This Time, Get Global Trade Right

Courtesy of The New York Times. The Editorial Board

Many Americans have watched their neighbors lose good-paying jobs as their employers sent their livelihoods to China. Over the last 20 years, the United States has lost nearly five million manufacturing jobs. In that same time, however, the prices that Americans pay for basic goods like T-shirts and televisions have fallen. The cost of clothing is down 8.2 percent since 1993, as “made in China” and “made in Bangladesh” labels have crowded out “made in U.S.A.” on the shelves of the local mall.

There is a national ambivalence about our trade of goods and services with the rest of the world, which has more than doubled in the last two decades. Americans want the benefits of trade — and they are potentially big and quite real, including opening up new markets to American cars and software — but they’re increasingly anxious about the downside, which includes closed factories and lower wages. The country needs to pursue new trade agreements, but this time we need to get the agreements right.

This page has long argued that removing barriers to trade benefits the economy and consumers, and some of those gains can be used to help the minority of people who lose their jobs because of increased imports. But those gains have not been as widespread as we hoped, and they have not been adequate to assist those who were harmed. As the Obama administration negotiates two big trade agreements — one with 11 countries along the Pacific Ocean and the other with the European Union — it is appropriate to take stock of what we have learned in the 20 years since the passage of the North American Free Trade Agreementand use that knowledge to design better agreements.

To gain the support of a divided Congress and public, the administration must ensure that new agreements are much stronger than Nafta and other pacts. President Obama, whocriticized the agreement with Canada and Mexico as a candidate in 2008, promised that his negotiations would avoid a race to lower costs and standards by requiring that countries adhere to common regulations in areas like labor rights, environmental protection and patents. Living up to that promise should be one of his highest priorities.

If done right, these agreements could improve the ground rules of global trade, as even critics of Nafta like Representative Sander Levin, Democrat of Michigan, have argued. They could reduce abuses like sweatshop labor, currency manipulation and the senseless destruction of forests. They could weaken protectionism against American goods and services in countries like Japan, which have sheltered such industries as agriculture and automobiles.

The Pacific agreement, known as the Trans-Pacific Partnership, could also encourage China, which is not part of the talks, to reconsider its currency and labor policies to avoid being at a disadvantage. (The participants are Vietnam, Malaysia, Japan, Australia, Canada, Mexico, Singapore, New Zealand, Chile, Peru and Brunei.) And a pact with the European Union could harmonize overlapping regulations to reduce the cost of doing business and increase competition. Both pacts could aid American foreign policy by strengthening alliances in Asia and Europe.

WELCOMING BUSINESS, NOT THE PUBLIC One of the biggest fears of lawmakers and public interest groups is that only a few insiders know what is in these trade agreements, particularly the Pacific pact.

The Obama administration has revealed so few details about the negotiations, even to members of Congress and their staffs, that it is impossible to fully analyze the Pacific partnership. Negotiators have argued that it’s impossible to conduct trade talks in public because opponents to the deal would try to derail them.

But the administration’s rationale for secrecy seems to apply only to the public. Big corporations are playing an active role in shaping the American position because they are on industry advisory committees to the United States trade representative, Michael Froman. By contrast, public interest groups have seats on only a handful of committees that negotiators do not consult closely.

That lopsided influence is dangerous, because companies are using trade agreements to get special benefits that they would find much more difficult to get through the standard legislative process. For example, draft chapters from the Pacific agreement that have been leaked in recent months reveal that most countries involved in the talks, except the United States, do not want the agreement to include enforceable environmental standards. Business interests in the United States, which would benefit from weaker rules by placing their operations in countries with lower protections, havealigned themselves with the position of foreign governments. Another chapter, on intellectual property, is said to contain language favorable to the pharmaceutical industry that could make it harder for poor people in countries like Peru to get generic medicines.

Another big issue is whether these trade agreements will give investors unnecessary power to sue foreign governments over policies they dislike, including health and environmental regulations. Philip Morris, for example, is trying to overturn Australian rules that require cigarette packs to be sold only in plain packaging. If these treaties are written too loosely, big banks could use them to challenge new financial regulations or, perhaps, block European lawmakers from enacting a financial-transaction tax.

SEEKING THE REAL SOURCE OF JOB LOSS Could these agreements lead to further job losses and exacerbate income inequality in the United States? Many critics are legitimately concerned about more outsourcing of jobs, and there is no doubt that trade, along with automation and financial deregulation, has contributed to income inequality.

But it’s important to remember that our trade with trade-agreement countries, like Mexico, is much more balanced than our trade with China. Those countries buy more American goods and services than they would without an agreement, sending money and jobs back in this direction.

study published last year blamed increased imports from China for 44 percent of the decline in manufacturing employment from 1990 to 2007. People who lost those jobs were more likely to stop seeking work or to find lower-wage jobs in other industries, suggesting that government programs to retrain workers hurt by trade are inadequate. A second paper by the same scholars concluded that the negative impact of imports from Mexico and Central American nations with which the United States has agreements were “economically small and statistically insignificant.”

It’s easy to point the finger at Nafta and other trade agreements for job losses, but there is a far bigger culprit: currency manipulation. A 2012 paper from the Peterson Institute for International Economics found that the American trade deficit has increased by up to $500 billion a year and the country has lost up to five million jobs because China, South Korea, Malaysia and other countries have boosted their exports by suppressing the value of their currency.

HOW TO WRITE A BETTER AGREEMENT The trade agreements the Obama administration is negotiating provide a chance for the United States to press countries to stop manipulating their currencies. The administration appears to be afraid that raising the issue could scuttle the talks. It’s time the administration stiffened its spine.

The president also needs to make clear to America’s trading partners that they need to adhere to enforceable labor and environmental regulations. This would level the playing field for American workers and improve the lives of tens of millions of workers in developing countries.

The Obama administration also needs to do much more to counter the demands of corporations with those of the public interest. Consumer and workers groups should have been on the same industry advisory committees. And Mr. Froman, the trade representative, must make clear that these agreements will allow countries to adopt regulations without the threat of a lawsuit from powerful businesses. On patents, the agreements should not cut off developing countries’ access to lifesaving generic medicines.

In recent months the debate about trade, and the Pacific agreement in particular, has become increasingly polarized. Senior Democrats like the Senate majority leader, Harry Reid, and the House minority leader, Nancy Pelosi, have come out against granting the president trade promotion authority, under which Congress agrees to vote up or down on agreements without amendments.

To a large extent, the administration has only itself to blame. By keeping secret so much information about trade negotiations, which have ceased to be purely about trade matters like tariffs and quotas, the government has made itself a target for criticism. Mr. Obama and Mr. Froman argue that their critics have misunderstood or misrepresented their intentions. But that is precisely why the president should provide answers to the questions people have raised about these agreements. It is time for him to make a strong case for why these new agreements will be good for the American economy and workers.

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