TPP, NAFTA, and other blanket free trade agreements deleverage American workers and businesses while undermining US economic sovereignty. Despite what short-term benefits the Peoples and economies of poorer countries receive from free trade, they face the same costs in the long-term.
After all, free trade and the overall liberalization of the global economy are supposed to “free” global markets from government control, which means further empowering the economically influential, i.e. wealth individuals, corporations, and business-like governments such as that of China.
Inside the United States, Democrats have offered backlash against President Obama’s pursuit of TPP. Of course, they may well have reached a political compromise that would allegedly provide greater enforcement mechanisms against so-called currency manipulation. Unfortunately, the political consequences do not matter.
Although daily nuanced changes and major long-term shifts in the valuation of currencies impact the competitiveness of US exports and imports, the United States is the largest economy in the world while richer countries have far higher standards of living than poorer ones. Even if currency manipulation is discovered and properly addressed, economic entropy dictates loss of income and opportunity for the majority of the people living in the developed world.
Beyond America, the failures of the US and the rest of the developed world to protect worker rights, consumer rights, high standards of living, and the ability of governments to regulate undermine efforts on behalf of poorer countries to impose such costs. Free trade creates a situation where industry is drawn to the lowest bidder economy in order to produce goods at the cheapest possible price.
In turn, competing to cheapen goods means quality and other standards are suppressed. Aside from a minority of investors and business owners who can reap the profits of free trade, free trade forces everyone to compete by lowering their standards and costs.
In the case of Japan, small-scale farmers could easily be crushed by large-scale American agribusinesses. Recognizing Japan already has an overreliance on food imports, around 60%, this cost of free trade would likely be very harmful to the broader economic interests of the third largest economy. Conversely, American manufactures would be harmed by removing tariffs against Chinese manufacturing imports.
Quite frankly, the US needs more trade, not necessarily more free trade. Lowering trade barriers means foreign goods are no longer taxed. When domestic goods are taxed, unless business taxes are displaced onto individual taxpayers, free trade translates into domestic goods that are less competitive.
If a foreign country has an established, efficient industry, which does not cater to vital national interests, that can deliver an equivalent and/or superior product and there is a weak or nonexistent domestic industry, free trade can be beneficial as it can be used to remove trade barriers to established industries in exchange for the same benefit. This can translate into lower priced goods with few economic disruptions to domestic industries.
With that in mind, the so-called “Trade Promotion Authority” (TPA) being debated alongside TPP may offer a solution. Where political concerns revolve around the fact that TPA limits Congressional approval on trade agreements to an up-or-down vote with no amendments or filibustering allowed, this restriction can actually help limit the influence of politics when it comes to trade.
On the other hand, it also discourages Congress from checking the political bias of the Executive Branch and the undue influence of special interests groups that target the White House. Most problematic is the inability to filibuster, which is necessary if trade agreements can be rammed through Congress without an amendment process. In other words, the downside to TPA is that it makes it easier for wrongheaded thinking and corrupt White House staffers to hurt the American economy for their benefit.
To maximize the benefits of trade, lawmakers need constructive compromises that actually address the shortcomings of free trade and TPA. The benefits of trade are, however, only available when free trade agreements are targeted to specific industries. Because trade must be tailored to the economic needs of each trade partner in order to maximize both the benefits for both partners, the one-size-fits-all grand-bargain that is TPP cannot be embraced. Free trade must be a bilateral arrangement.
Consequently, the Executive Branch needs the authority to negotiate and renegotiate trade agreements, which focus on the tariffs of various industries for individual countries. In turn, negotiators need to focus on lowering foreign tariffs on US goods when it is to the advantage of America in exchange for lowering US tariff on foreign goods, e.g. cane sugar, when the trade partner has something to better offer.
In fact, all countries that embrace trade agreements, especially free trade agreements, need to adopt the policies and practices that will allow them to develop healthy bilateral trade agreements. Above all, trade agreement must be done in a transparent manner in order to disclose every potential conflict of interest that might result in harmful trade deals.
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