CEI Adjunct Fellow Fran Smith, coauthor of the new CEI study “Free Trade without Apology,” talks about the recently passed free trade agreements with Colombia, Panama, and South Korea. The agreements will lower tariffs and other trade barriers between the U.S. and the other countries, and are expected to reap billions of dollars of economic benefits. The agreements also contain a number of trade-unrelated provisions, such as labor and environmental standards. These erode our trading partners’ sovereign lawmaking power, and are best avoided in future agreements.
Trade
President Obama is finally sending three pending trade agreements — with South Korea, Colombia, and Panama — to Congress for a vote. The three trade deals were ready for this moment before Obama entered the White House. So what’s taken so long?
Quite simply, as Michael Barone notes in his Washington Examiner column today, the president wanted to avoid angering his political allies in organized labor.
[Obama] could have sent [the treaties] 985 days earlier; negotiations were completed in 2006 and 2007. Or, if he were concerned they’d be deep-sixed when his fellow Democrats controlled Congress, he could have sent them 274 days earlier when Republicans took over the House.
To be sure, they are opposed by many labor union leaders and congressional Democrats. There is a nostalgia among many union and party old-timers for the days, more than 30 years distant, when the auto and steel workers’ unions had nearly 2 million members.
Now each has less than half a million. But the old-timers seem to feel that somehow something like those olden days can be brought back if they oppose FTAs.
Indeed. In the new CEI OnPoint, “Free Trade without Apology,” CEI Adjunct Fellow Fran Smith and former CEI Research Associate Nick DeLong document how efforts at appeasing organized labor — in the hopes of blunting union opposition to trade deals — have been not only ineffective, but harmful.
Union leaders have taken all concessions they’ve been offered only to ask for more. This has led to trade agreements becoming weighted down with provisions governing labor and environmental issues (to appease environmentalists) which have nothing to do with trade. And those provisions have only gotten longer and more onerous in each subsequent agreement.
Organized labor’s success in getting labor issues included in trade negotiations is a relatively recent phenomenon. The 1985 U.S.-Israel free trade agreement was the last American trade deal that did not include labor and environmental provisions. Since that time, the U.S. has entered into 10 free trade agreements covering 17 countries.
Eight years after the Israel agreement, the Clinton administration, as part of a deal to ratify the North American Free Trade Agreement (NAFTA), pushed Mexico and Canada to sign the North American Agreement on Labor Cooperation (NAALC) and North American Agreement on Environmental Cooperation (NAAEC) as side letters to the trade pact. That was the first time that labor and environmental objectives were directly linked to international trade negotiations. From that point onward, interest groups of various stripes have lobbied hard to include a host of irrelevant political agendas in trade negotiations. Organized labor and environmental groups have been especially active in this effort.
The NAFTA labor provisions were still not enough to satisfy Big Labor. Four years after the labor cooperation agreement was passed, the AFL-CIO stated in a public comment that the agreement had been “ineffective in promoting the concerns of workers beset by stagnant wages and job insecurity.” Rather than appease, the NAFTA labor provisions only whetted the union leaders’ appetites. To this day, unions continue to pressure Congress for more stringent labor obligations in current and future agreements.
It’s time to end this game, which only advantages protectionist lobbies.
Congress is likely to take up stalled free trade agreements with Colombia, Panama, and South Korea when it returns from its August recess. Adjunct Fellow Fran Smith talks about the good and bad parts of the agreements. Billions of dollars of economic benefits are offset by trade-unrelated provisions, such as labor and environmental standards. These erode our trading partners’ lawmaking sovereignty. An increase in trade adjustment assistance also seems likely. This gives money and training to workers who lose their jobs because of international trade.
Trade is going to be a hot issue this summer. Pending agreements with Panama, Colombia, and South Korea might finally pass. Opponents of liberalization are already on the attack.
My colleague Jacque Otto already covered the creative destruction defense of trade today. Over at the Daily Caller, I look at employment data and find out that the labor force has grown by 23 million people since NAFTA passed. Doesn’t sound like a job-killer, does it?
Just as trade doesn’t kill jobs on net, neither does it create them on net. The real advantage of trade is that it allows people to specialize and become more productive. That is how economic growth happens:
When governments lower trade barriers, they allow more people to exchange and to work together. In economics jargon, the size of the relevant market gets bigger. And the bigger the relevant market, the more people can specialize.
