Topic: Trade and Immigration

Polling Free Trade

A New York Times/CBS News poll from 2013 asks, “Which is more important to you – to protect American industries and jobs by limiting imports from other countries, or to allow free trade so you can buy good products at low prices no matter what country they come from?” I like this question because it addresses protectionism as a policy rather than trade agreements.

When the options were protectionism or free trade, the result was 51% in favor of limiting imports and 41% supporting free trade.  Now that isn’t a majority of American favoring free trade, but it strikes me as an incredibly high number considering how broadly the question is worded.  It didn’t ask if we should lower tariffs; it asked if we should have any at all?  Do 41% of Americans really oppose all tariffs?

That’s worth keeping in mind as the public becomes more involved in the debate over trade promotion authority and the Trans-Pacific Partnership.  We’re going to be hearing more from the news media about Americans’ attitudes toward trade and globalization, and it’s important to remember that polls about trade vary greatly depending on how the question is worded. 

A 2013 Gallup poll focusing on general attitudes toward trade asked respondents, “Do you see foreign trade more as an opportunity for economic growth through increased U.S. exports or a threat to the economy from foreign imports?”  The problem with this question is that it assumes that trade is supposed to meet some mercantilist goal of exports exceeding imports and asks whether that goal is being met.  Unfortunately, this is how most supporters of the TPP have framed their arguments.  Still, the poll found support for trade at 57% with 35% opposed.

A new Pew Research Center poll shows that most Americans think trade agreements have been good for the United States, but when asked whether those agreements have been good for them personally, the results are more mixed:

Majorities across income categories say free trade agreements have been a positive thing for the U.S., but there are much wider income differences in opinions about the personal impact of free trade agreements.

Overall, somewhat more say their family’s finances have been helped (43%) than hurt (36%) by free trade agreements. Among those with family incomes of $100,000 or more, far more feel they have been helped (52%) than hurt (29%) financially. But among those in the lowest income group (less than $30,000), 38% say their finances have benefited from free trade agreements, while 44% say they have been hurt.

My colleague Simon Lester has noted that these results might be different if people were more informed about the regressive costs of protectionism.

Trade opponents have been quick to point out that polls about past agreements don’t actually ask if people support the TPP.  They also point to other polls that show strong public opposition when the question links trade agreements to specific hot-button issues like currency manipulation or outsourcing. 

Shawn Donnan of the Financial Times has noted how the Pew poll demonstrates a disconnect between the American public and their elected representatives.

What is remarkable is the consistency with which polls have pointed to support for trade and trade agreements in some important demographics.

Polls have shown a majority of Democratic voters support trade agreements even as most of the party’s representatives in both houses of Congress do not. The same is true for Republicans, voters under 30 and Hispanics, last week’s Pew poll found.

In fact the Pew survey found that a majority in all income groups thought trade agreements had been a “good thing” for the US economy even if they took contrasting views on what the impact had been on their own family finances.

Largely because of the political discourse in Washington, the US often looks from the outside like a parochial nation in retreat from the world, particularly when it is put up against a resurgent China. But from the ground, the US seems more comfortably interconnected with the world than it has in decades.

Just as polls show Americans are more comfortable with gay marriage than they once were they also reflect the fact that Americans are more accepting of globalisation than they have been in the past.

The TPP Is, In Fact, About Trade

One of the criticisms of the Trans Pacific Partnership (TPP) is that it’s “not about trade.”  While it is true that the TPP goes beyond trade, and addresses issues such as labor, environment and intellectual property protection (in ways that I’m not always happy about), its impact on traditional protectionist measures such as tariffs should not be ignored.  Here is Politico on this issue:

Vietnam slaps tariffs of 70 percent on U.S. cars and machinery, 35 percent on U.S. chemicals, 30 percent on U.S. biscuits and baked goods, and 25 percent on U.S. recording equipment. Japan marks up our oranges 16 percent from June through November and 32 percent from December through May; it marks up our beef exports 38.5 percent all year long. Cars made in America face a 30 percent tariff in Malaysia, which might not seem stiff compared to 50 percent on motorcycles or 35 percent on plywood, except that cars made in Japan and other Asian nations don’t face any tariff in Malaysia.

These burdensome overseas tariffs, provided to POLITICO by US Trade Representative Michael Froman, are the kind of problems President Obama hopes to address with the free trade deal known as the Trans-Pacific Partnership, which has not yet been finalized but has recently erupted into one of the most contentious topics on Washington’s agenda. 

