A Bipartisan Breakthrough on Trade
Washington, D.C., witnessed a rare but welcome event this week when Republican leaders decided to back President Obama's request for "fast track" trade authority. This would establish negotiating guidelines for the president and guarantee him an up-or-down vote in Congress on any trade deal he signed.
This in no way means that the fight is over. Just yesterday, Senator Bernie Sanders (I., Vt.) managed to force a delay in the Senate's consideration of the fast-track bill. Labor and environmental groups vow to fight any further action with all they've got. Still, the rare collaboration between the president and the Republican Party is something to celebrate.
Economic growth has been weak lately, both in emerging markets and in developed countries. Recently, IMF economists forecasted lower growth through 2020 due to deteriorating productivity levels and aging workforces around the world. The U.S. is not doing much better. The domestic economy is still dealing with the mess that was left by the Great Recession. Low domestic investment and productivity levels are raising concerns among policymakers.
It is obvious that we need a jolt to put everything back on track. A number of trade deals that are currently being negotiated could just do that. Economic research undertaken by different groups shows that both the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) could have wide-ranging positive effects on the countries involved. For example, TPP, whose negotiating parties represent 40 percent of total U.S. trade in goods and 25 percent of total U.S. trade in services, could increase global annual income by $295 billion ($78 billion for the U.S.) in 2025, according to Peterson Institute. If this agreement leads to a wider free-trade agreement in the Asia-Pacific Region, the global economic gain will be much larger.
Labor unions are vehemently opposed to trade deals, citing the possibility of job losses or lower domestic wages. However, the Bureau of Labor Statistics used to track the primary causes of all extended mass layoffs. (The measure was discontinued due to budget cuts.) Between 2001 and 2010, less than 2 percent of total involuntary displacement was associated with import competition or overseas relocation. On the other hand, Department of Commerce Data show that exports supported 11.3 million jobs in 2013 — equal to about 8 percent of total nonfarm employment that year. Furthermore, evidence shows that companies that have access to international markets invest heavily in technology and capital, increasing their labor productivity and their wages. According to David Riker, on average, exports contribute an additional 18 percent to workers' earnings in the U.S. manufacturing sector.
Some say these are just numbers and ignore the human side of the story. While it is true that there might be some job loss, this is more reason for both sides to work together. This week's deal was a testament to that. Both sides agreed on expanded trade-adjustment assistance to help workers in service and manufacturing sectors, whose jobs might be displaced by trade. In addition, for the first time, human-rights issues were part of the 150 negotiating objectives laid out by Congress for the president and the U.S. trade representative. If the outcome of the trade negotiations is not satisfactory, Congress still has the final vote. But at the very least, giving the president fast-track authority strengthens the administration's position during the bargaining process and shows a unified front for American politics abroad. It also reinforces the U.S.'s strong support for free trade.
Then there is another human side of the story: the impact on developing nations. As eloquently stated by former EU trade commissioner Karel De Gucht, "One thing is for sure: No country has ever lifted itself out of poverty without international trade." According to the latest estimates, 17 percent of people in the developing world lived on $1.25 a day or less. Access to international markets, either to sell their products or to purchase cheaper products, is paramount to economic growth and increased living standards in many of these developing countries.
It is the hope of many in Washington, D.C., that this collaboration between President Obama and Republican leaders is the first of many bipartisan agreements. The benefits to U.S. jobs and economic growth, not to mention our competitiveness and our standing in the growing global economy, are obvious.
Pınar Çebi Wilber is a senior economist for the American Council for Capital Formation, a nonprofit, nonpartisan organization promoting pro-capital formation policies and cost-effective regulatory policies.