For a Trans-Pacific Partnership (TPP) trade deal to happen, the United States must get Trade Promotion Authority (TPA) from Congress for the President and the executive branch, including the U.S. Trade Representative. Opposition from both parties has delayed the introduction of a TPA bill.
Recent maneuvering to block a TPA bill included news that the AFL-CIO labor unions are planning on deploying a new weapon on members of Congress: withholding campaign contributions until TPA or "fasttrack" legislation is decided.
According to a Wall Street Journal story, in the recent midterm elections, the unions supplied $65 million to candidates, nearly all Democrats, ("New Step by Unions to Block Trade Pact," 03/11/15).
What the unions don't understand is that the economy is now a world economy. All products compete in the world market to some degree. Keeping a particular product out of the United States means American consumers don't get to evaluate product price, quality and features. Other global consumers can get it. It also is likely that, because of trade retaliation, American producers won't get access to the other country's market, so their consumers can fairly evaluate American products.
What most American producers want is access – the chance to compete, to put their product up against the rest of world and let consumers choose. But some of the most vociferous opponents of allowing that chance to compete are not the companies that produce things, that have capital at risk – the ownership – but the labor unions who are a vital part of the production process but don’t take ownership risk.
Sen. Elizabeth Warren (D-Mass.) opposes trade deals because they would "hurt U.S. workers by putting them in direct competition with low-wage workers overseas," she said in The Hill ("Obama Courts Dems on Trade," 3/15/15). Warren doesn't understand competition in a global economy nor does she realize she's doing our workers no favor by shielding them from economic reality.
What producers of products – and labor – both have to remember is that the economy is not in existence to support them, to give them a job.
The shortsighted restrictive work rules and exorbitant wage and benefit rates Big Labor was allowed to impose on the Detroit auto industry eventually resulted in a) a government (taxpayer) bailout of GM, b) the handover/sale of Chrysler Dodge to Fiat and c) a Ford mortgaged to the hilt to stay alive without government subsidies.
The unions want to make more money doing the same jobs, rather than constantly moving the workforce towards jobs needed to do new things, teaching workers new skills and constantly adjusting to produce new things consumers want new quality levels they demand.
The free market is based on the principle that consumers are king – that they should be allowed to freely choose what products or services they wish to buy – or not buy. Think what a different situation American consumers would face if automakers and unions had successfully kept out all foreign cars from the 1960s on. The quality, longevity, performance and price of cars available today in America would not be the same without that competitive pressure.
The labor unions, R-CALF and National Farmers Union want to limit their attention to only the domestic market. While the United States is a significant and lucrative market, we are only four percent of the world's population. Agriculture’s production capacities long ago exceeded the domestic market's capacity. Beyond that, the world market values some of our production at a much higher level than our domestic market.
It just isn't practical to have hundreds of members of Congress on the negotiating team for a trade deal. They can set conditions. And an up or down vote is the ultimate failsafe Congress has to prevent a bad trade deal.
Hopefully Congress can see the huge difference between the U.S. Trade Representative negotiating on primarily economic and business issues and their distrust of the administration getting a good deal "negotiating" with the Iranian ayatollahs.
U.S. Trade Representative Michael Froman leads trade negotiations. Ambassador Darci Vetter is the chief agricultural negotiator for the USTR. She is a Nebraska native and was raised on a family farm. Part of her professional career has been working with NAFTA implementation, trade dispute resolution with Canada and Mexico and WTO Doha round negotiations. Negotiating trade deals should be left in the hands of trade experts. These very complex issues with many different players and should not be lumped together in congressional debates.
We've all heard the expression, "Cutting your nose off to spite your face." A significant number of Republicans are contemplating just such a drastic action. They could throw away perhaps the only major victory they could accomplish this year for their constituents, just to spite President Obama.
Don't get me wrong. I oppose most of the President’s actions. But part of the game of politics is getting what voters, what the economy, what consumers need when you can. Members of Congress are there to increase opportunity and reduce restrictions and barriers to jobs and commerce. The boost to economic growth, additional products and services for American consumers, new market access and reduced tariffs is not an opportunity to throw away.
Yet, Republicans are conjuring up inaccurate or shortsighted reasons for opposing Trade Promotion Authority (TPA) and a possible biggest trade agreement in decades, the Trans-Pacific Partnership (TPP). This a 12-country agreement with nations accounting for 40 percent of the world GDP, involving the fastest growing region in the world – Asia.
The historic opportunity in Japan is only happening because one prime minister has set his career to shake up his country from the economic doldrums of over two decades. The chance to streamline access for American beef and to substantially reduce or eliminate the 38 percent tariff U.S. beef pays to get into Japan is truly historic.
Australia is ahead of us, having struck a deal with Japan that has, and will continue to, reduce tariffs on Australian beef.
The news media is unlikely to carry stories about new products showing up on grocery or department or discount store shelves. They won't mention the money consumers might save, the cheaper prices because tariffs or unnecessary trade barriers disappeared through trade agreements. These advantages can affect hundreds of millions of U.S. consumers.
