22 July 2007

Swap or Bop?

The President is hitting his head up against a wall - of protectionism.

Today’s Wall Street Journal follows the fight between the White House and Congress over trade deals with Panama and Peru, which have yet to be passed.

After stamping their feet over a lack of labor and environmental “standards” imposed on developing countries, the Democrats allowed the President’s Free Trade Authority to expire on July 1st. The populists also have let trade deals with South Korea and Colombia rot. Although the White House inserted the Democrats’ “standards” into the trade deals with Panama and Peru, the protectionists now demand that the South American countries enact those standards into law before Congress approves the trade deal:

The reason, says House Ways and Means Chairman Charles Rangel (D., N.Y.) is that rank-and-file Democrats simply don't trust the White House to enforce the labor commitments once Congress approves the deals. "That's the bone of contention," says Mr. Rangel, whose panel is the starting point for trade initiatives in the House. "You take me and the Democrats to the mat...how do you think you're going to win?" he says in an interview. "The politics are on our side."

The White House is rightly protesting:

Ms. Schwab [President Bush’s trade envoy] sent a scalding letter to House Speaker Nancy Pelosi, a California Democrat. Ms. Schwab insisted the latest demand overreached, treading on the legal authority of another country. "Unilaterally requiring another sovereign country to change its domestic laws before the U.S. Congress approves a trade agreement would be a fundamental break with U.S. law, policy and practice," she wrote.

The Democrats counter that the U.S. has pushed countries to change their laws before signing trade deals in the past, but the White House retorts that it exerted that pressure to rollback laws which violated a “standstill” agreement - laws that should never have been passed.

Beyond the legalistic wrangling, the Democrats are merely clinging to their protectionist seats to stop any extension of free trade.

The Heritage Foundation shares my frustration with our Democratic friends:

The Administration even relinquished the ability granted under the expired TPA to keep recently concluded FTAs with South Korea, Colombia, Peru and Panama from being rewritten with the new compromise rules. Unfortunately, the Administration's concessions appear to have been in vain, remaining inadequate to persuade a hostile Congress to renew TPA.

But I can take solace in Federal Reserve Chairman Ben Bernanke’s remarks on the benefits of free trade from this past May:

According to one recent study that used four approaches to measuring the gains from trade, the increase in trade since World War II has boosted U.S. annual incomes on the order of $10,000 per household (Bradford, Grieco, and Hufbauer, 2006).2 The same study found that removing all remaining barriers to trade would raise U.S. incomes anywhere from $4,000 to $12,000 per household.

Perhaps our protectionist friends should take a look.


Judy Aron said...

Gee.. and yet it doesn't seem to bother anyone that we have been flooded with products from China.. which are for all intents and purposes made by slave labor. Have we asked China to change their laws?
Personally I'd rather have things made in this country and give Americans real manufacturing jobs again. I am hard pressed to find anything made here anymore.

Brian Bolduc said...

While the loss of manufacturing jobs frightens people, we need the right perspective.

At the turn of the 20th century, most Americans had agricultural jobs. Advances in technology allowed farmers to produce more food with less land; leading to overproduction of food, a drop in food prices, and a major loss in agricultural jobs. Those Americans who lost their agricultural jobs then took up manufacturing jobs. Although those manufacturing jobs may not have paid much, because food prices had declined, purchasing power increased; leading to an increase in the standard of living.

The same effect is occuring today. We are losing manufacturing jobs; but gaining more service jobs, which tend to pay more and/or are easier on us - working in an airconditioned office, etc.

China has a problem; but its political communism, not the economic capitalism that it has recently embraced.