When is everyone going to realize this train left the station a long time ago?
FROM POLITICO | MAY 13, 2015
For all the buzz there was, you might have thought we were witnessing a revolution against the prevailing world order. Led by Democrats who ganged up against President Obama over additional worker protections and other add-ons, the Senate on Tuesday failed to muster enough votes to start debate on “fast-track” authority for the Obama administration on trade.
And yet, for all the Sturm und Drang, what is most striking here–aside from the rather sorry reminder that Democrats and Republicans seem more able to work against something than for anything–is how little this debate actually matters to the future of global trade and America’s pivotal albeit shifting role. The fact is that regardless of whether this new deal is or is not consummated, global trade has only been increasing year by year, through booms and busts, and it will continue to do so either enabled by the Trans-Pacific Partnership or crimped by its absence.
The only question is whether we collectively accept that, or instead pretend that we have the power to halt a train that long ago left the station and has unstoppable momentum.
The scene today is simple: Democrats and Republicans are split between those who favor more frictionless global trade and those who see enabling it further as the death knell for American wages and workers. The White House and its allies argue strenuously for the necessity of the multi-nation Trans Pacific Partnership and for the fast-track authority to negotiate it as a whole deal that Congress can’t amend; the more populist Elizabeth Warren camp adamantly opposes this. Republicans are similarly divided.
These debates, however, are so 1990s. In fact, you could easily dredge up the arguments for and against the passage of NAFTA in 1992-93 and just substitute the TPP and you would hardly know the difference. Argument A) “If I didn’t think this was the right thing to do for working families, I would not be fighting for it.” B) “For two decades, most people have worked harder for less. Secure jobs have been lost …. We cannot stop global change. We can only harness the energy for our benefit.” The first was spoke by President Obama in the past week; the second was part of President Bill Clinton’s speech signing NAFTA into law in December 1993.
Yet here we are again, with the same forces arrayed. Warnings of further erosion of middle-class wages in the face of low-cost competition are now combined with warnings from Elizabeth Warren that the current agreement could undermine the financial regulations passed in the wake of the 2008-2009 crisis. On the flip side, defenders argue that unless the United States writes the rules of international commerce, then others – and China above all - will write them, to America’s detriment.
You could argue both sides cogently. Yet both sides of the argument are rather beside the point. Trade has been in nearly continuous expansion since the end of World War II. Only in the 1970s into the early 1980s did that expansion halt. Yes, there was also a sharp contraction in 2009 in response to the global financial crisis, but growth in trade resumed in 2010 and has continued well above global GDP growth. The mix of trade has certainly shifted, from primarily driven by the developed world of the U.S., Europe and Japan, to emerging countries such as China. The mix of trade has also been ever in flux, sometimes consisting of predominantly manufactured goods, sometimes with raw materials and commodities occupying a more prominent place. But what hasn’t changed is the relentless expansion of global commerce.
Again, you could argue–as critics of NAFTA did more than twenty years ago—that this relentless expansion has harmed American workers. Opponents of removing trade barriers in other countries have similar variants; Japanese rice farmers, for instance, warn darkly and perhaps legitimately that fewer barriers will mean more low-cost competition that will make their lives less tenable. The arguments against trade agreements, however, have had only one discernible effect: to halt the signing of additional trade agreements. They have not prevented the tsunami of global trade from inundating whatever barriers are put up.
It was true that the American middle class enjoyed higher-wages relative to costs until the end of the 1970s, before NAFTA and the World Trade Organization, but that was when the United States accounted for a disproportionate share of the global economy and of global trade in the decades after World War II. The world then became a more diverse and competitive place, which has indeed put downward pressure on U.S. wages as companies have taken advantage of the glories of the information technology revolution to disperse supply chains. That began in the 1970s (remember cheap electronic goods and gadgets made in Taiwan or Japan?) and has continued ever since.
That trend began before the modern free-trade pacts that are so controversial. It began because of a multi-faceted brew of consumer demands for affordable goods, multinational companies search for profits, and increasingly competition among nations. It may have been facilitated by NAFTA et al, but the absence of a Trans-Pacific Partnership has not, for instance, prevented ever more trade between the United States and the countries of the Asian Rim. And of course, trade between the United States and China, without any of the advantages of a free-trade but aided by the rules of the World Trade Organization, has only grown annually, with the U.S. exports to China actually growing more rapidly than U.S. imports from.
What we have, therefore, is a debate that is cast as U.S. workers against the tide of global commerce, or U.S. national economic growth hinging on the Trans-Pacific Partnership. It is, in truth, neither.
Passage of the trade bill will at best remove friction, but even with friction, trade marches on and wages in the United States do not. The flip side is that even with the friction, wages in many of the countries that will benefit from the pact are rising because those economies are closing the gap that has divided the developed and the developing for decades.
What does matter is how central the United States will be in setting the rules of engagement. Here, the pact matters, not because of its specifics but because of its symbolism. If over time the cost of doing business with the United States is too high because of barriers, then countries will do as they already have begun to do: find alternatives. That will happen anyway to some degree, but by retreating into a fairy tale that we can halt this tide, the United States will hasten its relative decline. There is much to be done addressing our domestic issues of equity and fairness. There is much to be done investing in a new generation of jobs and middle-class prosperity.
Fighting against trade will accomplish precisely none of those goals.