Smart trade deals can make the U.S. prosperous, but bad deals like those weaken the nation by stifling innovation through extending temporary intellectual-property rights like copyrights, destroying wealth-creating capacity and eliminating jobs, which in turn increase demand for government services while constricting the flow of tax revenue to support those services.
It is believed by critics that the TPP would lock current U.S. trade policy in concrete while granting flexibility on trade policy to competing Pacific-rim countries. Asymmetrical rules are a prescription for long-term economic damage to the U.S. and for the loss of millions more jobs as countries with flexibility game the system.
“Believed” is an important word because, except for Chapter QQ, the terms of the TPP are secret. In fact, they are so secret that members of Congress who want to see the proposed agreement must enter a room without pen, pencil or paper, as U.S. Rep. Louise Slaughter, D-N.Y., told me.
What did Slaughter learn? “Nothing — it was just pages of numbers and details that made no sense to anyone without specialized knowledge,” said Slaughter, a microbiologist whose legislative expertise is in the fine details of House rules.
Slaughter is not alone. Unions, consumers and domestic companies have also been kept in the dark. And so have the American people.
Instead of an open process with debate on the merits of the deal, the White House — which President Barack Obama said at a Google+ Fireside Hangout was “the most transparent administration in history”— wants what is euphemistically called fast tracking to quickly approve the pact. This means that once its terms are released, there will be up-or-down votes in Congress after perfunctory debate, no changes allowed.
In plainer English, democratic values are being subverted in favor of corporate values, part of a larger trend of growing corporate power that diminishes the exercise of democratic power.
Under the Constitution, the legislative branch is supposed to make the rules, and the executive branch is to faithfully execute them. But fast track reverses that. It is also a convenient way for U.S. multinational corporations to negotiate terms they want, since many of the thousand or so lawyers intimately involved in the process work for multinationals.
Americans should demand an open process and ignore claims that the debate sure to flow from openness would slow global economic progress. Speed is not of the essence here, but what the Constitution calls the “general welfare” is.
On this score, proponents of the secret new trade pacts will argue that they are good for the U.S.’s trade deficits. On the surface, 2012 looked like a year of declining trade deficits. Compared with 2011, the U.S. trade deficit in goods and services declined to $540.4 billion, a drop of $19.5 billion, or 3.5 percent.
But the entire decline and more was accounted for by reduced imports of crude oil and petroleum products, which fell by $34.8 billion.
NAFTA was originally sold as a job-creation scheme. President Bill Clinton said in 1993 NAFTA would mean “more trade, more exports and more jobs for the United States” and “the only way a wealthy country grows wealthier in a global economy is to increase the volume of trade.” Instead we turned small trade surpluses in goods with Mexico before NAFTA into deficits that last year exceeded $61 billion. The deficit in goods traded with Canada passed $31 billion last year.
Clinton sold Americans on liberalized trade with China, saying of the deficit in 1999 that “over time, clearly it will shrink with this agreement.” On the basis of the first nine months of this year, the 2013 deficit is likely to be about $316 billion, roughly the same as in 2012 but more than triple the inflation-adjusted deficit in 1999.
America’s goods deficit with South Korea in the first nine months of this year was just shy of $17 billion, more than the $16.6 billion for all of 2012. The last U.S. surplus with Seoul was 15 years ago.
Trade rules, though often picayune, are important because disputes can damage U.S. exports.
For example, a single case of mad-cow disease in the U.S. shut down sales of American beef to Seoul in 2003 — an issue that took five years to resolve. South Korean beef consumption rose, yet the value and amount of American beef shipped to South Korea was smaller in 2012 than in 2001.
And despite the “free trade” deal that took effect last year, South Korea continues to impose tariffs on imported American cars at a time when Hyundai and Kia, which are owned by the same conglomerate, sell every seventh new car in the United States.
Trade in services, rather than goods, is supposed to be the future for America. But increased services fall far short of making up for the damage done by deficits in goods.
Measured in 2012 dollars, the deficit in goods worsened by more than $741 billion from 1992 to 2012, while the surplus in services exported grew by less than $207 billion. The result was a net trade deficit that grew almost ninefold in two decades.
In addition, services face other challenges. Many services can be moved offshore easily, as Princeton economist Alan S. Blinder has shown. Some types of services, such as financial trades, can face subtle restrictions. For instance, South Korea requires approval from customers before their data may be stored on computers in, say, Singapore or Seattle.
The evidence from two decades of trade deals is clear: Americans end up with the short end of the stick as jobs, investment and the prosperity they bring flow to our trading partners. The way to end this self-inflicted damage and create millions of jobs is to embrace the democratic process with a robust debate on each element of any new trade deals — which would begin with killing the fast-track approval process.