Why has free trade, key to this state's economy, gone all wobbly?

Congressional Democrats, including from this state, have stalled out trade talks. President Obama has gone silent on the key issues of trade liberalization. You'd think business leadership would be ringing alarm bells.
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The Port of Seattle's Sea-Tac Airport. (Chuck Taylor)

Congressional Democrats, including from this state, have stalled out trade talks. President Obama has gone silent on the key issues of trade liberalization. You'd think business leadership would be ringing alarm bells.

As is often said, all politics are local. Certainly Members of Congress think so. Farm state members fight to save subsidies, rust belt members battle for auto bailouts, and everyone lines up for local earmarks. One of the biggest questions facing our Democrat dominated Northwest delegation is how hard will they fight to make progress on the biggest issue affecting Washington state'ꀙs economy — an issue that is completely stalled and may not have the support of the new President? Will our Democrats fight for free trade? Will our business leaders push them to do so?

Labor, Pat Buchanan, and Lou Dobbs have succeeded in making trade a deeply controversial subject, especially in the Democratic Party. Gone are the days when Democrat Bill Clinton was willing to wage political war to pass the North American Free Trade Agreement (NAFTA) and many Democrats were willing to follow. Today, President Obama and Secretary of State-designee Hillary Clinton are fresh off a campaign in which both promised to renegotiate NAFTA and to oppose free trade agreements.

Last year, Democrats in Congress succeeded in halting the last vestiges of progress towards lowering barriers to trade. Negotiations on multilateral agreements, such as the Free Trade Area of the Americas, and the Doha round of World Trade Organization (WTO) tariff negotiations, are completely stalled. The Bush administration had responded by using its 'ꀜfast track'ꀝ authority under the Trade Promotion Authority Act (TPA) to send Congress a series of bilateral agreements which Congress could not amend and had to act on within prescribed deadlines. Free Trade Agreements (FTAs) with Peru, Oman, Morocco, Australia, Chile, and Singapore all made it through Congress in this manner. In early 2008, Bush sent Congress FTAs with Colombia, Panama, and South Korea — the last agreements he had negotiated under his TPA authority, which Congress had allowed to lapse in 2007. This time the Democratic leadership found a way out by voting to suspend the provisions of TPA, allowing the majority party to avoid votes on the three Bush-proposed FTAs. After the vote Speaker Nancy Pelosi summed up what drove this unprecedented action: 'ꀜWe certainly should do more for our own economy before passing another trade agreement.'ꀝ

There is a mountain of evidence to suggest that trade agreements and free trade do benefit our economy. Economists seem pretty united in the belief that job gains outnumber losses and the benefits far outweigh the costs. Trade supporters have compelling answers to all the usual criticisms regarding the environment and trade'ꀙs impact on developing countries.

Trade critics seem to have forgotten the decades liberals spent bashing Republicans for the Smoot-Hawley Act which raised tariffs and deepened the Great Depression. (A lesson that bears remembering today.) They also seem to not understand that as we threaten to raise walls and renegotiate NAFTA, Canada, our second biggest trading partner, is negotiating a free trade agreement with the European Union which goes beyond NAFTA. Protectionism begets protectionism, and trade will flow where it is least restricted.

This month, Jagdish Bahagwati, a Columbia professor and senior fellow at the Council on Foreign Relations, wrote powerfully against the Democrats'ꀙ emerging neo-protectionist stance:

If Mr. Obama'ꀙs silences on multilateral trade are disturbing, should we be pleased by his strictures against bilateral free-trade agreements? On closer examination, though, this is not a vote for multilateralism but just the opposite. To understand this paradox, consider that labor union lobbies and their political friends have decided that the ideal defense against competition from the poor countries is to raise their cost of production by forcing their standards up, claiming that competition with countries with lower standards is 'ꀜunfair.'ꀝ 'ꀜFree but fair trade'ꀝ becomes an exercise in insidious protectionism that few recognize as such.

This cynical tactic can work only when the US is engaged in negotiating FTAs, typically with weak countries. It does not work for the multilateral system, where powerful, democratic countries such as India and Brazil reject such trade-unrelated demands. So, the 'ꀜfair trade'ꀝ lobbies, which Mr Obama continues to embrace, gravitate towards FTAs rather than the WTO. The Democrats'ꀙ opposition to occasional FTAs — including the latest one with Colombia — reflects, then, a recurring attempt at imposing yet more draconian demands on small countries rather than a preference for the multilateral trading system. If he is to embrace multilateralism and free trade forcefully, Mr. Obama needs a stellar crew that will understand the protectionist nature of 'ꀜfair trade'ꀝ demands and dispel the unions'ꀙ baseless fear that trade with poor countries harms American workers'ꀙ wages.

There is, to be sure, another side to this argument. Critics can make a forceful case that increased trade and globalization has cost some Americans their jobs, particularly in the Midwest. But it is much harder to argue seriously that trade isn'ꀙt critical to Washington state, the most trade-dependent state in the nation. One in three jobs here are dependent on trade, and our economy is driven by trade. Who says so? Democratic Gov. Chris Gregoire, and Democratic Sen. Patty Murray certainly think so.

The evidence is overwhelming. Boeing is America'ꀙs leading exporter. The ports of Seattle and Tacoma together comprise the third largest container port in North America, handling over 4 million containers per year. In addition to Boeing, Microsoft and Weyerhaeuser, over 9,000 Washington firms export overseas, producing 25 percent of our Gross State Product. Our farm sector is massively dependent on exports: more than 85 percent of our wheat, 60 percent of our hops, and 30 percent of our apples are sold overseas.

Trade is to Washington as cars are to Detroit, and traditionally our politicians have understood that. Washington state'ꀙs congressional Democrats have voted for most trade deals most of the time. In 2002, however, Representatives Jay Inslee, Brian Baird, and Jim McDermott all voted against reauthorizing Trade Promotion Authority. Last year, every Democratic member of our House delegation voted to suspend TPA in order to block consideration of the three pending Free Trade Agreements.

As for the future of trade policy, the election of Barack Obama raises nothing but questions. What exactly does President Obama have planned regarding trade? Will he ask for TPA? Are the three pending FTAs dead? Will he really try to renegotiate NAFTA? Will he push to jump start multilateral processes?

Nor is it clear at the local level. How will Washington state Democrats react? Was their vote to suspend TPA last year just part of a manuever to get the issue out of the election campaign? Will they push Obama to ask for TPA and then fight to get it for him? And where is the business community? Are they willing to really pressure Democrats (whose campaigns they largely supported) on this most important of business climate issues?

Trade is the key to our economic future. Isn't anyone in Washington state willing to spend political capital to move this issue forward?


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About the Authors & Contributors

Chris Vance

Chris Vance

Chris Vance, a former Republican party chairman, is a senior fellow at the Niskanen Center.