But if one factory employing 200 people closes because they could not or would not adjust to world competition, it is all over the news media. It is difficult and disrupting for those 200 people but the numbers of people harmed are infinitesimal compared to the advantages gained by most of the U.S. population.
Yet the squealing labor unions represent roughly seven percent of private industry employment versus more than 300 million U.S. consumers. And union products get sold globally daily.
The Commerce Department said more than 11 million American jobs were supported by exports (2014). Commerce Department Secretary Penny Pritzker said U.S. exports reached $2.3 trillion (2014). One-third of the growth our economy has seen since 2009, has come from exports ("The Engine That Pulled Us Out of Recession," Wall Street Journal, 03/19/15).
What about Constitutional authority? Article II, Section 2 contains the following, referring to the president: "He shall have Power, by and with the Advice and Consent of Senate, to make Treaties, provided two-thirds of the Senators present concur;." That sounds pretty explicit about "making" or negotiating a treaty, subject to Senatorial approval.
What about Congressional powers? Article I, Section 8, enumerates one of the powers of Congress as, "To regulate Commerce with foreign nations, and among the several states, and with the Indian tribes." "Regulate," by definition, "to direct or control by rule," we would understand to be writing the regulations necessary to carry out the treaty. But "regulate" does not imply international treaty negotiation or origination.
The Founders never intended for individual states to negotiate major treaties with other countries. TPA is a practical solution for country-to-country negotiation, allowing input from Congress but avoiding the chaos of allowing 535 members of Congress direct negotiating or amending authority.
That is my reading of the Constitution. Now, let's consult Ed Meese, a former U.S. attorney general and Todd F. Gaziano, director, Center for Legal and Judicial Studies. Their paper, "Why Trade Promotion Authority is Constitutional," referred to TPA being debated in 2001 for President George W. Bush (Heritage Foundation, Legal Memorandum #4).
TPA legislation is "clearly constitutional because Congress retains its authority to approve or reject trade agreements" up until a certain deadline, the paper noted. Congress can "always kill any future international agreement by withholding its final approval. The only difference under TPA is that Congress consents not to kill the agreement by amendment (i.e., the `death by a thousand cuts')."
Another objection is that agreeing to an international treaty erodes our national sovereignty. Actually, one of the functions of national sovereignty is the "right to enter into international agreements and to participate in their enforcement."
Some people object to submitting trade disputes to an international body for resolution. This is a dispute resolution system, like most treaties have.
"The U.S. will always have the ultimate say over what its domestic laws provide. No future agreement could grant an international organization the power to change U.S. laws."
Further from the Meese-Gaziano report:
"If Congress rejects a ruling or fails to act, other countries might impose a trade sanction or tariff, but they are more likely to impose high tariffs now without any agreement. The fact remains that no international body or foreign government may change any American law."
Peter A. Petri, Peterson Institute for International Economics – a well-respected, non-partisan group concentrating on international economics – explained "... trade agreements affect how people are employed, and ideally, substitute more productive jobs for less productive ones and thus raise real incomes," ("The Obama Administration's Illusionary Job Gains from the Trans-Pacific Partnership," Washington Post, 01/30/15).
Petri said that increased trade might well force changes in the labor force, most likely for more highly skilled jobs and totally new types of jobs, and it might. We would think labor unions would be closely tuned into trade agreements, in order to be fully informed on which jobs would likely be phasing out, increasing, created or requiring new training and skills. Instead, the unions want to protect jobs created yesterday and done today while blocking future new jobs. The constant adapting demanded by a dynamic free market is too messy for unions. They want a frozen scenario, captive workers and a trapped employer.
Petri believes the job transitions will occur gradually and there will be disruptions in certain industries but the magnitude of shifts caused by trade will be "dwarfed" by routine turnover and new jobs.
The Washington Post writer scoffed at the impact of a TPP deal, at slightly less than a half GDP point, just as a recent Wall Street Journal column did.
When the GDP under President Obama has struggled to top 2 percent growth (they're estimating 1st Qtr. 2015 growth as zero), a half-point is important. To be exact, their 0.4 divided by 2 is 20 percent growth in GDP. For many industries that have struggled to survive, been beaten up by new government regulations or outright attacks and suffered under a weak "recovery" that hasn't gotten back to square one, a piece of $78 billion is not chump change.
That $78 billion is just a half-point increase because our total trade is $2.3 trillion and total GDP is $20 trillion. It is imperative that we make significant moves like the TPP because it takes constant care and feeding to grow a $20 trillion baby.
American meat industries have much more to gain from a TPP deal, because the middle classes that are forming in Asia will be demanding more high quality protein, as one of the first advantages of attaining middle class income. After all, as Ambassador Vetter said, by 2030, two-thirds of the world’s middle class will be in Asia.
The opinions expressed in this commentary are solely those of Steve Dittmer, a veteran in agricultural policy and commentator.