerns — though one shared by far too many politicians and citizens alike — involves the impact of the trade agreement on the trade deficit, a wholly misunderstood and unfortunately named concept.
Despite these worries, Sen. Sessions voted, along with every other Senate Republican — including a handful of possible no votes on TPA and/or TPP including Sessions himself, Shelby (AL), Burr (NC), Moore Capito (WV), and Rand Paul (KY) — for cloture in Tuesday’s procedural vote on fast-track.
The Republican unanimity was pure politics, but in a better way than that term is usually meant. In this case, the political motivation is to support Senate Majority Leader Mitch McConnell in honoring his 2014 election season promise that if Republicans were given the Senate majority, they would return the body to regular order unlike the prior years of operating under the petty tyranny of Harry Reid. A “Yea” vote on Tuesday was a vote to proceed to debate and to the offering of amendments, not a vote to go directly to an up-or-down vote on TPA, much less TPP.
The value of free trade is consistently misunderestimated by many politicians (though more on the left than on the right), by reporters and pundits, and — not surprisingly — by many Americans.
The main reason for the confused conversation about free trade is that it almost always neglects the single most important group impacted by it: a few hundred million American consumers.
We hear that Nike could be making their shoes in the United States if only they weren’t making them in Vietnam. If you think Air Jordans are expensive now, just imagine what they would cost if Nike had to pay American union wages to make them. Actually, they wouldn’t be expensive because they wouldn’t be made at all.
We hear that recent trade deals have resulted in more imports into America and/or fewer exports to other countries than predicted and therefore to a “wider trade gap.” But what such a gap means is that Americans are saving billions of dollars by buying from producers who have comparative advantage in making those goods, leaving us all with more money to spend on a better car or a better school or health care or a vacation or saving for our retirements.
The use of the term “deficit” to describe when our nation imports more than it exports assigns a pejorative adjective to an essentially neutral concept; it implies (aggregate) harm where there is none. It also implies that a trade “deficit” is similar to a budget “deficit” in that it represents a cost to current and/or future taxpayers, an implication that is utterly false.
As liberal journalist Michael Kinsley has noted, “In all of social science, the proposition that comes closest to being scientific, in terms of being theoretically provable and true in real life, is that a society benefits from allowing its citizens to buy what they wish — even from foreigners.”
More than twenty years ago, Kinsley succinctly explained — using basic Public Choice economics language — why something that is an unequivocal national economic benefit nevertheless attracts “no” votes from politicians: “There is no doubt that free trade is a net benefit for the country as a whole. But there is also no doubt that it hurts certain individuals. Unfortunately, the benefits are spread among the general population and often hard to identify specifically, while the harm is concentrated on a few identifiable — and politically organized — interests.”
Clearly nothing has changed.
Democrats, wholly subservient to labor unions and their campaign expenditures, parrot AFL-CIO lies and misdirection in an effort to convince voters that what helps the vast majority of Americans is actually harmful.
Elizabeth Warren is to free trade and economic rationality what Jenny McCarthy — one of the nation’s most visible champions of not vaccinating children — is to public health and medical rationality. They have cult followers, some of whom mean well, some of whom don’t, most of whom are blissfully free of facts (and like it that way), and all of whom are perpetrating great harm on a substantial numbers of Americans.
If there is any good news, it is that the public mostly supports free trade even while not understanding the beneficial impact of trade on jobs and wages in the United States. Still, the public could use a hand from Frédéric Bastiat in learning to pay attention to “that which is unseen” in addition to the obvious impact of trade.
Yes, free trade (like immigration — not surprisingly if you think about their similarity in how they can impact the cost of production of goods) can erode the wages of America’s lowest-skilled and least educated workers. That’s the obvious part. The unseen is that trade (again like immigration) has an overall positive impact on employment and wages and cost of living of pretty much everyone else. As Kinsley said, there are some losers — and politicians implement programs such as job training to help them — but the nation overall comes out ahead. Way, way ahead.
It’s also worth pointing out that the negative impact on jobs and wages that trade can cause are roughly identical to the impact on those things due to improving technology. Those who oppose free trade on economic grounds should also go on tirades against tractors, washing machines, car-assembling robots, the cotton gin, and every other labor-saving device ever created by the ingenuity of mankind.
