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“Trade And Tribulation”: Protectionists Almost Always Exaggerate The Adverse Effects Of Trade Liberalization

Why did Bernie Sanders win a narrow victory in Michigan, when polls showed Hillary Clinton with a huge lead? Nobody really knows, but there’s a lot of speculation that Mr. Sanders may have gained traction by hammering on the evils of trade agreements. Meanwhile, Donald Trump, while directing most of his fire against immigrants, has also been bashing the supposedly unfair trading practices of China and other nations.

So, has the protectionist moment finally arrived? Maybe, maybe not: There are other possible explanations for Michigan, and free-traders have repeatedly cried wolf about protectionist waves that never materialized. Still, this time could be different. And if protectionism really is becoming an important political force, how should reasonable people — economists and others — respond?

To make sense of the debate over trade, there are three things you need to know.

The first is that we have gotten to where we are — a largely free-trade world — through a generations-long process of international diplomacy, going all the way back to F.D.R. This process combines a series of quid pro quos — I’ll open my markets if you open yours — with rules to prevent backsliding.

The second is that protectionists almost always exaggerate the adverse effects of trade liberalization. Globalization is only one of several factors behind rising income inequality, and trade agreements are, in turn, only one factor in globalization. Trade deficits have been an important cause of the decline in U.S. manufacturing employment since 2000, but that decline began much earlier. And even our trade deficits are mainly a result of factors other than trade policy, like a strong dollar buoyed by global capital looking for a safe haven.

And yes, Mr. Sanders is demagoguing the issue, for example with a Twitter post linking the decline of Detroit, which began in the 1960s and has had very little to do with trade liberalization, to “Hillary Clinton’s free-trade policies.”

That said, not all free-trade advocates are paragons of intellectual honesty. In fact, the elite case for ever-freer trade, the one that the public hears, is largely a scam. That’s true even if you exclude the most egregious nonsense, like Mitt Romney’s claim that protectionism causes recessions. What you hear, all too often, are claims that trade is an engine of job creation, that trade agreements will have big payoffs in terms of economic growth and that they are good for everyone.

Yet what the models of international trade used by real experts say is that, in general, agreements that lead to more trade neither create nor destroy jobs; that they usually make countries more efficient and richer, but that the numbers aren’t huge; and that they can easily produce losers as well as winners. In principle the overall gains mean that the winners could compensate the losers, so that everyone gains. In practice, especially given the scorched-earth obstructionism of the G.O.P., that’s not going to happen.

Why, then, did we ever pursue these agreements? A large part of the answer is foreign policy: Global trade agreements from the 1940s to the 1980s were used to bind democratic nations together during the Cold War, Nafta was used to reward and encourage Mexican reformers, and so on.

And anyone ragging on about those past deals, like Mr. Trump or Mr. Sanders, should be asked what, exactly, he proposes doing now. Are they saying that we should rip up America’s international agreements? Have they thought about what that would do to our credibility and standing in the world?

What I find myself thinking about, in particular, is climate change — an all-important issue we can’t confront effectively unless all major nations participate in a joint effort, with last year’s Paris agreement just the beginning. How is that going to work if America shows itself to be a nation that reneges on its deals?

The most a progressive can responsibly call for, I’d argue, is a standstill on further deals, or at least a presumption that proposed deals are guilty unless proved innocent.

The hard question to deal with here is the Trans-Pacific Partnership, which the Obama administration has negotiated but Congress hasn’t yet approved. (I consider myself a soft opponent: It’s not the devil’s work, but I really wish President Obama hadn’t gone there.) People I respect in the administration say that it should be considered an existing deal that should stand; I’d argue that there’s a lot less U.S. credibility at stake than they claim.

The larger point in this election season is, however, that politicians should be honest and realistic about trade, rather than taking cheap shots. Striking poses is easy; figuring out what we can and should do is a lot harder. But you know, that’s a would-be president’s job.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, March 11, 2016

March 13, 2016 Posted by | Bernie Sanders, Protectionism, Trade Agreements, Trans Pacific Partnership | , , , , , , , , | Leave a comment

“From TPA To TPP; A Trade Deal Explainer”: A Mix Of Policy, Procedure, And 2016 Politics

There is no shortage of acronyms or confusion surrounding the trade deal legislation being debated in Washington.

