Recently, the strangest thing has happened. Two American Nobel Prize-winning economists (Joseph Stiglitz and Paul Krugman) have called for the United States to stop negotiating new trade agreements. Specifically, they have called for a halt to the Trans-Pacific Partnership (TPP) talks and urged Congress not to give the president a mandate for these and other trade negotiations by enacting new Trade Promotion Authority.
Their primary stated reason for taking an anti-trade agreement position is that expanding trade leads to domestic job loss. Of course, more jobs by far are lost to productivity-enhancing technological breakthroughs. Yet these economists have not called for the removal of ATMs so that more bank tellers can be hired. They have decided, as King Canute must have when he found that he could not command the tide, that it would be foolhardy to resist technological change. Turning the clock back on either technology or trade is neither possible nor desirable. Any attempt to do so will only slow economic growth and limit human potential.
There is another major fault in the anti-trade position: It is founded on a basic misunderstanding of what the TPP and Transatlantic Trade and Investment Partnership (TTIP) talks are about. Yes, some longstanding areas of U.S. protection would be removed, but the U.S. market is already open with few exceptions and the areas that are still protected are not what any economist or policymaker would hold out to be the future of the American economy. U.S. trade negotiations are largely about providing new opportunities for business and workers through better international rules.
The following are a few examples of what up-to-date trade agreements could do:
Freedom for cross-border data flows. The major trade agreements that are in existence today were negotiated before the Internet became essential to global commerce. Being able to employ the Internet is the way small and medium enterprises, as well as large multinational companies, can gain access to global markets. But this technology is threatened with new protectionism – such as requiring servers to be located domestically.
Free trade in environmental goods and services. Likewise, existing trade agreements were negotiated before climate change became a dominant concern for policymakers in all major trading countries. Leaving these items subject to import barriers runs counter to this new policy imperative.
Disciplines on state-owned enterprises. In many countries, government enterprises go beyond the provision of needed public services and engage in business. They should then act in accordance with commercial considerations rather than becoming a means for their government owners to skirt international rules.
Opening markets for services. With the advent of the Internet, it is far more practical to supply services across international boundaries. While there is a code for services trade under the World Trade Organization, it applies to far too little of the spectrum of services that can be internationally traded. Liberalization in this area can create millions of jobs in the United States alone, and a multiple of that globally.
Curbing the unnecessary trade-restricting effects of product standards. Tariffs can slow trade, but product standards can prevent it altogether. Where the objectives are the same – e.g., safety of automobiles – there should be a mutual interest in adopting standards that are compatible rather than conflicting.
Honoring intellectual property rights. Innovation requires that benefits accrue to those who engage in intensive R&D efforts and bring new products to the marketplace. Trade secrets, as well as patents and copyrights, should be protected. Economic growth and global welfare require it.
Each of these initiatives, and the other subjects addressed by TPP and TTIP will create new opportunities for business and for employment. U.S. objectives in these negotiations are far from secret, and they deserve support. Far from calling a halt to current trade talks, the progress should be accelerated and the results should be given the means to achieve formal congressional input and approval.
Wolff serves as chairman of the National Foreign Trade Council and practices law at the firm of McKenna, Long and Aldridge. He was a senior trade official in the Carter and Ford administrations.