November 30, 2006
Opportunities for Bipartisanship: Trade

UPDATED II: David Postman adds some coverage today on the issue, highlighted by a conversation with Adam Smith. I don't like where Smith is going when he says, " the Colombia and Peru agreements likely will need side agreements on worker and environmental protections to win passage in the Democratic Congress." If he were talking about Democratic requests to expand existing aid programs for workers demonstrably laid off because of trade impacts that would be a manageable compromise. He instead says Congress may need to essentially reopen the negotiations with the countries in question (in Columbia's case, those long negotiations began in 2004), by adding additional requirements, likely making the pact unpalatable to the other side with whom we already agreed.

Adam Smith is arguably the most pro-trade Democrat in our state's Congressional delegation, and tells Postman that he still strongly supports free trade. If he and his pro-trade colleagues are serious then they're going to need to work to stop their Democratic peers from inserting high hurdles into the process that would make it nearly impossible to pass free trade agreements in the near future. Robert Samuelson has some blunt things to say about such potential policy blunders in today's Washington Post. Definitely worth a read for those interested in such issues.

UPDATED: The P-I carries a wire story on the Bush administration making overtures to incoming Democratic Congressional majorities on the topic of trade. The pending trade agreements with Peru and Columbia mentioned in the article are of particular importance as part of the United States' drive to expand productive relations with Latin American countries, in opposition to Hugo Chavez's countervailing efforts in the region. Washington Democrats in Congress would serve their state well by working within their respective caucuses to respond constructively to Bush's overture.

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In the post-election comity, or attempts therein, between the incoming Democratic majority in Congress and the Bush administration, one possible issue where Democrats can join with Republicans, and the President, is on the issue of trade. It largely falls outside the realm of issues that stir widespread passion in either party's base (though organized labor is increasingly anti-trade), thus productive legislation may be possible.

Locally, Washington's Democratic members of Congress have been historically pro-trade; a prudent position in this trade dependent state. Recently, all six Washington Democrats joined with Washington's three Republicans to support a trade agreement with Vietnam (which failed because of a a parliamentary requirement of 2/3 "yea" for passage), though a large number of Democrats, and not inconsequential number of Republicans, voted "nay."

Despite that positive trend in Democratic support, there have been relatively recent cracks in pro-trade solidarity from Washington's Congressional delegation. Last year, moderate Democrats and traditional trade supporters Rick Larsen, Brian Baird, and Adam Smith opposed the passage of CAFTA (the Central American Free Trade Agreement). Reading through their stated objections, one gets the impression their opposition was rooted in heavy pressure from labor unions and objections to assorted domestic policies, not truly based on the contents of CAFTA itself.

One of the legacies of Bill Clinton that many Republicans can embrace is his promotion of free trade, including pushing for the passage of NAFTA and normalized trade relations with China. Clinton left a legacy within the Democratic party of making a pro-trade position acceptable. Now, however, the emergence of new economic populism, and the self-destructive, errant resistance to globalization and free trade threatens that legacy. Columnist Mort Kondracke recently opined President Bush must be prepared to expend time and energy working on improving trade policy given this growing trend toward economic isolationism.

By one estimate, 27 victorious Democratic House candidates campaigned at least partly against free trade. Ohio's winning Senate candidate, Rep. Sherrod Brown (D), is one of Congress' most vociferous opponents of trade agreements, including those promoted by the administration of former President Bill Clinton.

...

In the new Congress, incoming House Ways and Means Chairman Charlie Rangel (D-N.Y.) says he foresees cooperating with the administration on trade, but Democrats will demand more attention to trading partners' labor and environmental standards.

Administration officials say other nations aren't willing to have the U.S. dictate their wage rates or emissions levels -- as the AFL-CIO seems to demand -- but the U.S. will have to win some new concessions or risk having trade pacts rejected by Congress.

Expansions in free trade have caused the U.S. and the world to advance economically and politically since the end of World War II, but those gains are in danger of coming to a crashing halt unless there's a counter to ascendant protectionism.

Yes.

The question remains though, even if Bush and certain Congressional Republicans commit themselves to ongoing efforts in support of free trade, will enough Democrats join them? And will our local Democrats be part of such efforts at bipartisanship?

Washingtonians are fortunate that local elected Democrats do seem to grasp that free trade is a force for good in the world and a boon to all participating economies, including the American economy that has provided a firm foundation for global economic growth in recent years. Let's hope that continues.

Posted by Eric Earling at November 30, 2006 07:42 PM | Email This
Comments
1. International trade has many good benefits. But what the free traders forget is that what makes American capitalism work is that there are "rules" governing the process. Each and every state has passed its version of the Uniform Commerical Code, which provides some common sense regulation of the buying and selling of things. No one seriously objects to contracts being enforceable in the courts under the English common law rules of contract that almost every English speaking jurisdiction and many non-English speaking jurisdictions have adopted.
We also have labor relations laws, collective bargaining laws and provisions for the litigation and enforcement of such union contracts. We have environmental laws that are necessary for keeping such collective wonders like Puget Sound from being completely ruined.
We have minimum wage and overtime laws.
Through this system we have allowed capitalism to florish, producing a middle class of workers who can afford the purchase the products of their labor.
The problem with free traders is that you seem to think we are better off allowing our jobs to be shipped overseas to the cheap labor of the Third World, and still expect to have prosperity. The Third Worlders are not paid sufficient wages to allow them to purchase the products of their labor, and there is a limit to Americans' ability to purchase such products when our manufacturing base was shipped overseas!
It comes down to a basic economic question:
If those who make the stuff cannot afford to buy the stuff, then to whom do we sell the stuff?
That is what caused the Great Depression.

