By Michael Stumo
Beware of the counter-attack of the establishment. Chairmen Hatch and Brady are trying to pivot from the Trans-Pacific Partnership (TPP) to a new trade deal with Japan.
I was in Washington visiting congressional offices in mid-November, the week after the election. I sat in the waiting room of one pro-TPP House office listening to a group of eight people meeting with the trade staff person. The group was making the case for a bilateral trade deal with Japan.
“Japan has already passed the TPP through its parliament, so it is ready to go,” they said.
Their argument has been falling on receptive ears in the form of Chairman Orrin Hatch (Sen Finance Committee) and Chairman Kevin Brady (House Ways and Means Committee). Both Hatch and Brady have been touting the Japan trade agreement line for a couple of weeks now.
A Japan trade deal is a bad idea. Why? First, the US has no strategy to win the international competition for good jobs. So they would again simply recycle past deals like the South Korea agreement and the TPP terms. Second, the old guard trade folks still think that merely cutting tariffs is the ultimate goal. They don’t agree with a goal to gain a net export advantage and, thus, a net job creation advantage.
Third, trade deals with aggressive mercantilist countries like South Korea become disasters. The South Korea trade agreement (signed in 2011 and implemented in 2015) doubled our pre-existing trade deficit with that country.
Japan is organized like Korea in that it is a democracy with a strong economic nationalist system to advantage its domestic industries and keep out imports. Japanese tariff cuts don’t allow US imports. Period. Imported auto penetration into the Japanese market in the 1980’s was 6%. In 2012, Japanese tariffs had been lowered to zero for auto imports. Import penetration was still 6% in 2012.
The US government needs to set a goal of balanced trade. Then determine what unilateral actions it can take to achieve that goal. Then it should engage in trade agreement negotiations with a clear sense of what actually works to improve US trade performance and net job creation.
Right now they are flying blind.