Thomas Palley: R.I.P. Trade Promotion Authority

Thomas Palley, one of the people interviewed in Chris Hayes' recent Nation article "Hip Heterodoxy," and "a dissident economist who received his PhD from Yale and once worked for the AFL-CIO, " sends along his latest on fast-track authority for trade agreements. [On the subject of heterodoxy, there is currently a nice discussion at TPM about heterodoxy in economics and I hope to contribute something to the discussion tonight or tomorrow, time permitting.]

Here's Thomas Palley expressing dissidence over trade promotion authority:

R.I.P. Trade Promotion Authority, by Thomas I. Palley: Trade promotion authority (TPA) - formerly known as fast-track negotiating authority - is set to expire on June 30, 2007. As a result, the Bush Administration and business interests are now lobbying Congress for its renewal. However, there are strong reasons to not just let TPA temporarily lapse, but also to permanently bury it.

After the November 2006 elections giving Democrats control of Congress, renewal of TPA appeared unlikely owing to the high degree of distrust and animosity toward the Bush Administration. Now, with Democrats and the Administration agreeing to include formal language on labor and environmental standards in the Peru and Panama free trade agreements, some are arguing for extending this newfound cooperation to renewal of TPA. That would be a serious mistake.

Not only would TPA renewal betray voters who no longer support the Administration, it would also miss a major opportunity to begin correcting course on globalization. Behind today’s flawed globalization lies a profoundly flawed policy process, and TPA is at the heart of that process.

The constitution gives Congress the right to decide upon trade relations with other countries. TPA has Congress ceding part of those rights by giving the President power to negotiate trade agreements that Congress can approve or disapprove but cannot amend or filibuster.

Opponents of TPA renewal have focused on two arguments. One argument is that such ceding of constitutional power is inappropriate, and Congress should reclaim this power as part of restoring a more balanced relationship between the legislative and executive branches.

A second argument is that absence of TPA would make it more difficult to sign new “free trade” agreements. This is because absent an up or down vote, agreements would get bogged down in Congressional special interest horse-trading. This is probably true, but it also constitutes a purely tactical argument for opposing TPA rather than an argument of principle.

An alternative argument for burying TPA concerns its distorting effect on trade policy. Over the last two decades the power of corporations has increased dramatically while that of labor has fallen. That power shift is reflected in the increased numbers of Washington K Street lobbyists working on behalf of corporations, which has increased corporate influence over policy and legislation. TPA plays into and amplifies this power shift.

Trade deals are negotiated by the office of the US Trade Representative (USTR), and then sent to Congress for approval. This negotiating process is stacked in favor of business. First, corporations get front seats at the negotiating table through regular detailed consultations, ensuring their interests are fully represented. Second, the trade bureaucrats who do the negotiating are subject to corrupting influences that bias negotiations.

One problem is that negotiators’ metric of success too easily becomes the number of deals signed, rather than getting good deals done. A second problem is that, as with other branches of government such as the Pentagon, there is a revolving door between USTR and business. Thus, trade negotiators who do good work for business are rewarded with plum K Street lobbying jobs, and Washington’s trade scene is crammed with persons who have followed this route. Furthermore, these lobbyists then have insider access to their former colleagues, thereby amplifying corporations’ representation advantage. The net result is business interests almost always trump those of workers.

TPA reinforces this jaundiced structure by reducing Congressional over-sight of trade, thereby short-changing the electorate’s interest. Bad agreements pass because the political costs of voting them down on account of specific problems are perceived as too high. Moreover, TPA provides individual congressmen with political cover, enabling them to retain favor with corporate sponsors without having to explain to constituents their lack of action.

The bottom line is that the balance of power and process of trade negotiation already favors corporate interests over those of ordinary people. TPA aggravates this pattern, which speaks for burying it and letting TPA rest in peace.

Comments

[robertdfeinman]

I'd like to pose a question about trade. Given that most of the big trade agreements have already been negotiated over the past 20-30 years what are the expectations for the increase in volume of trade if the new proposed policies are adopted?

We have already eliminated essentially all tariffs and quotas on the significant items. Just look at the volume of stuff Walmart imports from China.

