Voters Won’t Like It, but We Have to Bring Back Free Trade

Persistent joblessness and tepid growth are persuading policymakers to lower the barriers once again

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Mark Elias / Bloomberg / Getty Images

A top-loader vehicle carries a container through the South Florida Container Terminal yard at the Dante B. Fascell Port of Miami-Dade County, Florida, U.S.

There was a time, not that long ago, when policymakers and economists didn’t dare question free trade. The open exchange of clothes, cars, oranges, TV sets and everything else was almost universally upheld as a rock-solid route to prosperity. But over the past decade, free trade suffered a near death experience. The whole concept became a whipping boy for all sorts of economic evils. Workers, especially in advanced economies, blamed free trade for job losses to emerging nations and downward pressure on wages.

While it’s true that not everybody gains equally from free trade, there is no shortage of evidence that eliminating barriers to the flow of goods and services is beneficial for economies overall — boosting exports, enhancing efficiency and reducing prices for consumers. But tell that to angry voters. In one 2012 survey, more than half of respondents in the U.S. believed the country should either renegotiate or pull out of the North American Free Trade Agreement (NAFTA), even though it had gone into effect 18 years earlier.

Politicians took note. Republicans and Democrats may not agree on much these days, but some have reached across the aisle in recent years to call for the repeal of NAFTA. Many governments soured on approving new pacts. A free-trade agreement between the U.S. and South Korea took four years to ratify. International efforts to bring down trade barriers also stalled. The Doha Round of trade talks, which started in 2001 through the World Trade Organization, broke down over bitter differences between developed and developing nations. Doubts emerged that the deal could ever get done.

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Free trade, though, has unexpectedly sprung back to life, with U.S. President Barack Obama wielding the defibrillator. In a reversal of his previous hesitance — he too once expressed anti-NAFTA sentiments — Obama is pressing hard for a couple of wide-ranging trade deals that would be the most important in two decades. Long-awaited negotiations began in July for a trade agreement between the U.S. and E.U., which would knit together countries with nearly half the world’s GDP into a massive free-trade zone. On the other side of the world, the U.S. is also pushing for the completion of the Trans-Pacific Partnership (TPP), a trade pact that would include nations as far-flung as New Zealand, Peru and Malaysia. These deals, if finalized, “would change the entire trade landscape,” says Bruce Stokes, director of the global-economic-attitudes program at the Pew Research Center in Washington.

Countries that had been resistant to these pacts have changed positions and signed on. Japan, famously protective of domestic sectors like agriculture, decided to join TPP negotiations in March. “If Japan alone should become inward looking, we would have no chance of growth,” Japanese Prime Minister Shinzo Abe explained when announcing his decision. “The TPP is a framework which promises ‘prosperity in the future’ in the Asia-Pacific [region].”

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There is new energy on the international front as well. WTO director general Roberto Azevêdo, immediately upon taking office this month, called for a series of meetings to engineer a breakthrough in Doha negotiations ahead of a December ministerial-level conference in Bali. Members have hoped to reach an agreement that’s been dubbed Doha Lite, a more limited menu of trade reforms aimed at reducing bureaucratic barriers and aiding poor nations. Azevêdo’s enthusiasm may already be bearing fruit. The U.S. and India are attempting to set aside their differences over controversial government food-security programs, which have become a primary obstacle to a Doha deal, to allow negotiations to move forward.

What’s behind the new free-trade fervor? Still struggling with joblessness and a tepid recovery five years after the collapse of Lehman Brothers, policymakers have warmed to free trade once again in their desperate quest to elevate growth and create jobs. There are ample grounds for hoping free trade would do the trick. The Peterson Institute for International Economics figures that the TPP would increase U.S. national income by almost $77 billion a year by 2025; Japan would get a boost of over $100 billion. Similarly, the Munich-based Ifo Institute estimated in a recent report that per capita income in the U.S. would jump by 13.4% over the long term if a comprehensive U.S.-E.U. trade deal is reached, while E.U. citizens would see a 5% increase.

Still, there is no guarantee any of these pacts will advance past the blabbering stage. Hard negotiations lie ahead, with participants all angling for maximum benefit at minimal sacrifice. France, for instance, set aside its opposition to the U.S.-E.U. talks in June only after its European neighbors agreed to exempt its prized movie industry from any final deal — just the type of exception that could stymie a comprehensive agreement. Nor is it clear that voters, especially in the advanced economies, have become more amenable to such pacts. “Free trade is always something of a tough sell,” laments James Roberts, research fellow at the Heritage Foundation in Washington. Free trade may have escaped the undertaker, but a full recovery requires a lot more nursing.

