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Congress Shouldn’t Trust Obama to Negotiate Trade Deals

Free trade is undermining American prosperity, and Congress should deny President Obama authority to negotiate new deals in Asia and with the European Union.

Reducing tariffs and other barriers to international commerce should increase both imports and exports and move Americans from lower wage jobs, such as assembling iPhones, to higher paying employment, such as designing new electronic gadgets and writing software. However, the economic theory behind the benefits from free trade assumes balanced trade.

As the former Chief Economist of the U.S. International Trade Commission, I can testify negotiating market access across the panoply of goods and services is an imprecise business at best.

Trade pacts often create more imports than exports, but if that happens, economists expect the value of the dollar to fall against foreign currencies. That would raise prices for foreign products in U.S. stores and lower U.S. export prices to rebalance trade—unless foreign governments block that process.

In 2014, U.S. imports exceeded exports by $500 billion, cost American workers 4 million jobs, and pushed down family incomes, because Japan, China, and other countries pursued policies that cheapen their currencies against the dollar.

Such currency manipulation is illegal under World Trade Organization rules, but both Presidents Bush and Obama have ignored pleas from industry to bring complaints in the world trade body.

Economists on the right, left, and in the center have suggested policies to correct the trade imbalance but have gained no traction at the White House.

More and more, the United States pays its way in the world by developing new products and intellectual property, and the trade deficit has pushed down investments in R&D enough to slash about 1.5 percentage points off annual U.S. growth.

Since 2000, the trade deficit with China has increased fivefold. U.S. GDP growth has averaged a mere 1.8 percent, and average family incomes are down $4,600.

Presidents Reagan and Clinton were forceful advocates of U.S. trade interests, and from 1980 to 2000, the economy accomplished 3.4 percent growth and family incomes rose $9,900.

Modern trade agreements reach deeply into the treatment of foreign goods and services by altering domestic regulations for product standards, the environment, patents, and the like. Foreign leaders won’t negotiate on those issues if Congress can alter U.S. commitments during the ratification process. Hence, Congress has granted presidents since Gerald Ford Trade Promotion Authority, which binds the House and Senate to put trade deals to a simple up or down vote—with little opportunity for amendments.

Now Obama wants TPA to negotiate new agreements, but many members of Congress simply don’t trust him to put U.S. interests first. All the deals he has cut, for example with China on CO2 emissions and climate change, indicate he embraces left-leaning ideas that place the burden for fixing the world’s woes disproportionately on American backs, and he is inclined to give away the store.

Democrats and Republicans in Congress have made clear that the proposed Trans Pacific Partnership, which would liberalize trade with 11 Pacific Rim nations including Japan, makes no sense without a clear and enforceable discipline on currency manipulation. Yet the Administration’s TPP website lists 17 key issue areas—currency policies are nowhere to be found.

The administration offers outlandish claims that are more fantasy than fact. It asserted the proposed TPP would increase exports $124 billion and boost employment 650,000. The more likely figure for that amount of exports is about 100,000 and only if it is accompanied by no additional imports—and no trade deal would ever deliver such a one-way gain.

No surprise, 150 of 188 Democratic members of the House have signed letters opposing Trade Promotion Authority—and they know Obama’s negotiating instincts and veracity as well as anyone.

Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995 and is a professor at the University of Maryland and a national columnist. He tweets @pmorici1.

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