Topic: Trade and Immigration

With Trade Advocates Like These…

My colleague Dan Griswold salutes President Bush for ditching the traditional script and touting the broader benefits of trade in a speech yesterday in New York City. I would like to emphasize how rare, refreshing, and late-in-coming the President’s comments were.

One explanation for the growing resistance to trade liberalization in the United States is that the Bush administration’s “pro-trade” message has been weak, even self-defeating. Typically, when the President or members of his administration take to the podium, the message on trade is monothematic: exports are great and our trade agreements promote them.

The following is an excerpt from a speech the President gave at the headquarters of Caterpillar, Inc. in Peoria, Illinois on Tuesday:

Last year we exported a record $1.4 trillion worth of goods and services. Now, in order to export something, somebody has to make it. In other words, when I talk about numbers, behind the numbers is [sic] people who are providing the service and/or making the product. So the more one exports, the more likely it is people are going to be working.

Not once in the speech did the President allude to the benefits of imports, which are also important to Caterpillar, as sources of components and raw materials. Certainly, the mention of $1.4 trillion worth of exports in the context of the relationship between exports and jobs might invite the slightly curious to scratch their heads and wonder whether last year’s record $2.2 trillion worth of imports had an adverse impact on jobs.

Indeed, that is the central premise of many of trade’s opponents: exports create jobs, thus imports destroy them. By not mentioning that our record level of imports last year occurred alongside economic growth of 3.4 percent, the creation of 2 million net new jobs, and an unemployment rate that ended at a slim 4.5 percent, the President sacrificed an opportunity to drive home the point that imports do not undermine economic growth or job creation.

In fact, Dan Griswold has written extensively on the strong positive relationship between import growth and the growth of U.S. manufacturing output. (Here’s one of his offerings.) Basically, U.S. businesses account for about half of all U.S. imports. If you want to curtail imports, all we need is a handsome recession.

Now consider Exhibit 2. In response to the President’s announcement that he will seek extension of trade promotion authority, which expires at the end of June, U.S. Trade Representative Susan Schwab, yesterday, offered: 

The agreements enacted under TPA have helped us dramatically increase exports, which are likely to be an engine that drives the American economy to continued strong growth this year. U.S. exports to the 10 countries with which we implemented free trade agreements between 2001 and 2006 grew twice as fast as U.S. exports to the rest of world.

Okay, perhaps U.S. exports to those countries have increased faster. But is that all there is to tout?  What about the fact that we can purchase fresh grapes and blueberries, imported from Chile, in the middle of winter, at about the same price we purchase the same fruit from U.S. growers in the summertime?  (Just check the origin labels at your local grocer). By focusing exclusively on export potential, our trade advocates reinforce the myth that trade is exclusively a boon to business (“BIG BUSINESS,” of course), which comes at the expense of ordinary, “middle class” Americans.

Still, worse than the failure of policymakers supportive of trade to articulate its full benefits is when policymakers betray their own ignorance in a way that gives fodder to those counseling retreat from the global economy. Ways and Means Committee Ranking Member Jim McCrery (R-LA) claimed yesterday that “Our free trade agreements since TPA went into effect have reduced our trade deficit by $5.5 billion.”  I’m not sure how that was calculated or what exactly the figure represents, but presumably the comment is intended to demonstrate that trade agreements are good. I think it backfires.

If the exclusive purpose of trade policy is to promote exports, then it’s pretty easy for trade’s detractors to point to the massive and growing trade deficit and conclude we are losing grievously at trade. Our $800+ billion trade deficit is larger today than when TPA was enacted in 2002.  Using McCrery’s logic, trade is thus a menacing plague. I don’t know, maybe this is just a naïve thought but if you base the thrust of the case for trade on the export side, then the massive and growing trade deficit is all of a sudden an albatross around the necks of liberalizers. But the truth is that the trade account has virtually nothing to do with trade policy and efforts to somehow connect the two cannot serve a pro-trade agenda.

