(What’s Left of) Our Economy: Progress from Progressives on Trade

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America First, developed countries, developing countries, environmental standards, Financial Crisis, GATT, General Agreement on Tariffs and Trade, George W. Bush, Global Imbalances, Global Trade Watch, globalization, Hillary Clinton, Jared Bernstein, labor standards, Lori Wallach, multinational companies, NAFTA, national treatment, non-discrimination, North American Free Trade Agreement, offshoring, progressives, Public Citizen, The American Prospect, TPP, Trade, Trans-Pacific Partnership, World Trade Organization, WTO, {What's Left of) Our Economy

Ever since the debate over NAFTA (the North American Free Trade Agreement) more than twenty years ago turned trade policy into a nationally contentious issue, the American left has provided the overwhelming share of the political money and muscle aimed at creating urgently needed course corrections. So it’s great to see important signs that progressives have finally started touting two ideas that realistically could make a significant difference.

The evidence can be found in an article coming up in The American Prospect by Jared Bernstein, former top economist to Vice President Biden, and Lori Wallach of Public Citizen’s Global Trade Watch. To be sure, the article does dwell overlong on proposals that left-of-center figures have been making for decades, and that hold little, if any, promise of turning trade agreements and related policy decisions into engines of domestic growth.

For example, there’s the usual call for truly enforceable labor and environmental standards in trade deals – even though adequately inspecting enormous third world national manufacturing complexes is a logistically impossible task. Worse, the offshoring lobby and its minions in Congress and the Executive Branch have already twice used the tactic of making cosmetic changes along these lines in trade agreements to call progressives’ bluff: during the George W. Bush administration in deals with agreements with Panama and Peru; and in President Obama’s Trans-Pacific Partnership (TPP).

Don’t think Democratic presidential candidate Hillary Clinton doesn’t recognize how successful this ploy has been in persuading fence-sitting Congressional Democrats to fall in line behind new trade deals.

Judging from the Bernstein-Wallach piece, moreover, the American left still believes that no hard choices need be made in trade and broader globalization strategy, and that with their proposed reforms, growing international commerce can become a win-win for first and third world workers alike around the world. As I’ve recently written, positive sum outcomes for developed and developing country workforces are possible – if, for instance, NAFTA was turned into a genuine western hemisphere trade bloc, as its leading founders once suggested they intended.

On a global basis, though, the surplus of developing country workers earning pauper wages (both in absolute terms and in relative terms in sectors like advanced manufacturing and high tech services) ensures that for decades the third world will remain much more important as a low-wage and low-regulation production site than as a source of new consumer demand. And as long as that situation holds, astronomical growth-, job-, and wage-killing trade deficits in the United States will be inevitable. Also inevitable will be the buildup of enormous international economic imbalances like those that set the stage for the last financial crisis.

But the most encouraging aspect of the Bernstein-Wallach article was indeed encouraging: The authors argued that not all prospective U.S. trade partners should be treated equally – because they differ in crucial respects. Ever since the current global trading system began taking shape in the immediate aftermath of World War II, one of its biggest weaknesses – and one posing special problems for a relatively open economy like America’s – has been its insistence (largely at Washington’s behest, to be sure) on the principles of non-discrimination and national treatment.

In other words, regardless of how open or closed they are, or how wealthy or impoverished, the United States needed to deal equally with all countries belonging to the old General Agreement on Tariffs and Trade (GATT) and to the newer World Trade Organization (WTO). During the early post-war decades, these requirements legally forced American leaders to open their markets as much, say, to relatively open Britain as to hermetically sealed Japan, and to treat identically in the American market businesses from wildly varying countries.

When the end of the Cold War encouraged third world population giants like China and Mexico to introduce selected free market reforms and join the global economy, the option of mass production offshoring was created for multinational companies. As a result, these GATT and then WTO principles prompted the U.S. leaders influenced by these companies to expand trade whether or not the target countries could become significant net consumers, and thus create reasonably balanced trade flows and their economic benefits.

Bernstein and Wallach don’t favor discrimination on grounds like these. (That’s not surprising, since this practice would undercut their positive-sum first-third world trade optimism.) But they do urge selecting

“trade partners based on their countries’ records of compliance with the terms of past trade agreements, international labor and environmental standards, and human rights and other criteria. [The article makes clear that records of currency manipulation would be among them.] While no country has a perfect track record, there is a well-understood continuum of compliance, and known bad actors should be barred from the negotiating table until they’ve made proven, effective efforts to begin cleaning up their acts.”

