TPA “fast tracks” the congressional implementation of international trade agreements (which means changing U.S. law to fit the agreements) by requiring that the legislation (drafted by the executive branch) be voted on in a fixed time frame, with limited debate and no amendments. It is a surrender of the power vested in Congress by Article I, Section 8 of the Constitution, “To regulate Commerce with foreign Nations.”
By William R. Hawkins | January 29, 2014
John BoehnerKevin McCarthyCathy McMorris RodgersEric Cantor
Who can forget Democratic House Speaker Nancy Pelosi’s infamous statement: “But we have to pass the [health care] bill so that you can find out what’s in it,” during the debate over enacting Obamacare in 2010? Apparently, the House Republican leadership has forgotten. On January 9, House Speaker John Boehner, Majority Leader Eric Cantor, Majority Whip Kevin McCarthy and Republican Conference Chair Cathy McMorris Rodgers issued a statement in support of granting President Barack Obama “fast track” Trade Promotion Authority (TPA), which would expand executive power over a large share of the American economy, while diminishing the oversight role of Congress.
TPA “fast tracks” the congressional implementation of international trade agreements (which means changing U.S. law to fit the agreements) by requiring that the legislation (drafted by the executive branch) be voted on in a fixed time frame, with limited debate and no amendments. A perfect procedure for enacting measures no one will understand, until later. It is a surrender of the power vested in Congress by Article I, Section 8 of the Constitution, “To regulate Commerce with foreign Nations.”
The legislation that would grant President Obama this new authority is H.R.3830, the Bipartisan Congressional Trade Priorities Act of 2014 introduced by another Republican, Ways and Means Committee Chairman Dave Camp in collaboration with Democrat Senator Max Baucus, who introduced a companion bill in the upper chamber. President Obama has been calling for TPA for some time and now the House GOP leaders have come through for him just as he urgently needed some “bipartisan” support in the wake of plummeting poll numbers and continuing bad economic news.
America’s Slow Growth Economy
The day after Speaker Boehner & Company endorsed TPA, the Department of Labor announced the December unemployment figures, which brought to a close a year of very low growth five years into what has been the slowest recovery from a downturn since the Great Depression. Though the labor force was larger in 2013 than in 2007 (the last year before the 2008 financial crisis) the number of people with jobs was still less by 1.7 million. Officially, 10.4 million people were unemployed, and 3.4 million of these had been unemployed for more than 27 weeks. Among those employed, 7.8 million were only working part time because they could not find the full time jobs they wanted.
Another 6.1 million who were not officially in the labor force reported that they wanted a job, but had quit looking because the labor market was so bleak. The U-6 unemployment rate, which takes into account such “discouraged” workers, was given by the Labor Department as 13.1 percent. That figure was nearly double the standard unemployment rate of 6.7 percent. The standard rate had dropped despite the dismal report that only 74,000 jobs had been created nationwide in December. The drop was a statistical anomaly due to 350,000 people leaving the work force. Labor force participation had dropped by 0.8 percent over the year to 62.8 percent in December. If the economy had truly been improving, as one would expect in a recovery phase, labor force participation would have been increasing.
For Republicans to entrust President Obama with increased economic policy authority given his dismal record seems foolish. But as the 2012 presidential campaign showed, the GOP seems unable to put together a convincing argument on economic issues. The House leadership support for TPA merely continues this failure.
Dissecting the GOP Statement
Consider the House Republican leaders statement, “When Congress has provided TPA to presidents in the past, the result has been trade agreements that have spurred economic growth throughout the United States for farmers, ranchers, manufacturers, and thousands more by opening new markets to American exports. Most recently, through this mechanism, Congress approved three free trade agreements in 2012 with Colombia, Panama and South Korea which have had a significant positive effect on our economy – supporting an estimated 250,000 jobs spanning all sectors of our economy.” The jobs figure is misleading. It amounts to only about what the domestic economy would produce in a normal month – should we ever return to normality. Even the recession plagued economy produced an average of 174,000 jobs per month in 2013. While not enough to keep up with population increases (it takes at least 200,000 new jobs a month to do that), it still shows that the real answer to job creation is a stronger national economy built on better domestic policies promoting growth.
