Congress has the duty to change the terms of trade agreements that do not serve the national interest. The Framers gave Congress the power to regulate commerce because of the effect trade can have on local economies, good and bad. The elected representatives of those communities need to be part of the negotiating process.
By William R. Hawkins | October 9, 2013
The government shutdown caused President Barack Obama to cancel his trip to the APEC (Asia Pacific Economic Cooperation) meeting in Bali, Indonesia this week. Secretary of State John Kerry led the delegation instead. Bali is one of the most opulent resort areas in the world. On the sidelines of the conference, there were discussions between Administration officials with their opposite numbers from the other 11 countries involved in the Trans-Pacific Partnership (TPP) trade negotiations.
The TPP would bring together the economies of the U.S., Australia, New Zealand, Japan, Singapore, Malaysia, Brunei, Vietnam, Chile, Canada, Mexico and Peru – accounting for about a third of global economic output ($28 trillion). TPP talks began three years ago and President Obama has said he wants a deal by the end of this year. U.S. Trade Representative Michael Froman told reporters in Bali, “We’ve made significant progress this week.” But no details are available because the talks are secret.
For critics, the TPP negotiations merely perpetuate the faulty view of how trade is conducted between nations which has guided U.S. policy for a generation. Paper promises to lower tariffs and open markets for American capital and exports do not remove the non-tariff barriers established by culture and politics. The result is that imports increase into American markets, displacing domestic production and jobs, faster than foreigners accept American-made goods and services.
The most recent “free trade agreement” with a major Asia economy was South Korea. The U.S. trade deficit with South Korea in 2011 was $13.2 billion. In 2012, it increased to $16.6 billion. In the first 7 months of 2013 it had already reached $13.2 billion, equal to the total for 2011! U.S. exports to South Korea actually dropped in 2012 compared to 2011. So the notion that an even larger Asia trade agreement will boost U.S. exports enough to stimulate a national economic boom, or even lower the trade deficit is not supported by experience.
U.S. trade with all of Asia last year showed a deficit of $509.9 billion. Secretary Kerry noted in Bali that Asia is the fastest growing part of the world. The favorable trade balance Asia has is one of the reasons it is growing faster than the U.S. Asian producers have captured part of the American market and have added it to their own base; shifting the balance of economic power, income and growth.
The overall, global U.S. trade balance for 2012 showed a deficit of $727.6 billion. This is a net measurement of how much American money is being spent to support business and jobs overseas rather than here at home. Millions of jobs in manufacturing and related services (including high-tech and executive positions) have been lost to Americans; while strategic industries have become dependent on foreign components.
The Federal debt is increasing as the government tries to stimulate the economy in the face of massive trade deficits that are draining the economy. It is like trying to fill a bucket with a large hole in the bottom. And major importers want that hole to get bigger. “For Wal-Mart, we would like to see a high-quality [TPP] agreement, which is that no sectors and no products are excluded,” Scott Price, chief executive of the U.S. retailer in Asia, told ABC News.
President Obama wants “fast track” trade promotion authority (TPA) to reduce the ability of Congress to interfere with TPP and other negotiations. Under Article I, Section 8 of the Constitution, “The Congress shall have power ….to regulate commerce with foreign nations.” To regulate means more than simply voting yes or no on an executive agreement, but TPA would limit Congress to just this one vote. It could not change anything the President wanted. Implementing legislation is the only means by which Congress can express its interpretations of trade law and set priorities, but TPA would set aside this legislative process. Congress should not surrender its constitutional duty to a “fast track” procedure that does nothing more than rubber stamps presidential decisions.
It would seem unlikely that after the rancor displayed between House Republicans and President Obama during the current government shutdown, the GOP rank-and-file would vote to transfer more of their power over economic policy to the administration. However, Big Business is working hard to pull the GOP into harness with the White House. The TPP and an immigration amnesty agreement are top priorities of the Chamber of Commerce. For the transnational corporations that dominate the Chamber in Washington the link between trade and immigration is the pursuit of cheap labor. Free trade allows business to move operations overseas and still sell the output in the American market without penalty. For those firms who cannot move to foreign lands, such as construction, farming and retail services, open immigration allows the cheap labor to be brought here to displace “expensive” American workers who refuse to be treated like dirt. Republicans will have to choose whether they are merely the “party of business” or the party of national leadership.
It is argued that foreign governments will not negotiate with American diplomats if Congress can change the terms of an agreement. But Congress has the duty to change terms that do not serve the national interest. The Framers gave Congress the power to regulate commerce because of the effect trade can have on local economies, good and bad. The elected representatives of those communities need to be part of the negotiating process. An administration that consults regularly and broadly with Members of Congress whose districts may be impacted can head off amendments that could upset an agreement by taking their concerns into account. Fast track reduces the need to undertake such close consultation by preventing by law any amending of the signed executive agreement. It would reinforce President Obama’s manifest desire not to negotiate with Congress on economic issues.
If “fast track” is voted in before TPP is finished, Members of Congress will have disarmed themselves even before they know what is in the first major agreement they will face. Will it be another Obamacare “we have to pass it before we know what is in it” situation? Draft texts are said to exist for some 26 separate chapters in the TPP, but none of them have been released by trade negotiators for public review. A host of subjects, including environmental regulation, health issues, labor standards, state enterprises and intellectual property rights will be included in TPP. Congressional prerogatives on a great many domestic issues could be usurped in the name of a “fast tracked” trade agreement.
Foreign Investment and Currency Manipulation
A critical topic is the treatment of foreign investment. Usually this is presented as protecting American firms operating overseas from expropriation. Yet, with China and other countries with large trade surpluses looking to expand their control of productive assets in the United States by acquisition, America has an interest in making sure it can control the actions of foreign interests within its sovereign territory. Would TPP limit the Committee on Foreign Investment in the U.S. (CFIUS) or any other measures that Congress might want to adopt to protect the homeland and the economy on which its prosperity and security rests? The massive U.S. trade deficits put huge sums in foreign hands; for whose benefit will that money be used?
Another contentious issue is the foreign manipulation of currency values to gain a competitive advantage. Governments try to set exchange rates to make their export prices lower and import prices higher to benefit domestic producers. A bipartisan group of 60 Senators has signed a letter calling for the TPP to curb this practice. In the 112th Congress, the Currency Reform for Fair Trade Act had 234 bipartisan co-sponsors. What if the TPP does not have adequate safeguards against currency manipulation? Should Congress vote it down, or should it have the option of amending the agreement to both improve and save it?
For the House to vote away its legislative responsibilities in a “fast track” bill, its Members would have to admit that they have no useful role to play in the making of international economic policies that can affect wide areas of domestic activity, including activity within their own districts. The result will be trade agreements in which foreign governments and global corporations will have a much larger say than the American people, who will again end up paying the price for “trade promotion.”
William R. Hawkins, a former economics professor and Congressional staffer, is a consultant specializing in international economics and national security issues. He is a contributor to SFPPR News & Analysis.