That’s a start – and a potential wedge.

It’s also heartening to see Bernstein and Wallach emphasize “rewarding those who play by the rules” by creating and enforcing meaningful rules of origin in trade deals. As they rightly note, without such provisions, countries that have not signed various trade deals can still benefit from them because multinationals and other companies will be free to import into member countries goods largely made outside the new trade zone. That’s great of course for businesses seeking the great possible sourcing flexibility. But these practices inevitably render meaningless most of the rest of the given agreement.

And most encouraging of all – although the authors don’t mention this – an American trade policy (robustly) incorporating these features would be in violation of WTO rules. Free of a straitjacket that mandates policy uniformity in a highly diverse world, Washington would be free to choose another globalization lodestar – one that makes far more sense for a country with incomparable market power, potential for self-sufficiency, and thus unilateral leverage. A lodestar like “America First.”

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Im-Politic: What the Polls are Really Saying About Obama’s Trade Agenda

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2016 elections, CBS News, Congress, currency manipulation, fast track, Financial Times, free trade agreements, Global Trade Watch, Hillary Clinton, Im-Politic, Jobs, Obama, polls, public opinion, Reuters/Ipsos, The New York Times, TPA, TPP, Trade, Trade Promotion Authority, Trans-Pacific Partnership

I’m sure glad I’m not the Financial Times headline writer who told readers the other day that “Obama seems to be winning over public, if not Congress, on trade.” The writer blew it not because there haven’t been recent poll results containing good news for a president seeking a big new Pacific Rim trade deal and sweeping fast track negotiating authority from Congress. He or she blew it because such surveys have been showing such sharply contradictory results – as a new New York Times/CBS News sounding just reminded us. In fact, the headline was also off base in suggesting that any polls can be a reliable indicator of public on an issue like trade, which is poorly covered by the national media and partly as a result largely unfamiliar to many Main Street Americans.

As I wrote recently, the Pew Foundation findings stressed by the Financial Times contained some big apparent contradictions – chiefly, showing that Americans’ support for the idea of trade agreements keeps rising impressively, but that large pluralities believe the deals have significantly harmed the economy.

Meanwhile, Public Citizen’s Global Trade Watch has done an excellent job exposing the weaknesses in another recent poll – from Reuters/Ipsos – that seems downright incompetent. The survey reported majority support for “new trade deals,” but these agreements were described as seeking to “promote the sale of goods overseas.” Talk about a leading question!

In fact, as Global Trade Watch noted, a previous Ipsos trade poll found that when a specific feature of Mr. Obama’s Trans-Pacific Partnership (TPP) was included in a question (currency manipulation), nearly three quarters of Americans opposed the administration position. Moreover, that same survey showed 84 percent of the public agreeing that “protecting American manufacturing jobs” is more important than “getting Americans access to more products.”

The New York Times/CBS News results reported this morning contain more bad news for the president (and for that Financial Times headline writer). They show 55 percent to 42 percent public opposition to the president’s fast track request (which is accurately described). They show that although 78 percent of Americans have “heard or read…not much or nothing at all about the TPP (thanks, journalists!) they believe by a 22 percent to 16 percent margin that it will make fewer jobs available in the United States. (One third didn’t know or didn’t answer, and 29 percent doubted it would “make much difference.” And finally, 63 percent of respondents agreed that “Trade restrictions are necessary to protect domestic industries” while only 30 percent supported the view that “Free trade must be allowed, even if domestic industries are hurt by foreign competition.”

So for what they’re worth – and again, that’s open to big doubts – recent polls aren’t collectively sending any clear message on trade policy generally, and even muddier ones on the specific controversies Congress is dealing with today. But another body of evidence is less equivocal. As I noted in that recent post, most presidential candidates in both parties who have spoken out are running against Mr. Obama’s trade agenda. Others, especially Hillary Clinton, have conspicuously remained on the fence.

Of course, the primary voters these hopefuls will initially face are more partisan and ideological than the electorate as a whole. But candidates also know that their primary positions tend to stick with them during general campaigns. If on balance, this many professional politicians see fast track and the TPP as political losers, it’s hard to believe that they’re far off the mark.