Hillary Clinton weighed in on the trade debate Sunday during a campaign stop in Iowa. Or maybe she didn’t. Or she did, but not in the way people thought she did. Confused or frustrated yet? You’re not alone. Between TPP, TPA, TAA, TTIP, and any other number of letter t-laden acronyms, it has become difficult to pinpoint what, specifically, lawmakers are actually talking about as this process moves forward. That’s a problem.

Trade policy is complicated. Congressional procedure is complicated. Politics are often deliberately made complicated by lawmakers or candidates who see limited benefit in weighing in on thorny or increasingly complex issues. The ongoing fight on Capitol Hill over trade combines them all—a mix of policy, procedure, and 2016 politics. That means it’s probably worth breaking down a few top-line points on all three.

The policy

The Trans-Pacific Partnership (TPP) is the name of the 12-nation trade talks that are currently ongoing. There is no deal, though Obama administration officials say they are closing in on one. President Barack Obama has made reaching a deal on TPP one of the top goals of his second term and a cornerstone of his foreign and domestic policy agenda. It is also a top priority of Republican leadership in the House and Senate. Many Democrats, stung by past major trade agreements, are skeptical of the direction of the negotiations. But it’s important to note, again, there is technically no deal … yet.

Think about negotiating with 11 other countries. They’ve all got their own politics, their own legislatures, and their own powerful industries. How could you possibly get all 11 to agree on the same principles, let alone a specific trade deal? It’s not easy. So it would make sense to create a mechanism to try and streamline the process, right? Meet the Trade Promotion Authority (TPA). TPA is not the trade deal (again, that’s TPP). It is, more or less, a procedural mechanism designed to ease the passage of any deal. TPA, also known as “fast-track,” doesn’t prevent lawmakers from voting on a final deal, but it does prevent amendments. Obama administration officials say explicitly they need TPA to reach a final agreement on TPP. Other nations, as Obama’s team explains it, simply don’t trust that the U.S. can get a deal through Congress untouched without it. (This is a serious point of disagreement between Obama and Democrats opposed to the trade deal.)

While TPA is not (repeat: is not) the actual trade deal, it does require legislation and a vote. Democrats opposed or who are wavering on trade see that bill as one of the last points of leverage should Obama actually finalize a deal. If TPA passes and Obama’s team reaches an agreement on TPP, there’s little confidence within the ranks of those opposed to a deal that momentum could be halted at that point. For a unified labor movement, progressive activists, and Democrats opposed to the deal, that has painted TPA as a must-kill item on the agenda.

The procedure

Last week House Democrats chose to vote to sink their own priority, Trade Adjustment Assistance (TAA), in order to slow down Obama’s (TPA). So what the heck does this have to do with TPA? Well, nothing really. Except that program, used to provide aid to U.S. workers displaced due to trade, is expiring. Democrats, who are overwhelmingly supportive of the program, saw an opening in the TPA legislation and it became the vehicle to extend (and actually expand) the program.

House Democrats opposed to the underlying trade negotiations quietly settled on a strategy to deliberately kill their own priority in order to re-set the broader trade debate. That meant voting against TAA, even in the wake of (and perhaps because of in some cases) personal lobbying from Obama. In an interesting twist, House lawmakers actually had the votes to pass the TPA measure separately, but without TAA attached, that goes nowhere for the moment.

Obama and Republican leaders are now left with trying to find another route to get TPA to the president’s desk. One possibility is swinging a huge number of Democrats who just a few days ago voted against TAA. That seems unlikely, save for an epic weekend of lobbying by the White House legislative affairs team. But House and Senate leaders can get quite crafty when it comes to passing bills they badly want to move. So it’s safe to say there’s more to be written in this story.

The politics

The procedure and the policy have presented a political conundrum on the campaign trail for Clinton. She was Obama’s secretary of state when negotiations on TPP started and was supportive at the time. But the party continues to hold a general distrust for trade deals. As Clinton presses for a “better agreement” and leaves the door open to eventually supporting a final deal, Vermont Senator Bernie Sanders and former Maryland Governor Martin O’Malley have made attacking the trade deal a central point of their campaigns. Both weighed in to oppose TPA.