Posted by: Roger Knight on November 27, 2006 05:49 AM
2. The Great Depression was primarily caused by loose banking regulations, then exacerbated by protectionist legislation (the Hawley Smoots tarif comes to mind as the most eggregious example).

What those on the left who are protectionist fail to recognize is that the availability of cheaper foreign goods benefits those lowest on the economic ladder most (think Wal-Mart). Protectionism does nothing but increases the costs of those goods. What is the discernable benefit of that? Are the auto companies better off after a few decades of protectionism as they now try to face a global marketplace that has had two decades extra to get it right, or would they have been better off competing straight away in the early 80s? Given that Ford and GM are both basically bankrupt and on the blocks, and Chrysler is essentially a subsidiary of a German manufacturer, it is clear that protectionism didn't provide any long term benefit but rather cost jobs instead.

Finally, this bunk about "producing a middle class that can afford the purchase [of] the products of their labor" needs to go out the window. The fact is that Americans can now afford more than 50% greater consumption than they could in the 50s and 60s, and that purchasing power has been going up linearly since then. The myth is based on this idea that median income hasn't risen much over the last 40 years, a myth perpetuated by slack economic analysis that neglects to correct for the fact that the US lets in more than a million *legal* immigrants a year (and untold millions of illegals). Those legal immigrants almost always start out in the bottom 20% bracket of income distribution, but once you remove those people from the calculation it turns out that rather than remaining stagnant the middle class income has grown at almost the exact same rate as that of the wealthier brackets, and the purchasing power has grown faster due to the huge price declines over the last 25 years (and increasing percentage of consumption) in electronic goods and food. Guess what has driven those prices down (hint: it wasn't protectionism or anything else that your local union representative would approve of).

Posted by: Marc on November 27, 2006 07:33 AM
3. I question the premis of "productive legislation"

Posted by: dave-o on November 27, 2006 08:04 AM
4. I would think unions, by supporting free trade, would be helping themselves by opening markets for US goods. Instead they seem to be bent on isolationism and forcing tariffs on decidedly better foreign products, with the thought that by making better foreign products too expensive people will turn to domestic junk. Think again liberal unions. Americans will buy whatever they think is the best thing they can afford. Whether it's cars, electroincs, or what have you. The best way to compete is to sell the best designed, best built, best looking thing you can produce. Do that, and you won't need protection from competetion.

Posted by: Scott C on November 27, 2006 09:32 AM
5. Two points:

1: Why is globallization of restirctions and law good, but bad for the economy? (Think using international law as the basis for constitutional decisions!)

2: If the wages paid to Chinese and Indians are so bad, why are their economies booming (driving up the price of oil etc.)? Surely the prosperity generated there will create demands for US goods bringing up demand on a global basis, which is good for the US and US workers (Think quality of Japanese cars made in US compared to US cars - both US workers but different management, though US cars are catching up).

Posted by: Right said Fred on November 27, 2006 10:57 AM
6. Rep. McDermott has valuable experience in this area, with his authorship of the Africa Growth and Opportunity Act. I'm sure that all of his detractors, who have for years decried his supposed ineffectivenss, will rejoice in having his wealth of experience to serve us in this regard.

Posted by: Paddy Mac on November 28, 2006 07:39 PM
7. "post election comity, or attempts therein"?

Earling, you're a hack! I don't think you know what "therein" means - or perhaps it's a game of 'find the grammatical errors in Earling's pseudo-intellectual garbage.' If so, I win! Woo hoo!

Dude, seriously. Drop the attempts at big language and write from the heart, man.

And you use too many commas too.

Posted by: BigDawg on November 28, 2006 10:43 PM
8. Hey, BigDawg, a big person, reads through, that. Have you officially elected yourself as chief of grammar police? If you have, look out. If not, relax and read. Try to get over your hyper-critical nature. We would all appreciate it and you will feel better.

Posted by: Elaine on November 30, 2006 09:09 PM
9. Mr. Knight @ #1:
The present unemployment rate is 4.4%, an all time low. If all the jobs are being exported, where are the unemployment figures to match? Average wages are up, can't be that every foundry worker is flipping burgers. Manufacturing is up too. Somebody has to be doing those high paying jobs.

The United States has been "exporting" jobs since the start of the industrial revolution. As industries die and taken up by other countries, they are replaced by generally better, higher paying industries here (usually non-union). Workers (should) adjust to the new realities of job change. It is part of what makes our economy vibrant and sustaining at such a high level. You would rather we have strong labor laws like Germany, with 10% chronic unemployment, or France (ditto)?

There are two sides to the "cheap labor" story. When somebody buys a cheaper product made overseas, what happens to the money he/she saves? It gets directed to other uses like mortgages, savings plans, food or you name it. It extends the living standard. You are wrong about what "third worlders" cannot buy. China has a fast growing middle class and the same with India because they have good paying jobs making export to the world.

Time and time again it has been proven that free markets work better than isolationist markets. Once again, just look at Germany or France to compare. You have bought the union propaganda hook, line and sinker without bothering to look at the real, easy to acquire, facts.

Thomas Sowell has some very good, easy to understand, books on economics. Might I suggest that you pick one up? While you are at it, pick-up something that discusses what really caused the Great Depression.

Posted by: G Jiggy on November 30, 2006 11:14 PM
10. I am mystified by one thing, why can we normalize relations with Vietnam, but not with Cuba? Somebody please explain.

Posted by: the duke on December 1, 2006 11:50 AM
11. Duke @ 10:
Simple answer . . . politics. The Cuban exile/expat community is very powerful in this country and are the ones that don't want "normalized" relations. No politician in his/her right mind would go against them.

Personally I think that relations with Cuba would be the fastest way to bring down the regime.

Posted by: G Jiggy on December 1, 2006 02:09 PM
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