Anyone who wants the United States to benefit from more economic growth would do well to take Lane’s side:
The Great Recession wrought global havoc, but at least it did not rekindle protectionist sentiment. Or so it seemed until last week, when Senate Majority Leader Harry Reid (D-Nev.) trashed President Obama’s request for authority to expedite major trade-expanding agreements with the Pacific Rim and Europe.
It is not a bullish indicator if the man who controls Senate business says, “Everyone would be well advised just to not push this right now.”
Protectionists appear to be gaining traction with their attacks on the proposed pacts, especially the Trans-Pacific Partnership (TPP), which “could mean toxic food and environmental contamination,” according to a scary video on the AFL-CIO’s Web site.
The critics’ central claim is less lurid: The TPP would destroy U.S. jobs and wages — just as its “model,” the 20-year-old North American Free Trade Agreement (NAFTA), allegedly did.
Former Democratic congressman David E. Bonior of Michigan assembled anti-TPP talking points in a Jan. 30 New York Times op-ed: “Mr. Obama’s desire for fast-track authority . . . clashes with another priority in his [State of the Union] speech: reducing income inequality.”
Free trade is generally beneficial, on net, to all sides. Free trade with low-wage nations, though, can push down net incomes for workers in directly competing U.S. industries. This “Stolper-Samuelson effect,” as economists call it, is probably one of many hard-to-quantify factors that increased income inequality in the United States — offset, of course, by the benefits to previously impoverished people abroad.
Contrary to opponents’ implications, however, the TPP would not expose the United States to major new competition from foreign low-wage labor.
Bonior misleadingly described the TPP as a “12-nation pact with Latin American and Asian nations.” Actually, four of the 12 — the United States, Canada, Australia and New Zealand — are high-wage, developed nations neither Latin American nor Asian. Three others are Asian but decidedly high-income: Singapore, Japan and tiny oil-exporting Brunei.
The United States already has bilateral free-trade agreements with six of the TPP nations —Canada, Mexico, Australia, Singapore, Chile and Peru — and runs trade surpluses with the last four. These countries account for 80 percent of U.S. merchandise trade with the TPP area. So for that huge segment, the deal represents a mere tweak to the status quo.
We’ve covered this issue previously. It is worth mentioning that Andrew Sullivan has not yet seen fit to attack Reid for undermining his own president on trade policy, which is as much a foreign policy issue as it is an economic policy issue.