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Home Publications Blogs Beat the Press The Theory of Immaculate Trade Pact Conception

The Theory of Immaculate Trade Pact Conception

Monday, 17 February 2014 07:58

It's amazing what some folks will say to promote trade agreements. Today, John Harwood in the NYT gave us the theory of immaculate trade pact conception. In this view trade pacts are negotiated by members of the high priesthood who focus on promoting the overall national interest and economic growth. Unfortunately, these pacts must deal with the evils of everyday politics.

In this respect he tells of the urgent need for fast-track (a.k.a. "trade promotion") trade authority:

"Presidents value the Trade Promotion Authority because it forces Congress to vote up or down on trade deals, shielding them from House and Senate amendments at the behest of corporations, unions, environmental groups or other interests."

In reality these deals were being negotiated by corporate interests from day one. The U.S. trade negotiators are working hand in hand in with the pharmaceutical industry, the software industry, the financial industry, the oil and gas industry, and other major corporate interest groups to craft a deal that will increase their profits. Economic growth has nothing to do with it. Even the models used to tout the benefits of these deals show gains that are too small to be measured in annual GDP data. And these growth estimates don't even take account of the negative impact that stronger patent and copyright monopolies, and the resulting prices increases, would have on growth. The idea that these trade deals are about promoting growth is a story for little kids and reporters at major news outlets.

Of course it is possible to craft a trade deal that would promote real economic gains. Doctors in the United States earn salaries that are hugely out of line with those in other wealthy countries. The same is true for other highly paid professions. If a trade deal focused on reducing the barriers that prevent these professionals from providing their services in the United States the gains would be substantial. The savings on doctors alone could be close to $100 billion a year (0.6 percent of GDP).

The agreements could also focus on reducing the value of the dollar, which would make our goods and services more competitive internationally. This would lower our trade deficit and potentially create millions of jobs. And, we could reduce patent and copyright barriers, lowering prices and making markets more competitive.

But these items don't come up at trade negotiations because the folks at the table would lose from these growth enhancing measures. Instead we get silly stories about trade pacts being negotiated by disinterested parties who are only looking out for the good of the country. Come on folks, you've got to do better than this.

Comments (3)Add Comment
America Stays Focused on Reducing Competition
written by Robert Salzberg, February 17, 2014 7:35
Broadband speeds in America average less than 1/10 those of Japan, but because we pay more than 10 times the price per Mbps, we pay more than consumers of broadband in Japan for service that is more than 10 times slower on average. Instead of promoting competition, we're considering merging 2 of our biggest broadband providers.

How to Fast Track the Constitution
written by Last Mover, February 17, 2014 9:56
"Presidents value the Trade Promotion Authority because it forces Congress to vote up or down on trade deals, shielding them from House and Senate amendments at the behest of corporations, unions, environmental groups or other interests."

Uh huh. Like NAFTA "shielded" Congress from meddling with it by loading it with language that began the practice of corporations sueing the federal government for anything imaginable that constituted "interference" with their existence - much of which by definition violates the Constitutional rights of Americans.

Git 'er done America. Go fast track. Dean Baker is correct. Trade is not free. Now the cost includes your Constitutional rights.
written by urban legend, February 18, 2014 1:51
But if we're going to try to reduce incomes of professionals (and in the process divert some of their incomes to foreigners who will spend little of it here), then shouldn't the quid pro quo for that be, besides currency revaluation, stronger labor and environmental protections to push wages up for blue collar American workers? Otherwise, it looks like Dean is advocating a race to the bottom: since lower income people are losing ground to foreign competition, let's make sure everyone loses ground.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.