When Congress comes back to work early next year, Trade Promotion Authority (“TPA”) is likely to be high up on the Congressional agenda, and it is something the President and Congress can work together on. The basic concept of the law is simple.
[Reposted from the Huffington Post | Gil Kaplan | December 30, 2014]
It provides that if the President and the United States Trade Representative bring back a trade deal with Asia (Trans-Pacific Partnership or TPP), with Europe (Transatlantic Trade and Investment Partnership or TTIP), or some other trade deal, Congress has to address it with an up-or-down vote within a set period of time, usually 90 days. They cannot try to amend the trade deal back here in Washington, after U.S. negotiators have gotten the best deal they think they can.
The law made a good deal of sense when trade deals were mainly about lowering tariffs. No Senator or Congressman would want to see a tariff protecting a big plant in his or her district lowered, and any trade deal would soon be encumbered with hundreds of amendments raising, or preventing the lowering of, many tariff lines. So everyone in Congress just had to vote up or down on the deal, presumably looking at the greater good of the country, and not at their own parochial interests (imagine that!) There is also an argument that TPA is necessary because our foreign trading partners would never make their last, best offers in negotiations if they knew Congress could just amend the deal and ask for more later on.
But Trade Promotion Authority may make a lot less sense given the complexity of current trade deals and the broad scope of their coverage. TPP, for example, has provisions covering intellectual property, state owned enterprises, labor rights, environmental compliance, pharmaceuticals, financial services, E-Commerce, and government procurement, to name a few. How can a member of Congress be expected to simply vote “up or down” on something like that?
But the bigger problem is the coexistence of the two sides of trade that the United States lives with, and the seeming inability of our trade agreements to deal satisfactorily with both of them. On the one hand, we have many great multinational companies and breakthrough innovators who need a market of the whole world, and who have regularly increased exports and maintained profits because of the market opening trade deals have accomplished. But on the other side, we have a “Bleak House” of industries and workers that are creative, competent, cost conscious, and U.S. based, and are being subjected to unfair subsidies by foreign countries, minuscule wage rates at competitors abroad, and surges of low priced imports into our market.
Many of these latter industries are in the manufacturing sector. They may not have the unassailable market position and patent portfolio of a company like Google or Apple. Yet they still merit a big place in our economy and the millions of workers they employ deserve that place too. They are being harmed because these trade agreements do not deal effectively with the biases of so-called free trade or with unfair trade practices. The effects on the average U.S. worker are overwhelming. In addition to the loss of jobs, manufacturing wages have been declining.
Do we need a manufacturing industry in this country? For at least three reasons we definitely do. We do not want to be dependent on China or any other country for the basic manufactured goods we need to keep our economy going, such as steel, bearings, smartphones, computers, semiconductors, auto parts, glass, textiles and many others. Such dependency takes away our freedom, our international clout, and our national security. Secondly, manufacturing jobs, at least in the past, have been some of the best in our country, paying excellent wages and benefits to middle class workers in a way most service jobs do not. And finally, having manufacturing industries is critical to staying at the cutting edge of R&D and innovation. If we don’t make smart phones or computers here, we will lose the R & D prowess related to these products. The same pattern will be repeated for product after product and technology after technology. Innovation is central to our economy (and to our identity as a people) and we cannot afford to lose it.
So where are we now, and what do we need to do in any TPA bill to remedy the situation? We are not in a good place. We have lost millions of manufacturing jobs in the United States and tens of thousands of factories. We run a $300 billion dollar trade deficit with China on manufactured goods, and over $100 billion of that is in high technology products. We have a $700 billion trade deficit with the world overall, most of it in manufactured goods. And indeed we make almost no smart phones, computers, liquid crystal displays or many other high tech products in this country anymore.
The TPA debate must begin with a recognition that there are two sides to trade when it comes to U.S. manufacturers and workers, and our current trade policies and laws needs to deal with both. We need to open markets for exporters, but we also need to understand the problems of indigenous U.S. manufacturers. And what do we need to do for them? Recognition of the problem will be a good start. And then some specific actions should be included in the TPA legislation:
1) We need to develop and implement a national manufacturing policy with the goal of turning around the decline in our manufacturing sector and accomplishing significant revival. We do not have a national manufacturing policy now. We need a Secretary of Manufacturing who will have the responsibility to reach that goal.
2) We need to create American industrial zones which will revive U.S. electronic manufacturing. This will require careful planning with U.S. electronic companies, and significant investment to replace some of the input product manufacturing that we have already lost. Manufacturers in these zones will be able to pay a VAT tax instead of income tax with respect to revenue from facilities in the zones, and the VAT will be rebated on exports, making products from the zones competitive internationally.
3) All United States trade agreements currently being negotiated or to be negotiated in the future should be subjected to the test of whether they will increase the number of jobs in the United States and whether they will increase the number of factories in the United States (“Plus Jobs/Plus Factories Trade”).
4) All of our trade agreements going forward must include a new negotiating objective, which is to make significant industrial subsidies (over 5% by value) illegal, and not merely actionable after-the-fact.
5) Our trade agreements must address currency undervaluation (the largest industrial subsidy in history), and also provide that trade remedies can be applied to off-set undervaluation if it continues despite commitments made in a trade agreement.
With these additions to our trade policy and these kinds of commitments, we can begin to make trade promotion authority into jobs promotion authority for many more American companies and many more American workers.