Commentary

Our Protectionist Protection

By Aaron Lukas
This article originally appeared in the Orange County Register on March 21, 2004.

George W. Bush’s record on trade isn’t perfect, but it is a known quantity. A second term would bring continued, if erratic, progress toward new global, regional and bilateral free trade agreements (FTAs). Less clear is what a John Kerry presidency would mean for America’s economic relations with the world.

As often seems to be the case, John Kerry’s rhetoric and record don’t match. In the Senate, he understood the importance of trade. He bucked the prevailing trends in his party to approve the North American Free Trade Agreement (NAFTA), to give China normal trade relations status and to support presidential trade promotion authority. Yet during the primaries, Kerry abandoned the pro-trade New Democrat center in favor of the isolationist fringe. He disavowed his vote for NAFTA and promised to elevate labor and environmental standards, not open markets, to the top of the U.S. agenda. He proudly declared that there was no difference on trade between himself and his chief primary rival, protectionist Sen. John Edwards.

It’s possible that John Kerry may flip-flop yet again on trade. Yet even assuming fidelity to his current word, there are limits to how radically a President Kerry — or any president — could alter the course of U.S. policy.

Contrary to popular perception, the final say over trade matters doesn’t come from the White House. The Constitution vests Congress with the power “To regulate commerce with foreign nations.” This includes the authority to raise or lower tariffs.

For 140 years, culminating in the disastrous experience of the Smoot-Hawley Act of 1930, Congress exercised its power to directly manage trade policy. Members routinely traded votes for higher tariffs on products of interest to their particular constituencies. A representative in Florida, for example, might vote for tariffs on wheat in exchange for tariffs on oranges.

This behavior reached its peak with Smoot-Hawley, where Congress set tariffs for over 20,000 items at the highest levels in U.S. history. That massive increase in protectionism helped turn a cyclical recession into the Great Depression, spelling financial ruin for millions. Congress had proved incapable of resisting parochial appeals in favor of the national economic interest.

In 1934, as part of the New Deal experiment to reverse the Depression, leaders on Capitol Hill decided it was time to try something new. They passed the Reciprocal Trade Agreements Act that delegated authority to the executive branch to negotiate agreements with foreign nations to cut tariffs on a reciprocal basis. Congress did not need to approve every cut in U.S. tariffs; rather, it granted the president freedom to act, up to pre-established limits, as long as our trading partners did likewise.

In essence, Congress was telling the president, “Stop us before we tax trade again!” The idea worked. From 1934 through the creation of the World Trade Organization in 1995, tariffs in the U.S. fell precipitously and trade steadily grew.

The 1934 act was the precursor to the “fast track” legislation — now called Trade Promotion Authority, or TPA — that has been hotly debated in recent years. TPA gives the president authority to negotiate trade agreements as a package subject only to an up-or-down vote by Congress. The Bush administration fought a successful battle for this authority in 2002 and has put it to use by securing approval for FTAs with Chile and Singapore. Soon, it will submit agreements with Australia and Central America for a vote.

But if TPA represents a delegation of much of Congress’s power over trade, the system is designed to work only in the direction of opening markets. The president cannot raise tariffs on his own authority. Nor can he unilaterally withdraw the United States from NAFTA or the World Trade Organization — or even “revisit” the text of an existing agreement, as Kerry has promised to do.

The president’s primary impact is on future trade pacts. A protectionist president wouldn’t launch any new negotiations and could allow ongoing talks to flounder. Even here, however, presidents have found it difficult to break fully from their predecessors’ initiatives. If Bush were to leave office without submitting the just-completed U.S.-Australia trade agreement for congressional approval, for example, Kerry would face enormous pressure from Congress and the business community to move forward on it.

Although a wholesale closure of U.S. markets is unthinkable, the election of an anti-trade president would still be dangerous. As Federal Reserve Chairman Alan Greenspan recently warned, the greatest threat to the American economy and its burgeoning recovery is the specter of creeping protectionism. America’s trading partners — many of which retain high tariffs and quotas — will be loathe to drop their barriers if they perceive a lapse in our commitment to open markets. And free trade remains a critical weapon in the war against terrorists, helping to drain the swamps of poverty where extremists hide and recruit.

Congress delegated the task of lowering trade barriers to the executive branch because it expected the White House to promote the nation’s best interests. Democratic presidents such as Franklin Roosevelt, John Kennedy and Bill Clinton proved them right by embracing a platform of global economic engagement. It’s a mistake for John Kerry to abandon that legacy. Voters deserve to know that regardless of the outcome of this election, the president will advance America’s long-term economic health and its global leadership by supporting free trade.

Aaron Lukas is an analyst with the Cato Institute’s Center for Trade Policy Studies.