Sunday, October 11, 2015

Free Trade and 40% of the Global Economy

In the United States, unions in the manufacturing sectors oppose it, fiscal conservatives generally support it and it is always disruptive to some extent. Any free market treaty. The notion of a truly free market – the foundation of market capitalism – is a fascinating quest on a planet with virtually no free markets. Environmental and financial regulations, direct or indirect subsidies (often in the form of tax incentives or government guarantees like crop insurance) and local treatment of foreign manufactures or raw materials all weigh in to make sure that there will never really be a truly free market anywhere.
Still, the notion of dropping import duties and quotas has a strong benefit for consumers seeking the lowest prices and for nations whose products have been taxed to equalize the relative cost to higher-priced labor in more sophisticated markets with greater social welfare and compensation requirements. For high-price labor… well, there are issues.
We’ve lived with a local free trade agreement for well over a decade. “North American Free Trade Agreement (NAFTA) established a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. NAFTA immediately lifted tariffs on the majority of goods produced by the signatory nations. It also calls for the gradual elimination, over a period of 15 years, of most remaining barriers to cross-border investment and to the movement of goods and services among the three countries.” Summary statement from U.S. Customs and Border Protection. With a few bumps along the way and while more than a few unions and local American businesses still rail at its terms, NAFTA has become a way of life in North American trade.
But what happens when an international treaty pushing against some grassroots Democratic Party priorities – protecting American labor against cheap foreign competition – while upholding some pretty basic free market goals for Republicans is proposed by a President who is wildly unpopular with the GOP, which controls a majority in both houses of Congress? After all, when you poll conservative sections of the country on their feelings about “Obamacare,” they uniformly express disdain and vitriol. Present the main features of that Affordable Care Act (same law) without the hated “Obama” label, and a substantial number of those same people will extoll its virtues.
It’s called the Trans-Pacific Partnership, and its reach circles nations that border on the Pacific Ocean and its adjacent seas, starting with a dozen nations from Austral-Asia, North, Central and South America to Asia, the treaty’s reach literally would account for 40% of the global economy. “To members of Congress, administration officials have repeatedly pressed their contention that the partnership will build a bulwark against China’s economic influence [China is expected to join later, by the way], and allow the United States and its allies — not Beijing — to set the standards for Pacific commerce.
“The Pacific accord would phase out thousands of import tariffs as well as other barriers to international trade. It also would establish uniform rules on corporations’ intellectual property, open the Internet even in communist Vietnam, and crack down on wildlife trafficking and environmental abuses.
“Several potentially deal-breaking disputes besides the dairy details kept the ministers talking through the weekend, and forced the repeated delays of a celebratory announcement. Final compromises covered commercial protections for drug makers’ advanced medicines, liberalized trade in sugar and a slow phaseout — over two to three decades — of the tariffs on Japan’s autos sold in North America.
“The negotiators had postponed action on ending tariffs and opening the participating countries to each other’s dairy exports until the pharmaceutical drug issue was resolved. But they miscalculated how long it would take to settle questions involving the politically powerful dairy industries in Canada, New Zealand, the United States and other countries.” New York Times, October 4th.Australia, Brunei, Chile, Malaysia, Mexico, Japan, Peru, Singapore and Vietnamround out the list.
It took five years to negotiate, but the accord was signed on October 5th at the Westin Hotel in Atlanta, Georgia, and now goes to the ratification process of the signatory nations. The U.S. Senate has three months to defeat or support that accord, and there are strong negative feelings on both sides of the aisle. Republicans, facing an election year, are loath to vote for a seminal Obama-sponsored initiative: “Senate Finance Committee chairman, Orrin Hatch (R-Utah), described the deal as falling ‘woefully short’ of goals such as opening more foreign markets to U.S. exports and boosting domestic jobs. Hatch was a strong backer of giving the White House so-called ‘fast track’ powers to pursue the pact.” Washington Post, October 5th.
On the other side of the aisle, “Opponents of the deal, including labor unions, environmental groups and liberal Democrats, have pledged to mount a final campaign to block the accord on Capitol Hill. They have criticized the TPP as a regulatory framework aimed at protecting the interests of large multinational corporations while doing little to protect worker rights and the environment. U.S. officials have said that there are chapters in the agreement with enforceable provisions to do just that.
“On Sunday morning, a handful of protesters unfurled a large banner reading ‘#StopTPP!’ They chanted ‘TPP is corporate greed. Affordable medicine is what we need’ before being removed from the lobby of the Westin hotel.” The Post.

“The timing of Monday’s trade agreement guarantees that a deal that was going to be the subject of a fierce political fight under any circumstances will now be thrust into an intensifying presidential campaign, complicating its chances for approval by Congress.

"Not surprisingly, Senator Bernie Sanders of Vermont, running for the Democratic presidential nomination, immediately assailed the Trans-Pacific Partnership, which he has previously strenuously objected to while the Republican candidate Donald J. Trump weighed in on Twitter, calling the trade pact a ‘terrible deal.’

“But the politics get a little trickier on Capitol Hill. Many congressional Democrats, for instance, have sided with labor against the agreement, but they are reluctant to quickly reject something that is a top priority for President Obama. Representative Nancy Pelosi of California, the Democratic leader, said Democrats would be ‘shining a bright light’ on the terms of the agreement.

“Most Republicans, on the other hand, are inclined to support the trade deal, which is strongly backed by the business lobby and was pushed by Republican congressional leaders. But they are anxious about getting too closely tied to anything that has the president’s endorsement or backing a deal against which Mr. Trump is whipping opposition. As the details of the agreement trickle out in the weeks ahead, it will become more clear just how difficult a sell the trade deal is going to be.” New York Times, October 6th.

For the GOP, the accord represents their best case in the current global environment, and for the Dems, not voting for this treaty undermines their own president. But in a world that seems hell-bent on fracturing and pulling apart, a reaction to massive chaos and economic malaise, having a treaty that brings nations to an arena of at least a modicum of bipartisan common understanding seems almost a miracle.
I’m Peter Dekom, and whatever your party affiliation, understanding this Trans-Pacific Partnership would seem to be essential to our collective future.

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