Washington Insider--Wednesday

More Facts on Trade

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Can Republicans Rescue President's Trade Legislation? Can He?

House Republican leaders have decided to give themselves until the end of July to revisit President Barack Obama's trade legislation and now look to coordinate their efforts with the Senate. The House Rules Committee approved a rule that would give the chamber until July 30 to act on a motion to reconsider the Trade Adjustment Assistance bill contained in the legislative package on trade that went down to a resounding defeat last Friday.

The president spoke Monday with House Speaker John Boehner, R-Ohio, about how to move forward, the White House said without providing details. The speaker's office also gave no information about the call.

Nearly two-thirds of House Republicans supported Obama last Friday on the trade bill. After the vote, Republicans said it was up to Obama to round up enough Democratic support to pass the displaced worker measure which has become a necessary first step in the process of giving the president fast-track trade authority. "Enough" Democrats appears to be around 100, which would be a major accomplishment, given that in last Friday's vote, only 40 Democrats sided with the president, while 144 opposed. Just what might change over the next six weeks to alter the vote on trade legislation is far from clear at this point. (Also see longer item below.)


U.S. Calls on Canada to Cut Tariffs on 'Protected' Agricultural Products

The United States is continuing its campaign to convince Canada to re-examine policies that impose excessive tariffs on U.S. imports of agricultural products such as dairy, eggs, and poultry. Deputy U.S. Trade Representative Michael Punke this week used a regular World Trade Organization trade policy review of Canada to press home U.S. displeasure with most-favored nation tariffs for dairy products and animal products that currently are 238.7% and 47%, respectively.

The United States also has been using Trans-Pacific Partnership (TPP) negotiations as another forum to convince Canada to alter its trade policies, so far without any noticeable success.

Canadian trade officials have indicated they do not intend to put better offers on the table at the TTP talks unless Congress approves a Trade Promotion Authority bill that would preclude the U.S. legislative branch from amending a completed TTP agreement. Canada already is the United States' top trading partner, with more than $658 billion in two-way goods trade last year, or an average of $1.8 billion per day.


Washington Insider: More Facts on Trade

Just when you thought the fight on trade agreements couldn't get uglier, it may have. All along, there have been assertions about worries about "off shored jobs" and claims that all the consequences from technology growth actually are the result of trade deals. Then, after last Friday's vote in the House, there were assertions that focused heavily on the president's personality and his so-called failure to adequately schmooze the Congress in advance of the vote.

At the same time, many Republicans have hardly been able to hide their glee at this opening to criticize Democrats. However, in the course of pointing out how bad the Democrats are, some valid points about the value of the trade deal that seems to be slipping through their fingers are being made. David Brooks, New York Times resident modestly-right columnist, went so far as to count up the "damages" the Democrats will have done if "this policy stands."

He wrote on Tuesday that defeating the "underpinnings" of the Trans-Pacific Partnership (TPP) trade deal would impoverish the world's poor. NAFTA, he thinks, probably didn't affect the American economy too much but it did boost Mexico's. "With more opportunities, Mexican workers feel less need to sneak into the United States, he says. And, Brooks argues, in Asia, the American-led open trade era has created the greatest reduction in poverty in human history.

Perhaps more important, he thinks defeat of the proposed trade deals will damage the American economy, noting the global poor benefit the most from trade, but that most people in rich countries benefit, too.

Trade treaties have led to significant growth in U.S. manufacturing exports, he reports -- and, export-intensive industries pay workers up to 18% more than nonexport-intensive ones. Stifling trade also stifles innovation here at home. He counters Democratic assertions that some U.S. workers have been hurt by trade deals, observing that most manufacturing job losses have been caused by technological improvements. He says the best way forward is to increase the number of high-quality jobs in the service sector.

The Pacific trade deal would help since it is mostly about establishing rules for a postindustrial global economy; rules having to do with intellectual property, investment, antitrust and environmental protection. Service-sector industries are where America is strongest today. That's where opportunities for innovation are most exciting and where wages are already 20% higher than in manufacturing.

At rock bottom, Brooks thinks that defeat of the trade policy would imperil world peace. The Pacific region will either be organized by American rules or Chinese rules, he argues. "By voting against the trade deal, Democrats went a long way toward guaranteeing that Chinese rules will dominate."

Then, the gloves come off and he cites "various people" as suggesting that the vote last week was a miniversion of the effort to destroy the League of Nations after World War I. "It damaged an institution that might have headed off future conflict," says Brooks.

He further accuses Democrats of using only "small and inadequate" arguments including suspicions that the deal is being negotiated in secret, noting that tough deals typically are hammered out in private.

Brooks calls opposition to the trade pact part of a "long tradition of populist reaction." When economic stress rises, there is a strong temptation to pull inward.

Brooks' name calling is fairly standard and his attempt at logic likely will have little or no impact on this highly emotional debate. He does confront some of the anti-trade rhetoric with recognition that rejecting the Trans-Pacific Partnership will hurt economies from the United States to Japan to Vietnam.

Most important, he is right that it would send yet another signal that America can no longer be counted on as the world's leading nation with a strong commitment to global interconnections.

Brooks may also recall that the Republicans have long depended heavily on the "trade plank" as a centerpiece of their economic policies. If this policy is rejected by a Congress under Republican leadership, it will be a tough, tough defeat for them as well as for the Democrats, Washington Insider believes.

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