When the recent compromise was announced for a deal for Congress to advance Trade Promotion Authority to President Obama, New York Sen. Chuck Schumer appeared to speak up for most Democrats when he said, “I don’t believe in these (trade) agreements anymore … I’ve changed.”
There used to be bipartisan support for trade agreements. 95 percent of consumers are outside of the U.S., there are more barriers to exports than there are to imports and Free Trade Agreements have expanded global trade significantly over the past 20 years, a major component to the rise of the global middle class.
The global economy is now slowing and the rise of protectionist trade barriers the world over is a reason why. The public and political support for protectionism is a result of the lingering pain caused from the Great Recession similar to what occurred during the Great Depression when Congress responded with Smoot Hawley tariffs. Enacting the Trans Pacific Partnership would show that we actually learned something from past history that instead of slowing the world economy with trade barriers that we should instead remove them to allow stronger trade and economic growth.
Trade agreements are formed by negotiated give and take. The U.S. befitted more from these trade agreements then we have lost but if the focus is only on the losses you ignore the net benefit. Most of the jobs lost to other countries were not the result of bad trade agreements but for lack of them. The answer is not to become more protectionist ourselves which is now being advocated by Democrats who are arguing that protectionism is “not a bad thing,” but to tear down other’s protectionism.
The result has been that the U.S. has run a $500 billion trade deficit with countries with which we have no trade agreements and a $50 billion trade surplus with the 20 countries that we do have trade agreements with. U.S. ag exports have increased 145 percent since the North American Free Trade Agreement. The TPP would require Canada to make concessions on trade barriers to U.S. dairy and poultry exports that are still allowed under NAFTA. The TPP will improve upon NAFTA. The U.S. Ag Sector has benefited more from these trade agreements than any other economic sector. U.S. Ag productivity leads the world and as noted, the world’s population needs U.S. food. ISU Economist, Dermot Hayes, said that the TPP is the biggest single economic opportunity in U.S. history for the U.S. pork industry.
As to giving the President TPA, there are some conservatives who will join protectionist Democrats in voting against TPA out of personal animosity toward giving the President more power to do anything. My Congressman, Steve King, is reportedly one of them. He said he doesn’t trust Obama to negotiate anything. There are a lot of pork producers in his district who need TPP and it takes a small man to put his animosity toward the President in front of his responsibility to his constituents. Steve King ignores the concerns of his district’s dairy farmers on the immigration issue and his refusal to approve TPA to finish a TPP is another issue where he is putting ideology ahead of his constituents, in this case livestock and poultry producers. For gosh sakes, even Ted Cruz supports TPA for Obama.
President Obama said that trade protectionists in his party are playing on fears over trade using facts that are not true. Democrats were never strong trade proponents as labor was always there badgering them over any support for trade deals. Trade agreements get up or down votes in Congress as part of TPA. 535 members of Congress won’t fit at the negotiating table so the Administration cuts the deal and then Congress gets to vote whether to approve it or not. The protectionists oppose TPA which they see as nipping trade deals in the bud. If they lack the authority to finish negotiating them then they will be never be brought to Congress for ratification. To oppose TPA is blatantly protectionist saying that President Obama could or would not ever bring a trade deal to Congress that the Democrats would vote to approve of.
President Obama argues that the TPP will have enforceable new labor and environmental protections in it that his party brethren call for. He is making a powerful argument that stalwarts in his party such as Sen. Elizabeth Warren are “wrong on trade.” The President charges that they are using trade as the scapegoat to blame for a decline in the middle class when he thinks trade, specifically the TPP will help benefit and strengthen the U.S. middle class.
Although President Obama calls the TPP the most progressive trade agreement in history, Hillary is hedging as to whether she will support it due to political pressure within her party. The protectionists think Hillary is a member of their group, yet Hillary is on record previously as supporting TPP. The competition in her party from the left is goading her to do what Chuck Schumer has done change, and now oppose TPA and TPP.
In many ways this trade agreement is bucking the tide of history as rising trade protectionist sentiment follows world recessions. It is always a test of whether we learned anything from history and the Democrats have now taken over from Republicans who were the protectionists in the 1930s.
The Ag Sector strongly favors TPA and TPP which would boost global ag trade another $498.5 billion giving the global economy a shot in the arm that it is sorely in need of. Given U.S. business creativity and innovation, denying ourselves access to the world market through opposition to trade agreements makes no sense. Export related jobs pay 16 percent more than non-export related manufacturing jobs. 80 percent of global buying power is outside the U.S., so the more consumers that we gain access to the better. The trade protectionists are on the wrong side of history.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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