Im-Politic: Mainstream Conservatives’ Sovereignty Concerns are Way too Selective

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American Enterprise Institute, Buy American, Constitution, COOL, Financial Stability Board, food safety, free trade agreements, G-20, Im-Politic, NAFTA, regulation, sovereignty, The Wall Street Journal, TPP, Trade, Trans-Pacific Partnership, Wall Street, World Trade Organization

Ever since the NAFTA negotiations launched the current era of U.S. trade policy 20 years ago, critics on both the left and right-wing fringes (and I’m not using the word pejoratively) of American politics have complained that many new trade deals have threatened American sovereignty. Joining this chorus over the years have been voices from the far right that have detected the same danger from international organizations like the United Nations. These critics, who typically finger one-world-er American officials as co-conspirators, invariably are dismissed by mainstream journalists and pundits as a paranoid “black helicopter crowd.”

So imagine how strange it is to see a member of the U.S. government’s Securities and Exchange Commission (SEC) co-author an op-ed for The Wall Street Journal claiming that Washington has secretly outsourced some key financial regulatory authority to a little-known international body called the Financial Stability Board (FSB). According to SEC Commissioner Daniel Gallagher and former senior Treasury Department official Peter Wallison, the Obama administration :

“has consistently moved to implement the FSB’s decisions without telling Congress, or the public, that it regards the FSB’s decisions as binding. There’s a reason for this lack of candor. Congress has never endorsed the idea that FSB decisions are binding on U.S. agencies. The FSB’s authority, if any, flows from the G-20 [a grouping of the world’s 20 biggest economies]. Allowing its decisions to dictate U.S. policy means that an American president can create authority to issue domestic regulations simply by making an agreement with the G-20 or other foreign leaders.”

The purpose of this post isn’t to evaluate whether Gallagher and Wallison are right in contending that “This is a dangerous precedent. The FSB’s decisions cover the financial system. But there is nothing to stop similar agreements about the environment, telecommunications and other crucial matters if the precedent is allowed to stand. The result would unravel the separation of powers and the role of Congress in the U.S. constitutional system.”

Rather, the point is to ask where these two, and other establishment conservatives, have been for the last two decades – during which nearly any American laws and regulations having any effect on U.S. trade flows have been vulnerable to the decisions of the World Trade Organization (WTO). And to wonder whether they will finally take off their blinders?

The WTO technically cannot strike down U.S. policy decisions. But it can bring about their elimination, and prevent their enactment, by authorizing countries claiming to be victimized by these measures to respond with tariffs versus American goods and services aimed at their markets.

Nor is this a theoretical possibility. For example, the WTO right now is ruling on whether Washington can require food producers to tell U.S. consumers whence their products come.  And its rules helped President Obama and the offshoring lobby defeat proposals to broaden the Buy American requirements governing federal purchasing policies – which would have greatly increased U.S. production of real world goods and services, and employment in those sectors, at the depths of the Great Recession, when they were desperately needed. (In fact, they still are.) Stronger and wider Buy American rules would have limited multinationals’ ability to supply the U.S. government from their foreign factories and other facilities – at U.S. taxpayer expense.

Moreover, other U.S. trade agreements have generated the same dangers, thanks to dispute-resolution systems that give all signatories equal say and votes, even though the American market is invariably the largest single national market at stake.

In principle, Washington’s submission to these global organizations is constitutional, because American membership and participation were expressly approved by Congress. But how many legislators do you suppose actually read the full texts? And how many do you suppose believed then-U.S. Trade Representative Mickey Kantor, who championed the WTO’s creation with a classic piece of Clinton-style parsing: “[T]he WTO does not require the United States to change any law, regulation at the federal or state or local level as the result of any decision made under this use — dispute settlement process. That’s up to the Congress or other legislative bodies, whether or not they wish to take that act. We’ve not given up any sovereignty in that regard.”

Now of course, President Obama is asking Congress to approve another major trade agreement – the Trans-Pacific Partnership (TPP) – that because of its sweeping regulatory scope arguably contains more threats to America’s sovereignty than the WTO. Yet both the Wall Street Journal editorial page staff that published the Wallison-Gallagher piece, and the American Enterprise Institute that employs Wallison, strongly favor TPP ratification. Which makes it hard to avoid concluding that they think it’s more important for the Constitution protect Wall Street than to protect American workers and the rest of the nation’s productive economy.

(What’s Left of) Our Economy: Sauce for the Canada Goose on Trade and Investment

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(What's Left of) Our Economy. Canada, foreign direct investment, globalization, sovereignty, tax inversions, tax reform, Trade

Whatever you think of the corporate tax inversion thing, Jared Bernstein’s recent Washington Post item on the subject contained a valuable reminder of (a) the importance of sovereignty in international economic policy, and (b) the imperative of the United States using its own national power much more unabashedly and effectively in this sphere.

