Last week’s congressional committee votes to give President Obama “Fast Track” negotiating power may go down in economic history as among the most self-destructive ever. The leaders of the Republican Party betrayed their voters, may have destroyed their own political careers, and may have even destroyed America’s economic future.
Two-thirds (68%) of Republicans say they are less likely to vote for a Member of Congress who votes to give President Obama fast-track authority. Among the conservative Republicans who dominate many primary electorates, this figure is an extraordinary 74%.
Some Tea Party groups speak for these voters. At a recent Capitol Hill Press Conference, Richard Manning of Americans for Limited Government called on Congress to “not cede any additional authority to a president who has spent the past six years shredding the constitutional separation of powers.” Similarly, Niger Innis of TheTeaParty.net said that Fast Track would be “a monumental failure of congressional Republicans to understand the nature of the president’s fundamental transformation of America.”
Misrepresenting Trade Statistics
The Committee Votes
As we documented in our book Balanced Trade, by manipulating their currencies to unbalance trade, trade surplus countries gain
- More factories.
- More research and development. (R&D often needs to be near factories.)
- More economic growth.
- Reduced factories.
- Reduced R&D.
- Reduced economic growth.
But their amendment was defeated by nine Republicans (Hatch, Roberts, Cornyn, Thune, Isakson, Toomey, Coats, Heller, and Scott) who were joined by six Democrats (Wyden, Cantwell, Nelson, Carper, Bennet, and Warner). And the results were even worse in the House Ways and Means Committee, where, with Committee Chairman Paul Ryan calling the shots, not a single Republican stood up against letting our treaty partners engage in currency manipulation.
But even if these anti-currency manipulation amendments had passed, they would not have been sufficient, since governments can easily hide their currency manipulations in seemingly innocent activities. For example, the Japanese government has its government pension investment fund sell massive numbers of Japanese bonds, using the proceeds to buy foreign stocks and bonds. Through such techniques, the Japanese government brought the exchange rate of the yen down from 1.02 U.S. cents per yen in October 2013 to 0.85 cents today.
Although governments can hide their currency manipulations, they can’t hide their trade surpluses. Trade agreements should provide mechanisms for balancing trade, such as by letting trade deficit countries place trade-balancing tariffs upon the products of countries with which they have trade deficits.
The final trade agreements might contain things that Republicans in Congress like, including patent and copyright protection for American intellectual property and a reduction in tariffs on American agricultural products. However, President Obama may also be negotiating things that Republicans normally oppose, including:
Creating a private court system that gives foreigners the right to sue the U.S. government if any law or regulation violates the treaty. There is no doubt that this is in the current draft of the treaty.
Mandating an end to congressional limits on legal immigration from Mexico and other treaty countries. There is dispute about whether this is in the current draft of the treaty.
Members of Congress might be well-advised to avoid voting for “Fast Track” to see what’s in it. Voting down Fast Track would prevent the president from ignoring the wishes of the American people.
A better strategy would be to force Obama to negotiate the treaty and then bring it to Congress. If Congress retains its power to amend the final agreement, it will be strengthening the administration’s ability to extract favorable concessions. The administration can say, “I would like to negotiate what you want, but Congress would likely amend that provision out of the treaty.”
If Congress retains its full constitutional authority, then any deal negotiated is much more likely to be good for the American people.
The Worst Thing about Fast Track
The worst aspect of Fast Track is not that it would permit the currency manipulations that tilt the playing field against American workers. It would set up a private court system that could render billions of dollars of judgment against the United States government should a future president decide to balance its trade with the currency-manipulating countries through tariffs.
In contrast, WTO rules include a provision that lets trade deficit countries impose trade-balancing tariffs. President Nixon took advantage of that provision when he imposed an across-the-board 10% tariff in August 1971, which quickly forced changes that brought U.S. trade into balance by 1973. The United States could take advantage of this WTO provision today. Doing so would give the U.S. more factories, more R&D, and more economic growth.
But the new private court system changes everything. It ensures that no future president can ever solve America’s trade deficits.
The Best Thing about Fast Track
The Republican Party has about 16 candidates who have indicated that they may run for President in 2016. Fast Track could be one of the best ways to determine which ones possess economic understanding. So far Jeb Bush, Marco Rubio, and Ted Cruz have come out in favor of fast-tracking America’s economic destruction, while Mike Huckabee, Lindsey Graham, and Donald Trump have indicated that they are opposed.
We need to elect candidates who will fight for our children’s economic future, instead of candidates eager to empower President Obama to destroy it.
The Richmans co-authored the 2014 book Balanced Trade: Ending the Unbearable Costs of America’s Trade Deficits, published by Lexington Books, and the 2008 book Trading Away Our Future, published by Ideal Taxes Association.