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9 comments
EconomyInCrisis
EconomyInCrisis

No more FTAs! As it stands right now, the TPP is a secretive trade agreement being negotiated between the United States, Australia, Brunei, Chile, Canada, Malaysia, New Zealand, Mexico, Peru, Japan, Singapore, Vietnam, and possibly South Korea.  We all know how disastrous “free trade” agreements have been for us in the past – sky-rocketing trade deficits, soaring national debt, job losses and outsourcing – but the TPP will make NAFTA, KORUS, CAFTA and others look tame. In fact, the TPP has been dubbed ‘NAFTA on steroids, meaning that it will be even more harmful than any of its predecessors.  If signed into law, President Obama’s TPP will not only override American laws, but it will allow corporations to sue the U.S. government for losses at the tax payer’s burden.  

Even more concerning is that it will infringe on U.S. sovereignty. It will result in higher trade deficits and send more jobs, factories and industries out of the country! President Obama is allowing all of this and more. He’s even going to allow foreign companies to purchase U.S. assets that could leave us vulnerable to terrorist attacks!  The TPP will also include provisions that will dictate what our Congress will be allowed to pass and enforce, particularly in areas like patents and copyrights. Government procurement such as Buy American would be banned. Why should the United States be forced to buy foreign products? 

President Obama does not care about our opinion! Instead, he cares more about appeasing the giant multinational corporations who stand to gain from the TPP. If he did care about our opinion and concerns about the TPP, there would be more transparency coming from Washington, not secrecy. http://ow.ly/oZjz9

Onepatriot
Onepatriot

Changes to existing pacts are overdue.  We need to add requirements from exporting countries that they offset the carbon pollution from the cargo ships that bring their products to the US because that is one of the biggest problems we are facing and no one is addressing it.  The environment is paying a huge cost because of global trading. A recent report said the oceans are becoming more acidic at a faster rate than previously thought.   Thist has to be part of the agreements.

draph91
draph91

We don't need Free Trade, we need Fair Trade

also really?, I may not be from the US but this is a bad deal, the TPP will not help increase jobs in America, they will be off-shored, meaning more jobs in other countries but not in the USA, NAFTA did more harm then good when it was passed, the TPP will possibly do even more damage

Tothiwim
Tothiwim

"Free trade", like "small government", is a code phrase for "let the corporations run wild". Reciprocal protectionism must be maintained to counter the predatory protectionism practiced by foreign governments and multinational corporations.

When GM closed profitable auto plants in the US to seek greater profits by outsourcing those jobs to Mexico, the government should have nationalized those plants, put people back to work, and gone into direct competition with GM's new plants in Mexico.

The free market's internal controls on greed and incompetence only work in the long term and on global scales, not in the short term, local scales that devastate peoples' lives. No business ever created a job they did not intend to make a profit on, and no business can ever be trusted to put the greater good ahead of profit. Intense regulation and competent oversight are necessary.

The purpose of government is to protect us from those who see everything and everyone as a resource to be exploited, rather than being a mechanism that facilitates exploitation.

rjsigmund
rjsigmund

This is just a ploy to turn over world government to multi-national corporations; these deals will overrule ay domestic or local regulations.  They will increase the flow of uninspected food imports from Southeast Asia, lower our consumer product and food safety standards, force exports of liquefied natural gas to Japan and Europe and undermine financial regulations.  Natural gas prices are more than five times higher in Mexico ($16.50 per million BTUs), Asia ($15.35 to $15.75) and South America ($14.95 to $15.95) than in the US ($2.85 per million BTUs), more than three times higher in Europe ($9.79 to $10.25), If we are forced to export to these countries, domestic gas prices will more than triple and impact every part of our economy.

Lone.Wolf
Lone.Wolf

"The Peterson Institute for International Economics figures that the TPP would increase U.S. national income by almost $77 billion a year by 2025"

Yes, but how much of that $77 billion a year would actually go to the U.S. middle class and how much would go to further enriching the 1%.  So-called "free trade" has been a DISASTER for America's middle class.  Don't get bamboozled again.

sdjackso
sdjackso

@draph91 I agree that we need fair trade. However, it is also important to determine what fair trade looks like. See blog post on the TPP and fair trade at http://wp.me/p28ZWx-15c.