Clinton, for her part, has held her fire, instead broadly focusing on the need for a strong final deal on the TPP. There’s a reason. Read through the previous sections above. Does that sound like a process a presidential candidate would want to explain on the campaign trail? No. Especially not when the underlying issue is so divisive among the most activated members of the party, as it is for Democrats. Clinton, on Sunday, was talking about the broader trade negotiations, not the specifics of the fast-track legislative process. That, it appears, is something that her team has decided there is simply no benefit to weigh in on. As Robby Mook, Clinton’s campaign manager, said on CBS’s Face the Nation Sunday: “The back and forth that’s happening right now is about procedures and parliamentary this and that.”

Conclusion

This stuff is complex, and that’s even before one gets into the specifics of TPP itself—an enormously important negotiation that touches on just about every sector of the U.S. economy and more than 40 percent of the world’s. That, in a nutshell, is exactly why figuring out what each lawmaker or candidate means when they say something on the issue, matters. No matter how many times they use the letter “T” in the acronyms.

 

By: Phil Mattingly, Bloomberg Politics, June 14, 2015

June 16, 2015 Posted by | Economy, Election 2016, Trade Promotion Authority, Trans Pacific Partnership | , , , , , , , | Leave a comment

“The Votes Boehner Didn’t Deliver”: And Therein Lies The Problem, Republicans Didn’t Really Do Their Part

After this afternoon’s drama in the U.S. House, Speaker John Boehner’s (R-Ohio) office issued an interesting statement, effectively saying, “Don’t look at me.”

House Speaker John Boehner (R-OH) today issued the following statement after the House failed to pass legislation reauthorizing the Trade Adjustment Assistance (TAA) program:

“The outcome of today’s TAA vote was disappointing. Republicans did our part, and we remain committed to free trade because it is critical to creating jobs and growing our economy. I’m pleased that a bipartisan House majority supported trade promotion authority. This is an opportunity for the Democratic Party to take stock and move forward in a constructive fashion on behalf of the American people.”

The assertion that Boehner was disappointed by the TAA vote, but “Republicans did our part,” stands out. Strictly speaking, it’s not quite right.

Here’s the roll call on today’s vote on Trade Adjustment Assistance. Notice, 86 House Republicans voted for it, while 158 voted against it. Had the House GOP voted for the measure in greater numbers, “fast track” would be on its way to President Obama’s desk for a signature right now.

And therein lies the point: Republicans didn’t really do their part, so much as they voted for the part of the package they like (Trade Promotion Authority) and voted against the part of the package they don’t like (Trade Adjustment Assistance).

Clearly, the principal focus today is on House Democrats, and for good reason – President Obama made a direct appeal to his ostensible allies today, and few of them were swayed.

But let’s be clear about the broader dynamic: House Democrats are in the minority. In fact, it’s the smallest Democratic minority in the chamber in generations, and it’s not really up to them to decide what passes and what doesn’t.

Over at Vox, Timothy B. Lee had a good piece on this under-appreciated angle to the politics of the trade fight.

In principle, most Republicans are in favor of the president’s trade agenda…. But most House Republicans weren’t willing to spend the $450 million per year contemplated by the Senate bill on Trade Adjustment Assistance. That’s why House Speaker John Boehner (R-OH) was forced to resort to a complicated scheme where Democrats would have to approve TAA while Republicans approved the rest of the bill.

If you buy the arguments for the Trans-Pacific Partnership, which many Republicans profess to, this seems crazy. One influential study from the Peterson Institute estimated that the trade deal would generate $78 billion of economic benefits for the United States. Of course it’s worth taking this kind of projection with a grain of salt. But even if we assume it’s exaggerated by a factor of 10, the deal’s benefits still dwarf the $450 million annual price tag of TAA.

And yet, Boehner barely tried to get TAA through his chamber today, and he mustered up just 86 votes.

In fairness, that’s still more than double the number of Democratic votes the White House was able to secure, so it’s not as if Obama is in a position to call up the Speaker and complain. For that matter, it’s possible Boehner will pull together more votes early next week.