In the last few days, the Democratic infighting has been amusing to watch, with President Obama gently chiding Elizabeth Warren for opposing him on TPA and TPP. Well, gently at first. A few days after saying how the two of them are on the same side of so many Progressive policy positions, the president said on Saturday that “Elizabeth is, you know, a politician like everybody else.”
Two days later, in an interview with the Washington Post, Elizabeth struck back hard: “The president won’t actually let people read the agreement for themselves. It’s classified.” Warren went on to criticize a provision of TPP regarding conflict settlement which she claims might let an international “group of independent arbiters, whose decisions cannot be appealed… issue a money judgment of any size (against the United States government)” and which — again she claims — might be used to undermine the U.S.’s horrendous Dodd-Frank regulations. Obama disagrees strenuously with both assertions.
It would be amusing if it weren’t so outrageous that Warren objects to roughly the same situation that she has put so many thousands of American companies in when it comes to regulation by the completely unaccountable Consumer Financial Protection Bureau. Control for me, but not for thee…
Neither TPA nor TPP is truly dead. A handful of senators — mostly but not solely Democrats — want to drive a harder bargain, including incorporating into TPA or TPP some of their favorite trade-related populist policies, almost all of which are either intended to buy the votes of anti-trade groups or which are pure economic idiocy. In the latter category is the endless harping of Senators Chuck Schumer (D-NY) and Rob Portman (R-OH) about “currency manipulation,” primarily by China.
As George Mason University economist Don Boudreaux — one of the nation’s very best voices on free trade — often explains (such as here, here, and here), to the extent that China’s currency is undervalued and maintained that way by the Chinese government, they are taxing their own citizens to subsidize American consumers and we should be profoundly grateful.
If a Schumer-Portman fantasy world included the Chinese currency rising substantially in value, a few things would happen: millions of products that Americans buy every day would go up in price, and some of the manufacturing that is currently taking place in China would move to a slightly cheaper Asian country such as Vietnam. And some would disappear entirely. Not only would zero jobs be created in the United States, but retailing jobs as well as management jobs at companies like Apple (which manufactures primarily in China) would be lost and Americans’ cost of living would increase while our range of choices of goods would decrease.
It bears repeating — and repeating and repeating and repeating — that the benefit to American consumers of free trade is so large that it must trump any parochial interest of a particular industry or labor union or politician.
Because they lower the prices of imports, and even understanding that there will be a few losers, free trade agreements are almost always worth supporting regardless of what is offered to American exporters by the foreign trade partner. That is not to say that we shouldn’t attempt to open foreign markets to American exports as much as we can. But even if the agreement is asymmetrical in, for example, tariff reductions, another Boudreaux metaphor paints a clear picture: just because some other country is willing to fill their ports with boulders doesn’t mean we should.
Trade policy and politics are intricate, often dull, and highly politically charged due to potential negative impacts on small but loud interest groups. But free trade is too valuable to 300 million Americans to allow the cynical and the ignorant to fill our ports with boulders.
Tuesday’s political theater was interesting, not least because it shows just how lame a duck President Obama is, how few friends he has even within his own party, and who really holds the whip in 2015’s Democratic Party. (You hear that, Hillary?)
The whipped included Colorado Senator Michael Bennet, up for re-election in 2016, who had previously supported TPP if it included the very sorts of worker and environment protections mentioned above. On Monday, the Denver Post’s editorial board lauded Colorado’s two senators (the other being Republican Cory Gardner): “Both, to their credit, intend to support fast-track authority for an up-or-down vote in Congress on the TPP deal.”
On Tuesday, despite research from the University of Colorado’s Leeds School of Business saying that TPP — among other benefits — “will significantly expand market access for Colorado exporters” including farmers, Bennet voted against cloture for TPA. (Only one Democrat, Tom Carper of Delaware, was unmoved by the sting of Warren’s lash or the threats from unions and environmentalists.)
Republicans should ensure that neither the TPP’s “living agreement” provision nor any other section of the document would allow non-U.S. institutions or governments to impose penalties on American taxpayers or otherwise erode American sovereignty.
Separate from those issues, however, and even if the measure includes pointless items from the Obama wish list such as trying to get developing nations to raise their minimum wages or allow unionization of manufacturing employees (neither of which will actually happen in any significant way), Republicans should support increasing trade liberalization at every turn.
Even if it means giving President Obama a win.
Because it’s a much bigger win for the American people.
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