Jared, a prominent labor specialist who used to be Vice President Biden’s chief economist, noted that one possible under-appreciated reason for Burger King’s plan to move its corporate headquarters across the border when it acquires Canadian donut and coffee chain Tim Hortons has nothing to do with capitalizing on Canada’s lower corporate tax rate. Instead, it has to do with Canada’s approach to all foreign direct investment.

A New York Times observation he spotlights explains why: The Investment Canada Act “allows the national government to block a merger if it is deemed to not be in the best interests of the country … Given Tim Hortons’ status as one of the country’s iconic restaurants, a merger structure would allow it to remain Canadian.”

Granted, portraying a fast-food chain as a national treasure whose takeover by a foreign firm rises to the level of a national policy issue is dubious, to say the least. But here’s the main point: As a sovereign country, and especially as a democratically governed one, Canada has every right to handle incoming foreign investment however it chooses, and every right to attach whatever value to Tim Hortons it wishes.

At least as important: Canada – and the U.S. government – need to recognize that America has the exact same right. Which means, for example, that the next time the Canadian government goes ape over Washington’s approval of a Buy American rule that would discriminate against Canadian-made goods and service, as it keeps doing, here’s how U.S. leaders should respond: Far from being a detestable act of “protectionism,” these measures simply represent a case of the democratically elected American government acting “in the best interests of the country” – just as you do.

Similarly, if Canada doesn’t like America’s decisions, it can choose not to do less business with its northern neighbor – or no business at all. And Washington can take similar retaliatory steps. Any doubts about which country would prevail in this particular confrontation, and how cross-border economic policies and regimes would evolve as a result? If so, you’re as clueless as generations of U.S. leaders have been about the real recipe for much better results in global economic competition – and about how vital it is to build and maintain the national economic power that’s its foundation.

(What’s Left of) Our Economy: The WTO is a Great Organization for America — to Leave

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sovereignty, Trade, Trade Deficits, WTO, {What's Left of) Our Economy

Americans owe the World Trade Organization a big debt of gratitude. Just yesterday, the WTO reminded us of a crucial reason why all Americans with a decent regard for their country’s interests – or just with their heads screwed on tight – should be urging their members of the U.S. House and Senate to yank the nation out pronto, and thereby greatly strengthen its ability to safeguard critical international economic interests.

Not that the trade rule-making and enforcement body is short of critics – especially on the Left. But their claim that the WTO is an instrument used by the world’s corporate elites to shaft the world’s working people in both rich and poor countries alike badly misses the mark. Instead, the WTO is an anti-American kangaroo court. Its overriding mission is keeping the U.S. market much wider open to the rest of the world’s exports than other countries’ markets are open to U.S. exports, and developing countries like China have been among its biggest beneficiaries.

For evidence, you can look at the near-quintupling in America’s global goods trade deficit since the United States officially joined the WTO in 1994. (Happy 20th!) The bulk of that deficit increase, of course, has come in U.S. trade with China and other third world economies.

If you don’t think this debacle stems in large measure from the handcuffs put by the WTO on America’s ability to enforce its trade laws and defend its markets unilaterally, then you must think that (a) the United State has been growing much faster for the last two decades than most of its trade competitors and/or (b) that American industry and agriculture are hopelessly uncompetitive.

As for the new evidence, it came in a Monday Reuters article on two U.S. defeats in the WTO – new decisions holding that Washington overdid it when imposing sanctions on imports that the WTO itself agreed were unfairly traded. In one of the cases, the United States was found guilty of too readily concluding that Chinese “state-owned or partially state-owned enterprises” that were handing out subsidies are “public bodies.” Yep, you read that right.

But the real outrage was the reporter’s observation that the WTO decisions “reflected a widespread concern in the 160-member WTO over what many see as illegal U.S. protection of its own producers.” That is, even though the U.S. trade deficit began rebounding strongly almost the instant the current economic recovery began, the rest of the organization’s countries are determined to nip in the bud any sign that Washington may stop serving as the world’s importer of last resort – i.e., as the world’s trade punching bag.

In fairness, though, the Left isn’t the only political grouping that’s got it wrong about the WTO. The same goes for conservatives who claim to be vigilantly monitoring international organizations for plots they allegedly keep hatching to undermine America’s national sovereignty. These defenders of freedom would be well advised to spend less time decrying the dangerous designs or potential of bodies like the UN, and more worrying about the WTO.

After all, the United States can wield a veto in the UN Security Council as well as in the International Monetary Fund and the IMF. In the WTO, it’s one-country one-vote, which means that the rest of the world can enforce decisions and make policies that can harm the U.S. economy in concrete ways in the here and now.