No, It’s Not Supply Side Heresy to Oppose Obama Trade Bill
Writing about TPP, “Fast Track,” and all the associated skirmishing is made somewhat difficult by the secrecy of the legislative text. That said, supply-side thought leader John Tamny declares “The TPP is a no-brainer.” (If Tamny means free trade is a no-brainer he surely is right.) So also declares the decorated veteran of the Supply-Side Wars Peter Roff:
Trade promotion authority is critical to America’s future competitiveness and ability to participate in the global economy. The nationalistic retrenchment that is occurring in some parts of the Republican Party on national security matters should not be allowed to spill over into the economic arena. Global tariffs, which are really just another form of taxes, must come down.
That said, there is another point of view. America’s great supply-side founding father, Alexander Hamilton, was, of course, no enemy of tariffs as noted in Philly.com by columnist Robert W. Patterson.
Times have changed since Hamilton, and decisively so. Still, the founding father of modern supply-side economics, Nobel laureate Prof. Robert Mundell, a relentless foe of tariffs, stated in 2013 interview with Forbes.com columnist Eamonn Fingleton, as reported in a column entitled Nobel Laureate: The U.S. Is The ‘Naked Woman Of The World Economy: “It has been a mistake to let U.S. manufacturing run down so low. While other nations have industrial policies to maximize their trade benefits, the United States leaves itself open like a naked woman. A big problem is with nations that may prove to be future enemies.” Strong words.
Even adamant free trade champion Heritage Foundation chief economist Stephen Moore, on a national radio talk show broadcast on the night of June 13th, acknowledged that there are legitimate reasons to oppose the TPP.
So what to do?
Supply-Side Congressman Steve Russell (R-OK), ranked by National Journal as one of the top ten in it’s The Freshman Power Rankings, led the charge to peel off Republican votes in the House with a widely noted op-ed in The Hill headlined Right track, not fast track.“
Russsell there wrote:
At his State of the Union Address, President Obama asked us in Congress to grant him “fast track” trade promotion authority so he can “write rules for the world’s economy.” I sat alarmed for America’s future should we expand this president’s authority given how he has extended executive overreach, fumbled our foreign policy, debilitated our defense and diminished our domestic tranquility. At least this time, the president asked to bypass Congress.
Regardless of the merits of trade partnership or the tactics of their negotiation, two fundamental questions loom: Why do we trust this president given his track record in foreign affairs, and what serious harm would come to the nation by waiting 23 months?
As Abraham Lincoln famously said, “nothing good can be frustrated by time.”
This was no “sneak attack” by Rep. Russell, who in advance declared his intention to oppose Fast Track to House leadership. Russell’s high profile, principled, opposition proved effective, precipitating a significant exodus of Republicans from Fast Track.
Last week, President Obama lost a critical vote (and the support of Minority Leader Pelosi) toward TPP, a possibly fatal setback to its prospects in the 114th Congress. In a statement to me by email yesterday, Rep. Russell, whose commitment to free-market policies are beyond question, proposed these two further questions:
1. Why are we willing to give the Democrats concessions to give the President something he wants? Especially the concession is entitlement expansion with TAA? Why are we not getting oil and gas exports or border security from the President?
2. Why do we trust this president with this authority? The current President’s talent for negotiation among nations should be measured by his foreign policy. Have we forgotten the ‘Line in the Sand;’ the arming of Al Qaeda and other nefarious Syrian rebels to fight Assad only to watch them become ISIS; then dismiss them as a ‘JV Team;’ only to see them tear through Iraq— which fell apart after we abandoned it—after we were assured they could stand on their own if we left early? And now, no strategy to fix it. Then there is the Arab Spring which has morphed into a potential for Nuclear Winter with Iran. And let’s not forget Crimea, and Ukraine. I can go on. The question is, why are we? Like Lucy holding the football, we are told that the President needs the power to negotiate. If we just come and take a kick at it, it will all be fine.
I am for free trade but with this president we need ‘Right Track’ not ‘Fast Track.’
What’s really at stake? An excellent short description is contained in an analysis in the New York Times by Neil Irwin, What You Should Know About the Trans-Pacific Partnership parsing the winners and the losers from the probable deal:
Winner: American service industries.
Peter Petri, a scholar at Brandeis University and the Peterson Institute for International Economics, estimates that, with a deal, service industries would contribute an extra $79 billion to the American economy, more if additional Pacific Rim nations ultimately join the partnership.
Loser: Manufacturing workers
The same estimates from Mr. Petri that point to higher service-sector activity point to losses from trade in machinery, transport equipment and other manufacturing sectors. Over all, his estimates put the net effect of the trade deal on manufacturing in the United States as a $39 billion loss by 2025.
Winner: Owners of intellectual property
If you’re an American who develops products whose value is more abstract than physical — whether a blockbuster blood pressure medication or a blockbuster Hollywood film — you stand to gain.
Close call: Agriculture
Mr. Petri’s estimates place no net effect on the balance of trade for rice and wheat and a slight positive from other agricultural sectors. In particular, negotiators in Washington want Japan to reduce its protectionism of domestic rice, pork and beef industries, giving Americans better access to that big market.
But the reality is the deal would shape the outlook for major pieces of America’s agricultural economy in ways that will not become clear until more details become public.
The drama will resume on Capitol Hill as the White House attempts to resurrect the Trade Adjustment Assistance legislation. According to The New York Times: “There is still a possibility that the House will pass the worker assistance bill early next week and send to Mr. Obama, but it would require dozens of Republicans or Democrats changing their votes, a prospect Republicans said was remote.”
And there remains a last-ditch chance that, if the House stands pat, the Senate will pass the version of Fast Track already passed by the House, 219-211, without trade adjustment assistance, enacting Fast Track for TPP.
The TPP’s stakes are high although not as astronomical as sometimes presented in the hyperventilating debate. Last week’s big setback to TPP was shrugged off by the markets. As the New York Times’s Justin Wolfers observed:
Wall Street’s apparent indifference to this latest development tells us something, although it’s not quite clear what. One possibility is that perhaps this trade deal just isn’t such a big deal for the bottom lines of these firms — it adds only millions to the bottom lines of companies that are worth billions.
If that’s right, then perhaps the stakes here aren’t as high as the agreement’s most fervent boosters have argued. The economist Tyler Cowen suggested as much on Twitter, arguing that his “default hypothesis” is that “it is not actually a huge transfer of wealth to them.”
Free trade between nations overall, as bluntly stated by John Tamny, is a “no brainer.” The conflicting factors here, however, are not trivial. As one wag put it, this (secret) legislation might be to free trade what the Patriot Act was to patriotism.
To oppose Obama’s TPP does not rise to the level of supply-side heresy. As Rep. Russell asks, “What serious harm would come to the nation by waiting 23 months?”
Originating at Forbes.com.