Overall, the U.S. imposes an average tariff of 1.4 percent on foreign goods, less than half the average for the rest of the nations Froman is negotiating with, barely a fourth the average in Vietnam and Malaysia. And it can get much worse for specific industries and products. TPP nations have tariffs ranging up to 100 percent on textiles, 87 percent on corn, and 75 percent on consumer goods, not to mention selected Japanese tariffs that amount to 189 percent on U.S. shoes and a don’t-even-think-about-it 778 percent on U.S. rice above a certain annual quota.

Even our friendly trading partner to the north has some brutal anti-American protectionism on its books. The North American Free Trade Agreement of 1994 broke down a slew of barriers between the U.S. and Canada, but it exempted the poultry and dairy industries, which is why U.S. eggs face tariffs of up to 163.5 percent—and not less than 79.9 cents per dozen—in the land of ice hockey and eh. U.S. yogurt, milk, cheese, and frozen chicken all face tariffs between 237.5 percent and 249 percent in Canada.

Of course, when you talk to a U.S. government official, the focus will be on the protectionism of others, and U.S. protectionism will be ignored.  In reality, the U.S. is not all that great either.  Among other things, we have some “tariff peaks” of our own, we abuse anti-dumping duties, and there is lots of protectionism in government procurement (e.g., Buy America laws).  But the overall point is still valid: There is plenty of protectionism for trade agreements to take on.  The key, from my perspective, is how much of it the TPP actually gets rid of.  For that, we need to wait for the TPP to be completed, and see what the negotiators have accomplished.  Then, whatever has been achieved in this regard needs to be balanced against the other parts of the TPP.

Republicans Should Welcome Trade’s “Burgeoning Bromance”

The skepticism was evident in conservative talk-show host Laura Ingraham’s voice when she referred to the working relationship between President Obama and Senate Majority Leader McConnell as a “burgeoning bromance.” Her sentiment is shared by a number of Republicans in Congress, who are unhappy that Senate and House leadership is working with the president to secure Trade Promotion Authority.

Perhaps it’s no longer axiomatic that trade divides Democrats and unites Republicans.  According to Politico, “about 40 to 45 of the 245 Republicans in Congress are hard ‘nos’ on [TPA]” with many asking: Why would Republicans want to give this president, who has aggrandized his authority and disregarded congressional prerogatives, any more power?  Well, they shouldn’t.  However, TPA would not give the president any power to make mischief.

Trade Promotion Authority is neither a congressional capitulation nor an executive power grab.  It is a compact between the branches, which effectively deputizes the president to negotiate trade agreements on behalf of Congress, which meet parameters and fulfill objectives spelled out by Congress, which are put to votes in both chambers of Congress. 

If the concluded trade agreement meets Congress’s parameters and fulfills its objectives, legislation to implement the agreement is considered without amendments on an expedited timetable by an up-or-down vote.  If the agreement fails to meet Congress’s parameters or fulfill its objectives, it can be taken off the so-called fast-track through a resolution of disapproval.  And, ultimately, members and senators can always vote “no” if they don’t like the deal.  

Is the TPP a Huge Deal or No Big Deal?

As more journalists and commentators discuss the Trans-Pacific Partnership, we’ve seen very conflicting descriptions of the agreement.  For some, the TPP isn’t about trade at all but about giving power to corporations and ending U.S. sovereignty, or about containing China and building U.S. influence in Asia.  When commentators do focus on the potential economic impact of the agreement, they either describe the TPP as a very big deal or as a very small one.  It all depends on your perspective.

My colleague Simon Lester has written about problems in how GDP gains from the TPP have been estimated.  I’d like to take issue with a different figure commonly cited to bolster the idea of the TPP’s hugeness—that the 12 countries involved account for almost 40% of global GDP.  This number is correct but highly misleading as a gauge of the TPP’s economic significance.

For one thing about 22.5% of global GDP comes from the United States.  So, one could claim accurately that the U.S.–Jordan Free Trade Agreement covers almost a quarter of the global economy.  Also, most of the remainder comes from Canada and Mexico, with whom the United States already has a free trade agreement.  In fact, the United States has free trade agreements with all but five countries in the TPP negotiations.

The only large economy country in the TPP that the United States doesn’t already have a free trade agreement with is Japan.  So, if you’re going to measure the “size” of the TPP, it would be best understood as a U.S.–Japan free trade agreement.  That’s a pretty big deal, actually, but it’s not two-fifths of the world.

Free Trade Is Good for Poor People

A piece in the New York Times today suggests that rich people are more likely than poor people to support free trade:

The Trans-Pacific Partnership trade deal making its way through Congress is the latest step in a decades-long trend toward liberalizing trade — a somewhat mysterious development given that many Americans are skeptical of freer trade.

But Americans with higher incomes are not so skeptical. They — along with businesses and interest groups that tend to be affiliated with them — are much more likely to support trade liberalization. Trade is thus one of the best examples of how public policy in the United States is often much more responsive to the preferences of the wealthy than to those of the general public.

