Posts Tagged ‘free trade’

Fighting the Secret Plot to Make the World Richer*

May 24, 2015

President Obama is battling for “fast track” authority, to negotiate the Trans-Pacific Partnership (TPP, a trade deal among 11 big countries) without having it subject to Congressional amending. It’s the only way such a deal could conceivably happen.

Warren

Warren

Most Democrats, led by Elizabeth Warren, oppose this. They say the trade negotiations are being conducted in secret, shaped behind the scenes by corporate interests. (We all know Obama shills for fatcats, right?) As columnist Ruth Marcus points out, this Warren argument is simply bogus. It’s not as though legislators will have to vote on the deal without our knowing what’s in it. In fact, the proposed legislation requires the terms to be made public 60 days before signing – an unprecedented proviso.

Unknown-2But, as Marcus notes, the secrecy argument is a mere excuse, and Warren et al would still oppose this deal if the negotiations were broadcast live on C-SPAN. They paint it as selling out American workers by helping foreigners to compete unfairly against them. This reprises the 1990s NAFTA debate, when Ross Perot warned of a “giant sucking sound” of U.S. jobs going to Mexico. Warren says he was right. But in truth that sound was at most a whisper, with direct U.S. job losses minimal.

Well, free trade does threaten some jobs by exposing them to tougher foreign competition. But this perspective is like viewing the universe through a straw, blind to the bigger picture. Part of that picture is that freer trade lowers prices for consumers. This is huge; the U.S. Chamber of Commerce estimates that imports add $10,000 annually to the average American family’s purchasing power. That enables them to spend more, stimulating the economy and generating more jobs – probably way more jobs than the few lost to foreign competition.

Unknown-1By harping on those latter lost jobs while ignoring the benefits to consumers and the economy as a whole, Warrenite Democrats are literally favoring the interests of the few (very few) over the interests of the many. Some populists.

Unknown-4Interestingly, for most of its history, throughout the 19th and early 20th centuries, the Democratic party understood perfectly well that freer trade was good for the many while protectionism cosseted the few at their expense. Not a good deal for “everyday Americans.” This was in fact a headline issue for Democrats. But then (perhaps too heavily invested with union interests) Democrats lost their way on the trade issue.

Meantime, even the focus just on America’s economy is too narrow and misses the larger reality. If NAFTA’s impact on U.S. jobs is debatable, its impact on Mexican ones was unarguably huge, making Mexico much more prosperous than it would otherwise have been. And surely a richer neighbor is something in America’s national interest.

imagesIndeed, whatever its effect on any particular job, or industry, or country, freer trade makes the world as a whole richer.** Any serious economist will tell you so. It does this by enabling capital investment to be put to the most economically efficient uses, unhindered by artificial barriers and constraints, which results in production of more goods with fewer inputs of resources and labor. That’s an enlargement of the global economic pie, so more people can get bigger slices. Since WWII, this – an increasingly globalized world, with more and freer trade – has been the prime driver which has raised billions of people out of poverty.

Surely that is something in America’s national interest. A richer world is a less troubled world; and can buy more that U.S. workers produce.

Warrenites cloak themselves as tribunes for those “everyday Americans,” believing that if Democrats sound this trumpet loudly enough they’ll win. Thus they are trying to move the party, and Hillary Clinton, to the left of President Obama – who in fact was just barely not too far left to win – barely. The British Labour party made the same mistake in their recent election, believing the country would embrace pet left-wing themes. It did not; Labour was crushed.

imagesOur next election, with a Democratic candidate tacking left and having big trustworthiness issues besides, will be the Republicans’ to lose. If only they can control their own self-defeating instincts and offer a halfway sensible nominee.

* I cribbed this title from a recent article in The Economist.

** Potentially $220 billion richer annually, from the TPP alone, it’s estimated.