In one very real sense, it’s a crying shame that President Obama’s trade agenda is so completely stalled both at the negotiating table and in Congress. Of course, it’s true historically that trade policy critics have always tried playing for time, believing that the longer international trade negotiations took and the longer Congressional votes were delayed, the better the chances of derailing deals for good. The latter view, further, has been strongly supported by a record showing that when Presidents and Congressional leaders decide the time is ripe for a trade vote, it’s because they’ve (rightly) grown confident of victory.
But if the president’s proposed Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (TTIP) agreements were completed and submitted by now, along with a request for fast track negotiating authority, they’d all face an information environment in which the case for such deals is looking weaker than ever.
Just look at what’s happening on the international currency front. Japan is the biggest economy by far included in the TPP (China is out for the time being), and the value of the yen has declined so much lately versus the U.S. dollar that the exchange rate is at a 6-year low. Since Japan is one of the world’s most protectionist economies wherever its currency stands, arguments for TPP’s U.S. export-boosting potential will be difficult to make with a straight face.
The euro, the currency of most of America’s prospective partners in the trans-Atlantic trade deal, is doing better than the yen lately – but not by much. Earlier this month, it hit a one-year low versus the dollar, is a bit stronger this week, but could be heading lower soon with the European Central Bank committed to ever looser monetary policies to stave off recession in the Eurozone.
Meanwhile, another pounding has just been taken by the idea that America urgently needs to secure new trade deals to speed up its sluggish recovery because the vast majority of the world’s consumers live outside its borders. I’ve already reported on World Bank and International Labor Organization data showing that the vast majority of these consumers earn far too little to become robust net importers of U.S. goods and services any time soon.
But as made clear in new, equally authoritative research summarized by The Economist, consumption power in 15 developing countries designated as emerging markets will take much longer to even begin approaching U.S. levels than once believed. According to the magazine, additional World Bank findings strongly indicate that the progress made by these developing countries in closing the income gap has now shifted into reverse. Third world growth rates recently have slowed so that the expected catch-up date with the United States has been moved back from the roughly 30 years that appeared justified before the global financial crisis broke out in 2008 to roughly 50 years. And if China is excluded, the catch-up date now looks to be 115 years off.
In fact, however, the implications of this delayed catch-up are even worse for the U.S. economy than The Economist seems to realize. For the slowdown in emerging market economic growth and the income lag it indicates means that if these countries are to reverse their fortunes again, their economies will need to become even more export-oriented than they already are. And since there’s no reason to think that Japan and the Eurozone will become more open to anyone else’s products and services with their economies stagnant as they were in better times, emerging market exporters will need to target the United States more intensively than ever. For the United States, that would mean even higher trade deficits, slower growth and hiring, and more national debt.
The U.S. interests favoring more trade deals are so powerful and wealthy that, no matter what the facts say, it’s surely still a mistake for critics to start saying “Bring ‘em on.” But unless global economic trends change quickly, their prospects will depend more on lobbying clout, as opposed to the merits, than ever.