It’s no wonder we are having a national debate on the merits of trade, despite the overwhelming evidence of the relationship between greater openness and economic growth. Policymakers who claim to favor trade liberalization have been incapable or unwilling to articulate the complete and proper argument. That will have to change soon.

Tax-Funded Media Bias

This morning on Anti-Marketplace Radio–heard on tax-funded NPR stations–there was a fine example of the quiet, unconscious liberal bias that pervades NPR and other mainstream-liberal media. Host Scott Jagow interviewed Jody Heymann, director of the McGill Institute for Health and Social Policy, who had just published a report on paid leave around the world. The segment began, “The U.S. lags far behind the rest of the world when it comes to workplace policies such as paid maternity or sick leave.”

Then Jagow asked, “Where else is the U.S. falling short?” Noting that no federal law mandates paid vacations or sick leave, he asked, “How much are states picking up the slack and how much is the private sector picking up the slack?”

So where’s the bias? Let us count the ways. First, of all the studies in the world, only a few get this kind of extended publicity. It helps if they confirm the worldview of the producers. For instance, I don’t believe Marketplace covered this Swedish study (pdf) showing that the United States is wealthier than European countries (perhaps most provocatively, that Sweden is poorer than Alabama – perhaps because Europe has the kinds of laws the Heymann study advocates). Second, Heymann was allowed to appear without a critic. Third, the interviewer never asked a critical question. He never noted that the countries that Heymann was praising are poorer than the United States and in particular that many are suffering from high unemployment brought on by such expensive labor mandates. Fourth, look at the language of the questions: “lags behind,” “falling short,” “picking up the slack.”

The unstated, perhaps unconscious, premise is that countries should have mandatory paid leave and other such programs. If we don’t, we’re “falling short” and someone must “pick up the slack.” Language like that, which is very common in the media, posits government activism as the natural condition and then positions any lack of a government program as a failure or a problem.

President Bush Answers Critics on Trade

President Bush has gone on the offensive this week, touting the generally solid performance of the U.S. economy and the danger posed to our market-driven prosperity by rising protectionist sentiments in Congress.

In a speech yesterday in the historic Federal Hall in New York City, the President sounded a clear trumpet in defense of free trade. In a rarity for politicians of any stripe, he not only extolled the virtues of exports but also of imports, and bluntly warned against “walling off America from world trade.”

Here are a few highlights from the speech:

“As we improve free trade, consumers get lower prices.” 

“Since World War II, the opening of global trade and investment has resulted in income gains of about $9,000 a year for the average American household.” 

“The Doha Round … is a great opportunity to lift millions of people out of poverty around the world.” 

“I know there’s going to be a vigorous debate on trade, and bashing trade can make for good sound bites on the evening news. But walling off America from world trade would be a disaster for our economy. Congress needs to reject protectionism, and to keep this economy open to the tremendous opportunities that the world has to offer.” 

Of course, the President will need to work with skeptical Democrats in Congress to pass pro-trade legislation and stop any anti-trade measures.

In the meantime, the President can put his pro-trade words into action unilaterally. A recent article in The Weekly Standard cites several good ideas from your favorite libertarian think tank on actions President Bush could take independently of Congress to expand the freedom of Americans to trade in the global economy.

Doha, TPA Extension, and the Farm Bill: the Axis of Frustration

President Bush went to Illinois yesterday, asking for Congressional renewal of his authority (called “Trade Promotion Authority”) to negotiate trade agreements and send them to Congress for an up-or-down vote without amendment. The present TPA expires at the end of June 2007. For those of us who have strong doubts about the ability of members of Congress to take the broad view when considering trade agreements, TPA is a necessary–but not sufficient–condition for the United States to pursue trade liberalization in partnership with other nations, including the ailing Doha round of world trade negotiations and other preferential trade agreements like those underway with South Korea and Malaysia. (This Washington Post article has a good overview of the stakes and politics behind the battle for TPA.)

(Side Note: it was surely no accident that President Bush chose to make his case at the headquarters of a successful exporter [a sterling company Caterpillar may be] rather than, as Grant Aldonas suggests in the Post article, a company that delivers cheap imports to consumers. Mercantalism is alive and well, in case there were any doubts.)

