Trade Pact Heads For a Rewrite
Now that the White House has released more detail on the development of the controversial Trans-Pacific Partnership trade agreement, which will require future votes of approval by the U.S. Congress as well as approval from the participating nations, it has become clearer that the basic goal and direction is sound: eliminating tariffs in some industries, reducing non-tariff barriers in others. The bigger question is what the U.S. gains and loses in its trade agreements. And those questions already have been partly absorbed into the wider debate— triggered by the U.S. presidential election campaign—over protectionist policies.
Few will deny that prior trade agreements, such as 1994’s North American Free Trade Agreement, sacrificed some of the U.S. manufacturing base—and the jobs and business that base provides—in exchange for greater access to countries that don’t share the spirit of free trade in the same way that the U.S. does but had plenty of poor people willing to work cheaply. Americans enjoy cheaper imported goods; many thousands, perhaps millions of people around the world moved into the middle class or out of poverty.
With the Trans-Pacific Partnership, there are more than purely economic motives for the U.S. to press forward. China, most conspicuously, isn’t participating, since the proposed agreement is meant to set a U.S.-based trade agenda that prevents an aggressive China from leading—and for good reasons. China’s steel industry has destroyed thousands of U.S. jobs by dumping steel here. Moreover, China has flouted intellectual property rights and manipulated currency to keep its exports cheap.
Yet, an all-out trade war helps no one. Donald J. Trump, never one for subtlety, in 2011 said he would slap a 25% tariff on all Chinese goods and services. Now, as the Republican front-runner for president, he is talking about a 30% tariff on Chinese goods. If Trump becomes the Republican candidate, perhaps his tariff will hit the 50% level.
More thoughtful public figures are talking about rewriting aspects of the pact. Paul Ryan (R.-Wis.), the new Speaker of the House, told The Wall Street Journal that Congress’ and the Republicans’ support has been based on heading off China and that, rather than scrapping it, “we want to scrub this trade agreement to make sure that it reaches and meets the standards that we call for.” Presumably, that means more symmetry as far as trade barriers. Hillary Clinton, who once supported the pact but no longer does, will probably seek from U.S. trade partners promises of better environmental protections and working conditions for employees.
In any case, 2015 isn’t 1994. In the short run, recent U.S. trade pacts have helped to boost non-U.S. economies and cut the cost of imported goods and materials at home. In the long run, the U.S. has shifted its economy away from manufacturing. “Made in the USA” means “Paid in the USA,” with all the good and bad that implies.
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