But as the dust settles on today’s fight, and as Round II takes shape on Tuesday, let’s not forget that Boehner is supposed to have great influence over what clears the House, and if he supports “fast track” as much as he claims, he can do some heavy lifting – or at least try to.

Lee’s report concluded, accurately, “[I]f the TPP collapses, they’ll bear some of the blame.”

 

By: Steve Benen, The Maddow Blog, June 12, 2015

June 13, 2015 Posted by | John Boehner, Republicans, Trade Promotion Authority, Trans Pacific Partnership | , , , | Leave a comment

“The Left Is So Wrong On Trade”: Playing A 78 rpm Record In The Age Of Digital Downloads

The left’s success in denying President Obama fast-track authority to negotiate the Trans-Pacific Partnership is ugly to behold. The case put forth by a showboating Sen. Elizabeth Warren — that Obama cannot be trusted to make a deal in the interests of American workers — is almost worse than wrong. It is irrelevant.

The Senate Democrats who turned on Obama are playing a 78 rpm record in the age of digital downloads.

Did you hear their ally, AFL-CIO head Richard Trumka, the day after the Senate vote? He denounced TPP for being “patterned after CAFTA and NAFTA.” That’s not so, but never mind.

There’s this skip on the vinyl record that the North American Free Trade Agreement destroyed American manufacturing. To see how wrong that is, simply walk through any Walmart or Target and look for all those “made in Mexico” labels. You won’t find many. But you’ll see “made in China” everywhere.

Many of the jobs that did go to Mexico would have otherwise left for low-wage Asian countries. Even Mexico lost manufacturing work to China.

And what can you say about the close-to-insane obsession with CAFTA? The partners in the 2005 Central American Free Trade Agreement — five mostly impoverished Central American countries plus the Dominican Republic — had a combined economy equal to that of New Haven, Connecticut.

(By the way, less than 10 percent of the AFL-CIO’s membership is now in manufacturing.)

It’s undeniable that American manufacturing workers have suffered terrible job losses. We could never compete with pennies-an-hour wages. Those low-skilled jobs are not coming back. But we have other things to sell in the global marketplace.

In Washington state, for example, exports of everything from apples to airplanes have soared 40 percent over four years, to total nearly $91 billion in 2014, according to The Seattle Times. About 2 in 5 jobs there are now tied to trade.

Small wonder that Sen. Ron Wyden, a liberal Democrat from neighboring Oregon, has strongly supported fast-track authority.

Some liberals oddly complain that American efforts to strengthen intellectual property laws in trade deals protect the profits of U.S. entertainment and tech companies. What’s wrong with that? Should the fruits of America’s creativity (that’s labor, too) be open to plundering and piracy?

One of TPP’s main goals is to help the higher-wage partners compete with China. (The 12 countries taking part include the likes of Japan, Australia, Canada, Chile, Mexico, and New Zealand.) In any case, Congress would get to vote the finished product up or down, so it isn’t as if the public wouldn’t get a say.

But then we have Warren stating with a straight face that handing negotiating authority to Obama would “give Republicans the very tool they need to dismantle Dodd-Frank.”

Huh? Obama swatted down the remark as wild, hypothetical speculation, noting he engaged in a “massive” fight with Wall Street to get the reforms passed. “And then I sign a provision that would unravel it?” he told political writer Matt Bai.

“This is not a partisan issue,” Warren insisted. Yes, in a twisted way, the hard left’s fixation over big corporations has joined the right’s determination to undermine Obama at every pass.

Trade agreements have a thousand moving parts. The U.S. can’t negotiate with the other countries if various domestic interests are pouncing on the details. That’s why every president has been given fast-track authority over the past 80 years or so.

Except Obama.

It sure is hard to be an intelligent leader in this country.

