TCS Daily

Freedom`s Blessing: Pass Trade Promotion Authority

By James K. Glassman - December 4, 2001 12:00 AM

Every president since Gerald Ford has had the legal authority to negotiate trade agreements and then submit them to Congress for a simple up-or-down vote. Every president, that is, until President Clinton lost that essential power in 1994. The authority, which used to be called "fast track," has been re-christened "Trade Promotion Authority," or TPA - a more accurate and less threatening phrase. And thankfully, President Bush is now trying to win it back again in a vote scheduled at the Capitol for Dec. 6.

Traditionally, many members of the House oppose open trade in order to defend special local business interests seeking protection against competition, or after bowing to pressure from environmental groups. But TPA is critical to any serious trade negotiation, and it works. It enabled the United States over two decades to lower foreign barriers to U.S. goods - thus boosting manufacturing output to record levels - and to allow U.S. consumers to benefit from low-cost, high-quality foreign products, keeping inflation and interest rates low.

So it was tragic that fast-track authority lapsed. This is where -- even in the judgment of many of his supporters -- the Clinton presidency failed, since Clinton was unable, after several tries, to reinstate it. The Los Angeles Times said recently in an editorial, "President Clinton`s effort to renew [fast track] was at best half-hearted - a cavalier approach cheered by labor unions and environmental groups." Opposition by these interests has been intense but misguided. Unions fear competition from abroad while environmental groups see prosperity as a threat to clean air and water.

So now it`s up to the president to stand up and make the case since trade is an unmitigated boon, both to the U.S. and to the world economy.

Trade Barriers Hurt Americans

After fast track was rejected, no significant market-opening agreements were enacted by the U.S. Meanwhile, nations in Europe, Asia and Latin America have completed 130 preferential trade compacts. The European Union, for example, has established free-trade agreements with 27 countries in Latin America.

Consider Chile as an example of what American manufacturers and farmers now face as a result. Chile slaps $14,960 in tariffs and duties on a $187,000 U.S.-made Caterpillar 140 H Motor Grader tractor. But the same tractor -- made in Brazil and shipped to Chile -- faces just $3,740 in tariffs and duties. And the same tractor -- made in Canada and shipped to Chile -- faces zero tariffs and duties.

A roll of Kodak Max 400 film made in America and shipped to Chile is hit with a 17 percent tariff. But the same film, manufactured in Brazil, faces no tariff at all.

Given these circumstances, where will companies such Caterpillar and Kodak elect to make their tractors and film?

U.S. agriculture suffers because of restricted trade, too. Burger King in Chile buys its potatoes for French fries from Canadian farmers rather than U.S. farmers because the potatoes aren`t subject to tariff, the way American potatoes are.

Past agreements -- such as the North American Free Trade Agreement -- which has boosted U.S. exports to Mexico by 56 percent -- have helped the economy maintain its momentum. But now, with recession approaching around the world, fast track is needed more than ever.

Just the Facts, Ma`am

The vote in Congress will be tight - mainly because the case against trade is easy to demagogue and because the benefits of trade are spread so widely that many Americans don`t recognize them.

But consider these facts:

  • One in 10 U.S. jobs depend on the export of goods and services.
  • Farmers exported $51 billion in products last year, supporting 750,000 jobs.
  • Two-thirds of all America`s exporters are small businesses, with 20 employees or fewer.
  • Trade helps developing countries. A World Bank study found that such nations that trade globally enjoyed income increases of 5 percent annually while those that did not suffered decreases of 1 percent.

In addition, the best way to improve the environment worldwide is by increasing wealth, and the best way to do that is through free trade. The Heritage Foundation recently found that countries in the top quintile ranked by trade openness had the highest scores on an "environmental sustainability index," averaging 62.4, while countries in the bottom quintile for trade had the lowest scores on the environment, averaging just 34.9.

Economic Benefits and Human Rights

No one affirmed the principle of free trade better than Adam Smith, more than 200 years ago: "It is the maxim of every prudent master of a family never to make at home what it will cost him more to make than to buy." For that reason, most of us do not grow our own wheat, mill our own flour and bake our own bread. We buy it down the street. And, sometimes, it makes even more sense to buy things from across the oceans. As Adam Smith put it: "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them."

This arrangement is particularly good for the United States, as Melvin Krauss of the Hoover Institution has written. Free trade, he said, "creates income for the community by reallocating jobs and capital from lower productivity to higher productivity sectors of the economy." The U.S. is a high productivity nation.

But free trade is not merely an economic benefit. It is also a natural human right. The right to exchange the products of our hands and minds, with whomever we wish, must not be abridged by government. "Free trade," wrote Pierre Lemieux, a Canadian economist, "is but the individual`s liberty to exchange across political borders."

As Americans fight to preserve their liberty at home and to extend liberty in nations such as Afghanistan, it is important to remember the liberty to trade. The best way to put the principle into action is by giving this president what the five previous presidents (three Republicans, two Democrats) have had: the authority to negotiate serious market-opening agreements. Pass TPA.

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