Readers familiar with Adam Smith will recognize this as his division of labor. Everyone knows that specialized workers are more productive than jacks of all trades. That’s why Henry Ford’s assembly lines were so much more productive than his competitors’. The same number of people could suddenly produce more cars in less time, because they had a more specialized division of labor.
Workers didn’t have to waste time switching from one task to another. They got very good at their tasks. And because they knew their jobs so well, they were better able to come up with new, better ways of doing them. Rising productivity is how an economy grows. Prosperity doesn’t depend on the number of jobs. It depends on how much stuff workers can create.
CEI Senior Fellow Greg Conko discusses his recent trip to Kenya where he met with members of Parliament and other officials about the best way to regulate the introduction of genetically modified crops to the country.
This is a current CNBC ad — gasp — produced from a 1979 interview of Milton Friedman by Phil Donohue. Can hardly get a better defense of free markets.
H/T Cato, David Boaz
What’s one of the easiest things to do in the lame duck session? Why, nothing — in relation to the 45-cents a gallon tax credit for ethanol and the 54-cents a gallon tariff on imported ethanol. Both are due to expire at year-end. It seems, though, that Congress is working its way to doing something, reauthorizing these programs that cost taxpayers $25-$30 billion over five years and hit consumers with higher prices at the gas tanks.
Right now there’s talk that the ethanol industry “would accept” a slightly lower subsidy. And the protectionism tariff on imported ethanol looks like it’s sacrosanct, even though President Obama has been preaching the benefits of trade in the wake of the finally agreed upon Korea-U.S. Free Trade Agreement.
Support for continuing the ethanol subsidy and tariff seems to be the “business as usual” state of affairs just a month after game-changing elections that will bring some avowed government cost-cutters to Congress in the next session. Even saving that $25-$30 billion in new deficit spending over five years doesn’t seem to affect this Congress. Right now, it still looks like special interests may trump the public interest, unless the lame ducks grow some backbone.
Russia will be banning frozen chicken imports beginning January 1. The reason for the proposed ban? The head of the Russian agency in charge of Consumer Rights Protection and Human Welfare was quoted as saying, “It is an outdated and rough technology, which leads to a loss of many of the useful qualities of meat.”
Some domestic poultry producers in Russia are opposed to the ban, which would allow only chilled chicken to be sold in Russia. Of course, there are some, such as poultry producer and high-level Russian politician, Sergei Lisovsky, who supports the ban but wants it to go even further — to ban all imported chicken. In an interview reported by The Washington Post, Lisovsky said that the only reason imported chicken was allowed was to help Russia get admitted into the World Trade Organization. But then he was quoted as offering this seemingly contradictory argument: “Since we are not a member of WTO, why should we fulfill all these requirements?” he asked. “The quicker we stop fulfilling the WTO requirements, the quicker we’ll be allowed in.” Huh?
?? ????????????? ?? ???, ?????? “Don’t count on it, Sergei.”
In its Sunday editorial, The Washington Post takes an upbeat post-election look at the prospects for stalled trade agreements, especially the pending U.S.-Korea Free Trade Agreement. With the Republicans running the House, the article notes that some key House committee positions — chairman of Ways and Means and chairman of its trade subcommittee — will likely be held by legislators who call themselves free-traders. There is a note of caution, however, about the role of the new Tea Party members, who may not be as supportive of international trade. But, the Post notes, former U.S. Trade Representative under President Bush, Rob Portman, handily won the Senate seat in Ohio, which may mean there’s less opposition to trade than commonly thought.
In Seoul, South Korea, today top U.S. and Korean trade negotiators are trying to resolve some differences relating to autos and beef so the negotiations will be complete before President Obama and South Korean President Lee Myung-bak meet Thursday at a summit before the G-20 meeting. The trade pact would be the largest economic agreement since NAFTA and would substantially reduce both tariff and non-tariff barriers on both sides. Other countries have moved ahead in signing trade agreements with South Korea, most notably the European Union, and the U.S. would be at a considerable advantage if it backs away from its own Korea agreement.
The Washington Post editorial also points out not only the economic but the important geopolitical ties that a U.S.-Korea FTA and other pending FTAs would further:
At stake is not only economic growth, but also the strategic balance in Asia. As China rises, this agreement would help keep the peace by binding two long-time democratic allies closer. Similar arguments apply to stalled agreements with two U.S. allies in Latin America, Colombia and Panama. The finalization and swift congressional approval of all three pacts should be among Mr. Obama’s highest priorities for 2011.
Hear, hear.
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