 

By: Froma Harrop, Loeb Award Finalist for Economic Commentary in 2004 and 2011, Scripps Howard Award Finalist for Commentary in 2010; The National Memo, May 14, 2015

May 15, 2015 Posted by | Congress, Fast Track Authority, Trans Pacific Partnership | , , , , , , , , , | 9 Comments

“Something Liberals Should Remember”: Obama Is Right: Elizabeth Warren Is “A Politician Like Everybody Else”

On Friday, President Barack Obama sat down with Yahoo’s Matt Bai to promote the Trans Pacific Partnership and delivered his sharpest rebuke yet to Senator Elizabeth Warren and other liberals who oppose the trade deal.

“The truth of the matter is that Elizabeth is, you know, a politician like everybody else,” he said in the interview, which was published Saturday. “And you know, she’s got a voice that she wants to get out there. And I understand that. And on most issues, she and I deeply agree. On this one, though, her arguments don’t stand the test of fact and scrutiny.”

Bai correctly interpreted these comments as some of the harshest words the president has used against his liberal allies. But, at the same time, they are rather innocuous: Warren is a politician and is susceptible to outside pressure like anyone else. Liberals should remember that.

When Warren speaks about former Secretary of State Hillary Clinton, she often references a battle over a financial regulatory bill in the late 1990s and early 2000s. A law professor at the time, Warren strongly opposed the bill. But the economic team in President Bill Clinton’s White House was divided on it. Warren met with Hillary Clinton, then the first lady, and convinced her to oppose the bill as well. Hillary then convinced her husband not to sign the legislation at the end of his presidency.

Yet just a few months later, Clinton, as a senator from New York, the financial capital of the world, reversed her position. The bill passed and President George W. Bush signed it. “There were a lot of people who voted for that bill who thought that there was going to be no political price to pay,” Warren told The New Yorker’s Ryan Lizza recently. Warren wants to make sure that doesn’t happen again.

The fact that Hillary, the first lady, and Hillary, the New York senator, had opposite opinions of the bill shouldn’t have surprised Warren that much. As first lady, Hillary had no constituents to worry about. But as a senator, Hillary suddenly had millions of constituents with jobs either directly or indirectly connected to the financial industry. It would be great if she—and all politicians for that matter—always voted on principle and were immune from lobbying pressure. But that isn’t the case.

That’s true for Warren as well. The medical device industry is one of the most important industries in Massachusetts, and Warren has gone to bat for the industry multiple times. For instance, she is one of the few Democrats that supports the repeal of the medical device tax, which is part of Obamacare. In February, she introduced a bill to require pharmaceutical companies that pay a penalty and break the law to reinvest a percentage of that penalty into the National Institute of Health. But it has a loophole: Medical device manufacturers are exempt from the requirement unless they make drugs as well.

If liberals want to see a politician who always votes with his conscience, they need to look no further than Hillary’s one current challenger, Vermont Senator Bernie Sanders. When Sanders announced his presidential run, Matt Taibbi, writing at Rolling Stone, explained:

Sanders genuinely, sincerely, does not care about optics. He is the rarest of Washington animals, a completely honest person. If he’s motivated by anything other than a desire to use his influence to protect people who can’t protect themselves, I’ve never seen it. Bernie Sanders is the kind of person who goes to bed at night thinking about how to increase the heating-oil aid program for the poor.

When Sanders sat down with ABC News’s George Stephanopoulos, the host noted that he “can hear the Republican attack ad right now: He wants America to look more like Scandinavia.” To which Sanders responded, “That’s right. That’s right. What’s wrong with that?” That is a politician who doesn’t care about his image.

It’s just about impossible to imagine Warren answering a question that way. She and her staff closely guard her image. For instance, she is notorious for not speaking to reporters in the U.S. Capitol, unlike most of her colleagues. It’s very rare that she strays off message.

That doesn’t mean that her votes and policy positions aren’t principled most of the time. I have no reason to believe that she is opposing the trade deal for political reasons. I think she and the president simply disagree on the issue. But as liberals criticize the TPP as a sop to big business and the U.S. Trade Representative for its corporate ties—both of which may be true—it’s worth remembering that Warren herself is not immune to pressure.

 

By: Danny Vinik, Staff Writer, The New Republic, May 11, 2015

May 12, 2015 Posted by | Elizabeth Warren, Hillary Clinton, Trans Pacific Partnership | , , , , , , | 3 Comments

   

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