Although the status of Trade Promotion Authority aka "fast track" is far from certain today, I figured it would be useful to nail down some thoughts on this whole issue:
- First of all, there is no good reason to consider such a broad, far reaching piece of legislation such as the TPP under fast track authority. If this legislation is so good for the country, as the White House claims, then there should be no problem considering it under regular order in Congress. If this is such a good agreement, then there is no reason to fear open, honest debate in our (nominally) democratic bodies. If this was a simpler, bilateral trade agreement then it may be justifiable to get it done quickly and efficiently with fast track authority. But the TPP is no such deal.
- Despite how the mainstream media has portrayed TPP, it is NOT a free trade agreement. Most of the people standing against TPP are supporters of increased trade. Most tariffs with countries in the TPP are already very low; with the largest country Japan being less than 2%. Most of the provisions in TPP actually restrict trade by increasing patent/trademark enforcement in other countries. This is the main reason why the entertainment, pharma, and agriculture industries have been pushing so hard for the deal.
- There has been absolutely no grassroots movement that developed or pushed for the TPP. The desire for this legislation has come exclusively from corporate America and its allies in Washington, which included both staff in the WH and Office of the Trade Representative, and countless lobbies/trade associations around town. In fact, all the grassroots efforts related to TPP have been solidly against it. There is no natural constituency for this deal.
- The argument that "we have to write the rules, otherwise China will" is incredibly un-American and insulting. The United States should never be leveraged, threatened, or beholden to make certain policy decisions due to hypothetical action from another sovereign nation. This is an incredibly undemocratic and un-American line of argument. This is also the argument that Republicans were using to promote the Keystone XL pipeline: "hey, if we don't get the tar sands oil, China will," as if the Chinese were going to build a pipeline across all the way across the Rocky Mountains to the Pacific.
- The idea that US government needs to "open up" foreign markets for US industries to export to is ridiculous. If other countries want to lower standards of living of their own citizens/consumers by preventing them from buying US made products, that is to our advantage. Many of the developing countries in the TPP seem to be intent on making their citizens the worlds slaves, and then continually weakening what little purchasing power they do get from their jobs. We get to keep more of our own production, great! We never "need" foreigners to buy our stuff-we can always distribute spending power among our own citizenry so they can simultaneously consume everything they are producing. Exports are a real loss, imports are a real benefit. And given that the dollar is very strong right now, there is no need to worry about balance of payments.
- The White House's last minute addition of "environmental and labor protections" as a palliative to the left is insulting. Not only were these provisions added near the end of the agreement as a pathetic way of "polishing the turd", but its insulting that the WH would think that their own base would fall for such weak, unenforceable provisions. To the extent that US citizens should care about labor/environmental standards in other countries, we can address such issues in other ways, that dont involve significant concessions.
- The White House has demonstrated shocking arrogance and miscalculation in their attempt to sell the deal to their own party. Its as if they simply expected all the Democrats to take orders from President Obama. They were taken off guard by the unified front presented by Sens Warren and Brown, Public Citizen, and most of the labor unions, which shows how out of touch they are with their own base. Then, when this opposition became evident, Obama reacted in a nasty, personal way which we have never seen. He has never been this passionate for issues that the party base actually wants.
- The worst possible outcome is for the TPP to pass on a bipartisan basis. This completely removes the ability of any Democratic 2016 candidates to distance themselves from what is already a widely-hated proposal. Any Democrat foolish enough to vote for TPP (forget the policy, just for political reasons) deserves to be pilloried and primaried. Nonetheless, this is a fight the Democratic party needs to have. The inherent conflict between the progressive base of the party and neoliberal corporatists at the top is a long time comin', and has finally boiled to the surface. Hopefully this will lead to a resurgence of the party's roots and reveal the decaying neoliberals for the frauds and traitors they always were.
Excellent.
ReplyDeleteAt the end of the day, Democrats will cave. They care more about the personal political successes and failures of Barack Obama than they do about the country.
ReplyDeleteBy Fall 2016, the mainstream center -left pundits will be including TPP on their campaign laundry list of Great Obama/Democratic Triumphs.
On the "free trade" issue, remember that even trade deals that work in the classic textbook Ricardian way to boost aggregate economic product aren't necessarily good for the country. In a highly unequal country, it is entirely possible for a sizable majority of people to be harmed by a deal that is nevertheless beneficial to the country "in the aggregate". I GDP goes up by $100 billion because the share of GDP of the top 10% increases by $200 billion and the share of the bottom 90% decreases by $100 billion, is that a good deal or a bad deal for us?