Skepticism toward free trade among lower-income Americans is often substantial. Data from a 2013 CBS/New York Times poll show that 58 percent of Americans making less than $30,000 per year preferred to limit imports to protect United States industries and jobs, while only 36 percent preferred the wider selection and lower prices of imported goods available under free trade. But the balance of opinion reversed for those making over $100,000. Among that higher-income group, 53 percent favored free trade versus 44 percent who wanted to limit imports.

Similarly, a Pew Research Center survey released on Wednesday found that a plurality of Americans making under $30,000 per year say that their family’s finances have been hurt by free trade agreements (44 percent) rather than helped (38 percent). By contrast, those making more than $100,000 per year overwhelmingly believe free trade has been beneficial — 52 percent said trade agreements have helped their family’s finances versus only 29 percent who said they have hurt.

I am sometimes skeptical of polls on these issues, mainly due to badly phrased questions.  But regardless, I would be interested to see if the answers were affected by information on who actually pays the most in tariff revenue (as a percentage of their income), which, it turns out, is poor people:

Trade Promotion Authority and the Trans-Pacific Partnership: The Heavy Lifting Lies Ahead

On Friday night of Memorial Day weekend, the U.S. Senate passed the Bipartisan Congressional Trade Priorities and Accountability Act, better known as Trade Promotion Authority (TPA), by a vote of 62-38.  In light of what appeared to be formidable opposition pressing difficult demands that could have seriously prolonged the Senate TPA debate or derailed the Trans-Pacific Partnership (TPP) negotiations altogether, passage of the bill in relatively short order is a credit to the commitment of Majority Leader McConnell, Finance Committee Chairman Orrin Hatch, and Finance Committee Ranking Member Ron Wyden to getting it done.  But proponents of the trade agenda still have a long road ahead.

When Congress reconvenes next week, debate and consideration of a similar TPA bill will be one of the first orders of business in the House of Representatives.  Getting to 218 votes will test the persuasive powers of Ways and Means Chairman Paul Ryan, Speaker John Boehner, and President Obama, who will need to woo Democratic support without losing Republican support in the process. The goal is to pass TPA in a form that is sufficiently similar to the Senate version to avoid the need to reconcile different versions in conference, which would necessitate a second vote in the House. 

Meanwhile, with trade negotiators seeing some progress on TPA, the TPP talks appear to have begun to move into the “end-game” phase.  Although it is uncertain how long this phase of the negotiation might last – because it remains unclear how many issues are outstanding, how much distance there is between the parties, and whether unexpected demands requiring alterations to previously settled parts of the agreement will be made – it is now evident that the soonest Congress could vote to implement the TPP is early 2016, with the distinct and growing possibility that the matter will fall to a lame duck Congress and president or, even, to the next president and the 115th Congress.

Stay tuned for an analysis that fleshes out some of the issues likely to affect the direction and outcome of the trade agenda, including some possible hurdles and other twists and turns in the road.

The Folly of Ex-Im, Export Promotion Agencies, and Export Promotion in General

On May 19, I testified at a hearing titled “Trade Promotion Agencies and U.S. Foreign Policy,” which was held by the House Foreign Affairs Subcommitee on Terrorism, Nonproliferation, and Trade. The subject agencies were the Export-Import Bank (Ex-Im), the Overseas Private Investment Corporation (OPIC), and the U.S. Trade and Development Agency (USTDA). The focus of my remarks, which follow, was on Ex-Im and the myth that exports are the benefits of trade.

Good morning, Chairman Poe, Ranking Member Keating, and members of the subcommittee. I am Dan Ikenson, director of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute. Thank you for the invitation to share my views with you today concerning “Trade Promotion Agencies and U.S. Foreign Policy.” The views I express are my own and should not be construed as representing any official positions of the Cato Institute.

To the extent that today’s hearing will help clarify some of these issues and prompt a serious effort to reform and retire some of the redundant, distortionary, and, frankly, scandal-prone agencies among the panoply of federal offerings, I am pleased to be of assistance.

U.S. trade promotion agencies are in the business of promoting exports, not trade in the more inclusive sense. That is worth noting because despite some of the wrongheaded mercantilist assumptions undergirding U.S. trade policy—that exports are good and imports are bad—the fact is that the real benefits of trade are transmitted through imports, not through exports.

In keeping with the conventional wisdom, in January 2010 President Obama set a national goal of doubling U.S. exports in five years. Prominent in the plan was a larger role for government in promoting exports, including expanded nonmarket lending programs to finance export activity, an increase in the number of the Commerce Department’s foreign outposts to promote U.S. business, and an increase in federal agency-chaperoned marketing trips.