Basically, the bind is this: without TPA, Doha is dead. But many are suggesting that lawmakers will be reluctant to extend TPA if no Doha deal is imminent. Similarly, the new Farm Bill, due for enactment in September, may be an extension of the unsatisfactory 2002 Farm Bill if the Doha round does not exert significant pressure to reform, even though reform of U.S. agricultural policy would go a long way to helping the round succeed.

Don’t look to key members of Congress for their support in unraveling this knot, though. An article at the Delta Farm Press website contains some worrying statements from the new House Agriculture Committee Chair Colin Peterson. The money quote:

There’s pressure on us to change the farm bill because “that’s the only way we can get a trade deal,” said Peterson, a Minnesota Democrat. “Now, I’m sorry, but I’ve had enough of these trade deals. And unless we can get something good out of, I don’t give a darn if we get one.”

Something tells me that Chairman Peterson’s statement was not meant to be a be read as an endorsement of unilateral trade liberalization.

Visa Policies Costing U.S. Billions of Dollars

The United States is losing billions of dollars a year and the goodwill of millions of people by unnecessarily strict visa policies that discourage tourists, students and business travelers from coming to the United States.

The problem has become so critical that a broad coalition of American businesses, universities and other interest groups are planning to launch a campaign today for needed visa reform.

The U.S. government was obviously not doing enough before September 11, 2001, to keep dangerous people out of the country, but changes to U.S. visa policy since then have gone far beyond legitimate security needs. Tighter visa rules are keeping out potentially millions of visitors who pose no security threat to the United States.

As an article in this morning’s Financial Times reported:

The National Foreign Trade Council estimated that US businesses lost more than $30bn in the two years before mid-2004 because of the visa restrictions imposed after the 2001 terrorist attacks. That figure is likely to be much larger now.
“American businesses now routinely hold training seminars, conferences and sometimes even board meetings outside of the US,” said Bill Reinsch, head of the NFTC. “At the same time you see foreign universities attracting more students by advertising the fact that they don’t have a US-style visa regime.”

One step toward a more rational U.S. visa policy would be to extend the visa waiver program to such economically developed allies as Poland, Hungary, the Czech Republic, Greece, and South Korea. The program allows tourists and business travelers to enter the United States for up to 90 days without a visa. Expanding the program to selected countries would boost tourism and goodwill toward the United States without compromising national security.

I write about the need to expand the program in a new Cato Free Trade Bulletin and talk about it in a new Cato podcast.

U.S. Posturing for a Fight at the WTO

Regarding the antidumping dispute concerning “zeroing,” which I’ve argued could shake the very foundations of the multilateral trading system, we have this development (see last item).  It is becoming evident that the United States will attempt to discredit the WTO Appellate Body’s logic in its latest rebuke of U.S. zeroing practices. 

It may take a year or more before we get there, but we appear to be headed for a confrontation with the dispute settlement system that could leave that institution weakened and U.S. credibility further damaged.  And that could invite consequences far worse than a stalled or derailed Doha Round.

More to come.

Trade Showdown Looks Inevitable

Yesterday I argued that Congress’s unflinching devotion to the antidumping law poses a real threat to the world trading system.  As the WTO dispute settlement mechanism renders more decisions against U.S. antidumping actions and procedures, Congress will grow more inclined to question the efficacy and legitimacy of the WTO in public.  And that is a slippery slope.

I wrote:

To Congress, trade remedy laws are not the problem.  Dumping and subsidization are.  And the latest Appellate Body decision against zeroing makes it that much harder to combat “unfair” trade.

Accordingly, Congress is highly unlikely to go quietly into the night after the WTO’s latest indictment of zeroing. Thus, confrontation–perhaps intractable confrontation–between the United States and the WTO dispute settlement system may be in the cards later this year.

Well, judging from this news release and letter, written by the two highest ranking legislators on trade issues, “later this year” is here.  Stay tuned.