Memo to Congress: Don’t give Obama fast track authority for Pacific Trade Pact

Congress should deny President Obama authority to negotiate yet another jobs killing trade pact in the Pacific.

Free trade agreements eliminate tariffs and rein in many administrative barriers to commerce—such as inconsistencies in bank regulations and intellectual property laws—and should boost U.S. exports and give consumers a wider range of less expensive imports.

These deals should make Americans more prosperous by moving workers from low wage jobs, such as assembling smart phones, to higher paying employment, designing new devices and solving tough software problems. However, what works on a professor’s blackboard does not always prove out in practice.

Presidents Reagan and Clinton were forceful advocates of U.S. worker interests in international trade and from 1980 to 2000, the economy accomplished 3.4 percent growth and family incomes rose $9,900.

The president implemented a free trade agreement with South Korea in March 2012 promising broad new opportunities for American workers. Since then, bilateral imports are up much more than exports, and 100,000 jobs have been directly lost.

When imports exceed exports, economists expect the dollar to fall against foreign currencies. That would raise prices for imports in U.S. stores and lower prices for U.S. products sold abroad to rebalance trade and create good-paying jobs. However, principal U.S. competitors—China, Japan and Germany—all pursue monetary policies explicitly intended to keep their currencies cheap against the dollar and boost sales in U.S. markets to avoid economic reforms that would better solve their internal economic problems.

Many Asian nations target specific industries—such as autos and information technology—and compel U.S. firms to establish factories and research facilities in their economies. Subsidized facilities ultimately export into the U.S. markets and create even more unemployment here.

Overall, U.S. imports exceed exports by more than $500 billion annually—killing about 4 million jobs.

Currency manipulation is illegal under World Trade Organization rules but both Presidents George W. Bush and Barack Obama have ignored pleas from industry to bring complaints in the WTO.

Similarly, trade enforcement laws permit the Commerce Department and U.S. International Trade Commission to impose tariffs on subsidized imports that destroy jobs, but those have been weakened in recent years. Many Asian exporters evade those laws by shipping products through intermediate countries and altering customs classifications.

Republicans and Democrats in Congress have proposed fixes to trade enforcement laws that the White House should support as part of legislation implementing any new trade deal.

Modern trade agreements reach deeply into the treatment of foreign goods and services by altering domestic regulations for product standards, the environment and the like. Foreign leaders won’t negotiate on those issues if Congress can alter U.S. commitments during the ratification process. Hence, Congress has granted presidents since Gerald Ford Trade Promotion Authority, which binds the House and Senate to put trade deals to a simple up or down vote.

Obama wants TPA to negotiate a Trans-Pacific Partnership, which would liberalize trade with 11 Pacific nations. However, the bill recently hammered out between Republicans led by Senate Finance Committee Chairman Hatch and some Democrats does not establish disciplines on currency manipulation or strengthen U.S. trade enforcement laws.

Presidents Reagan and Clinton were forceful advocates of U.S. worker interests in international trade and from 1980 to 2000, the economy accomplished 3.4 percent growth and family incomes rose $9,900.

The same cannot be said about both the recent Bush and Obama Administrations and since 2000, U.S. GDP growth has averaged a mere 1.8 percent and average family incomes are down about $4,600.

A Trans-Pacific Partnership offers great economic potential and would importantly reinforce U.S. security ties with Asian nations, but it only makes sense with enforceable disciplines on currency manipulation and unfairly subsidized foreign goods.

Congress should require the president to agree to those in exchange for approving Trade Promotion Authority to finalize the Trans-Pacific Partnership trade pact.

Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.