Trade with small countries like Columbia and Panama cannot be expected to yield much, but the Free Trade Agreement with the more robust South Korea (the world’s 12th largest economy) has actually cost American jobs. The trade deficit with Seoul has increased since Congress approved the agreement. In 2011, the trade deficit was $13.2 billion. In 2012 it had grown to $16.6 billion with American exports dropping from $43.4 billion to $42.3 billion, while imports increased. Under current trade policy, the U.S. had been losing ground to more aggressive foreign rivals.
Trade deficits measure the amount of American money that is being used to support jobs and production capacity overseas, rather than here at home. The World Trade Organization was approved by Congress under TPA during the Clinton administration in 1994. It was created, according to its foreign proponents, to cripple the ability of the United States, as the world’s largest economy, to use national policy to protect its leadership position. The result has been the ravaging of the U.S. industrial base and the loss of millions of high-paying jobs in manufacturing and related fields. In 2012, the U.S. trade deficit in goods was $729.6 billion, a massive, negative figure that canceled out whatever stimulus was being applied domestically to revive the economy.
Trade deficits are again approaching the size suffered during the run up to the 2008 financial crisis. The trade deficit in goods for 2007 was $808.8 billion. In 2011, Federal Reserve Board Chairman Ben Bernanke warned that “uneven” international financial flows of the past decade had been a major factor in the worst Western economic collapse since the Great Depression. He advised: “countries with large, persistent trade deficits must find ways to increase national saving, including putting fiscal policies on a more sustainable trajectory.” The U.S. has not done this and nothing in H.R. 3830 sends the country in the right direction.
Consider how the Republican leaders have addressed currency manipulation, a tactic used by many of our trade rivals to gain a competitive advantage. Bernanke noted in 2011, “those countries that have allowed their exchange rates to be determined primarily by market forces have seen their competitiveness erode relative to countries that have intervened more aggressively in foreign exchange markets.” The reason foreign governments intervene to back their domestic producers with export subsidies, concessionary loans, import barriers (protection), tax breaks, currency manipulation, and a host of other predatory trade practices is to gain advantages over rivals and win larger market shares both at home and abroad. It is an international battle for production, jobs, wealth and power, which the GOP embrace of “free trade” does not allow the party to wage – so America loses by default.
As Alexander Hamilton warned at America’s founding, “There are some who maintain that trade will regulate itself [but] this is one of those speculative paradoxes…rejected by every man acquainted with commercial history.”
GOP Leadership Talks a Good Game on Currency Manipulation
Currency manipulation is mentioned in H.R. 3830, but not until point 11 and then in a vague form that does not include any call to action. It simply pleads for other countries to
“avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other parties to the agreement” on their own volition. This weakness is to be expected given the GOP leadership’s pathetic record on this issue.
In the 112th Congress, Chairman Camp, with the support of Speaker Boehner, refused to bring to the House floor the Currency Reform for Fair Trade Act of 2013, which had 235 bipartisan sponsors, precisely because it would have passed with a large majority. It would have mandated action against foreign countries that used this predatory tactic to harm the American economy. Last year, more than 60 Senators and 230 House members signed bipartisan letters asking the Obama administration to include disciplines in the pending Trans-Pacific Partnership trade deal that addressed currency manipulation. President Obama has refused because he knows that many of the TPP countries would reject any limits on their trade tactics. So Obama will appease them in the talks, and the Republicans will let him get away with it. So much for the assertion in the GOP leadership statement that TPA will “strengthens Congress’ role in trade policy.”
Trade Promotion Authority as presented in H.R. 3830 will place increased power in the hands of a liberal President, who is wedded to the status quo in trade policy; a status quo that has harmed American workers, reduced the production capacity of the United States, and increased the burden of foreign debt. It has also undermined the recovery from the 2008 financial crisis and weakens the ability of the economy to avoid another recession. Republicans should be critical of White House’s policies, not be cheering them on; but GOP leaders continue to be incapable of independent thought on this issue.
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.