ReplyDeleteThe neoliberals recognize that some people are hurt by these deals, but they always wave their hands and say we'll fix the bad stuff later with palliative measures. But we're still waiting for them to fix the Rust Belt, aren't we?
99.9% agree with Just Gatekeeper, with a few quibbles:
ReplyDelete"Exports are a real loss, imports are a real benefit."
Exports of knowledge products are not a real loss. Imports of knowledge products are not a real benefit (to the country as a whole) unless the economy is running at full capacity, which has never happened in my lifetime.
Selling a Mosler car to someone in Timbuktu is no more of a loss to the seller than selling the same Mosler car to someone in Kansas. Either way, the seller exchanges real work for tokens.
Most of the work that goes into making a Mosler car is knowledge-type work. The more knowledge work you do, the more knowledge you gain, so you don't lose knowledge when you sell knowledge products.
The unstated assumption behind MMT's trade theory seems to be that it is the government that is exporting and importing, rather than private parties?
" this is a fight the Democratic party needs to have." Keep hoping, but remember The Iron Law of Institutions.
Exports are not a "real loss" in net terms. If they were, then companies wouldn't export. From the standpoint of a business, it doesn't matter whether on'e customers are in country A or country B.
ReplyDelete@Dan Kervick, glad I'm not the only one who can see that.
ReplyDeleteIt might be different if the government, rather than private parties, were exporting/importing real stuff in exchange for tokens.
All economists agree that experts are a real cost in aggregate, and imports are a real benefit in aggregate. It's kind of like statistical odds, that apply to the population not individuals especially when the tails are fat.
ReplyDeleteIt would be true if the aggregate costs/benefits were evenly distributed but they are not.
What's good for a country (in aggregate) is not necessarily good for the people of the country (distributively). Otherwise there are winners and losers and the distribution may be large and uneven.
But even though all economists agree that experts are a real cost in aggregate, and imports are a real benefit in aggregate, many economists still argue for export-led growth (and domestic wage suppression).
The sense in which exports are a real cost for a country is no different than the way in which selling goods is a real cost for a business. Yes, when you sell those goods, your resulting inventory is smaller and so your real assets have been diminished. But of course you received some money in exchange for those goods, and so your money assets are increased. And you can then use those money assets to buy more capital equipment or inputs for further production, and then your real assets increase again.
ReplyDeleteNobody thinks that because sales temporarily reduce a firm's real assets, that means that there is anything fishy or uneconomic about companies selling stuff. You have to sell stuff to make money and you have to make money to buy stuff.
The same obvious logic applies when the unit of analysis is all of the firms and households in a country rather than a single firm. The occasional isolationist meme that seems to suggest that exporting is dubious because it reduces a country's real assets is goofy.
Real cost of exports means that a country's workers are working for other country's people and a country's real resources are being used elsewhere than the country. Real benefit of imports, vice versa.
ReplyDeleteThe net exporter receives a financial benefit and a met importer incurs financial costs.
A fundamental principle of MMT is that economics is about use of real resources and that financial matters are in service of that and subordinate to it.
Conventional economists focus on financial benefits and costs and ignore real benefits and costs.
How those benefits and costs are distributed is another matter. The conventional assumption is that distribution is according to the natural operation of market forces whereas the heterodox view is that the chief determinant is market power that enables the extraction of economic rents and skews distribution toward those holding power.
There trade agreements are not about trade as exchange of goods but rather about exercise of market power through imposition of institutions that disable national sovereignty.
Real cost of exports means that a country's workers are working for other country's people and a country's real resources are being used elsewhere than the country. Real benefit of imports, vice versa.
ReplyDeleteThat's silly. The country's workers work to produce goods, and in return they get some of the MONEY that comes from selling those goods. They aren't "working for" the consumers of those other countries. Similarly, people don't get imports for free because people in other countries are working for them. To get those imports they have to buy them with MONEY.
Either way, it's a pretty even swap. If a country is exporting more goods than it is importing, then it is also importing more money than it is exporting.
Conventional economics doesn't ignore the real costs and benefits. There was a school of economic thought that held that the accumulation of foreign exchange was all-important. It was called mercantilism, but most economists don't support it.