Much of the heavy manufacturing industry has already been internationalized as well. It would seem that the only sector with much potential is bulk commodity agriculture (like corn, wheat and soy). Since these are relatively cheap products and the foreign markets are already being served locally how much additional material do the producers think they will be able to sell?

Perhaps all this talk about "free trade" is just squabbling over the bones. If anyone has any projections I'd be interested in some citations.

[wjd123]

Throughout Central and South America the poor in democratic nations are throwing out free trade governments. Am I to believe that they just can't understand how much better free trade has made their lives. Is there some economic reason we can't have a free trade system that actually empowers the poor so they can make their lives better.

Such a system would be international governments with the power to enforce sanctions when national governments don't live up to accepted conditions for trade. For instance nations that accept the principle of free association would be afforded greater access to the markets of all those members making up a particular international government. A corporation that wanted to leave a country whose workers had unionized for a country where workers couldn't associate would have access to members markets reduced.

The political body which makes the call should be the international one and not the national one. If workers find that the international government affords them more rights and protects their rights that is where their loyalties will go.

Workers know whether their lives are getting better. They don't need economist to tell them. They will know where they have leverage, and they will use it to their advantage.

We have our economic morality, laws and regulations, effecting how business is done. Free trade agreements have throw us into an amoral world that hollows out our economic morality. We need a free trade system that is an ally to standards.

The reason I said international governments instead of an international government is because not all nations could live up to the same standards even if they wanted to. However, a system of interlocking trade agreements between international governments could be used to encourage governments toward higher standards.

By belonging to an international government whose members can meet standards the opportunity to raise standards is also a political possibility. For instance, the EU laws protecting woman against discrimination in the work place are stricter than any of its member nations.

Fast track negotiations should be killed and the WTO should be abandoned for a system of interlocking international governments.

[dissent]

I had an argument last night with a family member who felt we needed 'free trade' so poor countries could find markets for their agricultural products.

But that would be a drop in the bucket.

That's a laudable and justifiable goal. But what we have is 'free trade' that demolishes the living standards of a huge swathe of the American working and middle classes, and it's gonna get a lot worse. I think if what is desired is a market for the agricultural products of poor countries, than let's figure out how to get THAT. But what we have is soaring profits based on global labor arbitrage: it's the rip off of all working people for global capital. It's a sham to say this is about anything other than that.

[DRR]

If Stopler-Samuelson is correct, is there a "Free Trade" where non-skilled tradables workers in rich countries won't end up competing with non skilled tradables producing workers in poorer ones, and the negative (for the richer) and positive (for the poorer) effects that go along with it? If so give Dani Rodrik a call.

And yes, poor countries need a market for their agricultural goods but agriculture is too vulnerable to demand shocks and is a poor field to specialize in. The third world needs markets for their gadgets & gizmos.

[Tom palley]

Robert, your question is an important and good one. Yes, tariffs on manufacturing goods have largely (but not completely) been negotiated away. However, trade agreements today are increasingly about services, investor rights, and intellectual property rights. These are crucial issues that will have a huge impact on the global economy. Much of this remains to be negotiated and worked out. Given the current political and intellectual climate, TPA advantages corporations in this process and that is why it is important we bury it.

[Outside the Box]

Free trade may be losing support with the public in many countries because the benefits are so unevenly distributed. If consumers were allowed to benefit from lower prices, then the benefits of free trade would be more or less evenly distributed to all consumers. That would require the CPI to fall though, which few governments will allow.

The unevenness of wage increases due to trade is further compounded by political protection to trade competition granted to some industries. This makes workers in industries without similar protection howl with protest. Some groups, such as fixed income retirees gain nothing at all from free trade, as pensions are never trade adjusted. Since elderly retirees vote in great numbers, the political support of a large voting bloc is thus lost.

The proposal to use the tax system to redistribute wage gains sounds good in theory, but is subject to distortion by the same political process that grants trade competition protection to some. Politicians tend to tax money away from people who don't contribute to their campaigns/vote for them, and give it to people who do contribute to their campaigns/vote for them. There is nothing even about this redistribution policy. The redistribution losers again howl with protest, seeing free trade as just another means for the enemy political party to punish them.

[nodakdude]

I see the author's points, but I'm not convinced that the executive is more susceptible to lobbying than Congress would be.