YES: New trade pacts will create jobs. The United States is losing out to other countries.
By Thomas J. Donohue
It’s rare in the nation’s capital that a policy idea wins support from both sides of the aisle.
But in April, a development won bipartisan applause from leading Republicans and Democrats in both the House and Senate.
The occasion? The White House has clinched an agreement with Colombia on reforms that will open the door for congressional approval of the long-pending U.S.-Colombia trade agreement.
This means that all three pending trade agreements — including the equally vital agreements with South Korea and Panama — should be approved by Congress in the weeks ahead.
The case for approval of the U.S.-Colombia trade agreement begins with American jobs. This accord represents a budget-neutral, job-creating stimulus for American workers and farmers — and businesses both large and small — all across the nation.
This is a new kind of trade agreement that guarantees fairness and accountability. U.S. tariffs on Colombian manufactured goods averaged just 0.1 percent last year, but Colombian tariffs on U.S. manufactured goods average 15 percent — and even higher for U.S. agricultural products. A similar lopsidedness holds back our trade with South Korea and Panama as well.
Upon implementation, the agreement with Colombia will immediately eliminate most of those tariffs, removing nearly all of them within three years.
At a time when millions of Americans are out of work, it will create real business opportunities and a level playing field for American exporters.
The agreement will also open Colombia’s dynamic service markets and protect the intellectual property of American innovators and creative artists.
For America’s small and medium-size businesses, these trade agreements are critical. Nearly 30,000 U.S. small and mid-size companies export to Colombia, South Korea and Panama, and they account for one-third of U.S. exports to these countries.
Approval of the pending trade agreements will permit these firms to boost their sales and allow many more companies to tap these growing markets.
As President Barack Obama has said, “If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores.”
Indeed, other nations are racing to implement their own trade deals with Colombia, South Korea and Panama, threatening to put American workers at a competitive disadvantage.
In particular, the Canada-Colombia Free Trade Agreement and the European Union-Korea Free Trade Agreement will enter into force by July 1.
Largely as a result of Colombia’s earlier trade accord with Mercosur — South America’s common market pact — U.S. farmers have already seen their share of Colombia’s agriculture market fall to about one-quarter today from about three-quarters just two years ago.
While approval of the trade agreements can turn this around, the cost of further delay is set to escalate.
A U.S. Chamber of Commerce study has warned that the United States will lose more than 380,000 jobs and $40 billion in export sales if the pending agreements suffer further delays.
President Obama’s agreement with Colombia proves the United States can still lead on trade.
To create American jobs and level the playing field for trade, the moment has arrived for approval of the three pending trade accords and renewal of the Trade Adjustment Assistance program for displaced workers. There’s no time to waste.
Thomas J. Donohue is president and CEO of the U.S. Chamber of Commerce.
NO: Trade deals balloon the trade deficit and never benefit the United States as promised.
By Alan Tonelson
Federal budget clashes represent one major front in the struggle to spur a sustainable American economic recovery — but only one. Also vital is getting U.S. trade policy right.
That’s why President Barack Obama must scrap his business-as-usual approach to this often overlooked issue, and push to strengthen pending trade deals with Colombia, Korea and Panama negotiated by his predecessor.
Indeed, trade policy can be an especially important U.S. recovery option. Unlike most alternatives, it can spur private sector growth and employment without worsening budget deficits or consumer indebtedness. But accomplishing these goals requires policies that improve the U.S. trade balance, which has been massively in deficit for decades.
Unfortunately, the Obama-Bush trade agenda is bound to worsen America’s trade balance, thus reducing growth and hiring on balance, and adding to still-dangerous levels of national debt.
For the new agreements repeat in toto the blunders that have turned U.S. trade policy into an engine of deficit and debt creation, and therefore of output and job loss.
The Korea agreement continues America’s longstanding tradition of expanding commerce with economies structurally different enough to preclude mutually beneficial trade. Worse, like many predecessors, this deal proposes to eliminate troublesome foreign practices with expertly written clauses in treaty texts.
What Washington keeps ignoring is that economies like Korea’s — and the German and Japanese systems that have frustrated Americans for decades — are best seen as national systems of protection. Their fundamental purpose is maximizing national wealth by protecting home markets and by helping their companies penetrate foreign markets with all manner of subsidies.
Their economies are based on informal relationships between national commercial interests and powerful, largely unaccountable bureaucrats. Policies are formulated and administered largely behind closed doors. And rules are published and enforced selectively at best, to keep outsiders flummoxed.
The Colombia and Panama deals typify Washington’s other big trade policy mistake. Since the NAFTA negotiations of the early 1990s, America repeatedly has sought economic integration with countries too small, or too poor, or too indebted, or some combination of these characteristics, to possibly become big net importers.
At the same time, these countries have often become major exporters to America thanks to super-cheap but highly trainable workers, lax regulatory regimes, and governments willing to pay to attract business.
Through production and jobs outsourcing by U.S. and other multinational companies, Mexico, China and others like them have made impressive economic progress. Yet because domestic incomes have remained so meager, their production and exporting power and export orientation will long dwarf their consumption and importing power.
Agreements with these developing economies have enabled America’s Big Corporate sector to reduce its global cost base and boost profits — by guaranteeing access to the lucrative U.S. market from low-cost export platforms.
For two decades, the fake prosperity created by Internet, stock market, credit and housing bubbles masked the economic costs of deficit-boosting trade strategies. But the bubbles’ bursting has exposed agreements like the Colombia, Korea and Panama deals as unaffordable, and turned a fundamentally new approach to trade into a national imperative.
Alan Tonelson is a research fellow with the U.S. Business and Industry Council and the author of “The Race to the Bottom.”
