Debate Moderators May Try to Sabotage Candidates Who Oppose TPP Deal

There may be trouble ahead for the top candidates at tonight’s Republican debate, sponsored by Fox Business News and the Wall Street Journal.

Why? There may be a slew of new “gotcha” trade questions posed by the debate’s trio of free-trade favoring moderators, Maria Bartiromo, Neil Cavuto, and Gerard Baker. These free-trade proponents have never seen a so-called free-trade agreement that they weren’t predisposed to back. And they will likely be out to boost the Trans-Pacific Partnership (TPP) trade deal announced last week with their lead-in statements and questions.

Don’t believe it?  Fox and the WSJ should be friendly to Republican candidates, right? Not necessarily.

Free trade is the religion of the mainstream Republican establishment, backed as it is by large multinational corporations, banks, investment houses, and insurance companies. The moderators will promote the free trade, pro-TPP candidates such as Bush, Rubio, and Kasich, while attempting to make the opponents, Trump, Carson, and Fiorina, look foolish. They will also attempt to smoke out Cruz and Paul, both of whom voted against Obama’s Trade Promotion Authority (TPA) bill last June.

For evidence, just look at Mary O’Grady’s WSJ hit piece on Donald Trump and his views on immigration, “the Wall,” and NAFTA. O’Grady resorts to hysteria right in the sub-head of her op-ed: Trump will start a “trade war.” In the world of the Wall St Journal, one is prohibited from doing anything to straighten out the mess that NAFTA has wrought on immigration, trade, drugs, etc., as it might disrupt their conceptually and economically flawed free trade ideology.

Some will remember the proponents’ 1993 promises that NAFTA would put a halt to illegal immigration and drug smuggling because Mexico would become so prosperous that no one would need to come north or earn a living by transporting drugs. Wrong! Vastly efficient U.S. agriculture displaced 2 million subsistence Mexican farmers. They headed to the maquiladora transplant factories on the Mexican side of the border. When there were not enough jobs for everyone or space in the squalid shantytowns, they continued north.

Another supposedly winning argument: Marry American technological wizardry with cheap Mexican labor, and Mexico-America would become a vastly prosperous export platform to the rest of the world. Wrong again! Yes, trade among the three NAFTA partners has increased dramatically since NAFTA, but all three are running current account deficits with the rest of the world. NAFTA is hardly a wealth-generating export zone.

The United States has run trade deficits, some years reaching an alarming six percent of GDP, ever since the signing of NAFTA. Trade deficits involve spending more to buy goods internationally than a country earns by selling its goods to foreigners. To continue buying these foreign goods, the country must either borrow overseas or sell off its assets — or both, which the U.S. has done, running up a massive national debt in the process of over-consuming foreign goods, many of which were once manufactured domestically.

We can expect the debate moderators to ignore this big picture and concentrate on percentages and phony arguments. Here’s one example: We need TPP to reach the 95 percent of consumers who live outside the United States. Absurd! Yes, 95 percent of the world’s population lives outside the United States, but they are hardly consumers. The vast majority live on $10 a day or less, and they will not be buying anything that America still makes.

Another example: We have a trade surplus with the countries with which we have free trade agreements. No, we don’t. The implication here is that we need to pass TPP so that we will have trade surpluses with the other 11 TPP member countries— because free trade agreements equals American trade surpluses. The truth is that we have a trade surplus with some trade-agreement countries, but in other cases, we run trade deficits. Only by excluding our foreign energy purchases and lumping all the free-trade agreement countries together, could one claim that free-trade agreements are surplus producers. But the free-trade crowd does not like to be bothered by pesky facts.

A final example, direct from President Obama: “If we don’t write the rules of 21st century trade, China will write the rules.”

China is not a rules-based country. Beijing will do whatever it wants, regardless of whatever TPP rules might be in place. China is still not in compliance with many of its WTO obligations 14 years after its accession. In fact, its non-compliance is greater than the WTO is built to handle.

This level of non-compliance was never contemplated by American negotiators who thought that China would generally play by the rules. Also, China has consistently violated its IMF and G-20 obligations by manipulating its currency.  Does anyone who has even a passing familiarity with China’s record in numerous fields think it will be playing by Obama’s rules? Sadly, the Chinese Politburo did not attend Harvard Law School with Obama and U.S. Trade Representative Michael Froman.

The debate moderators’ level of familiarity with the pro-TPP arguments will far surpass that of anyone at a podium, and they will deploy all sorts of pseudo facts, preposterous claims, and accusations of protectionism or nativism against those who dispute that the TPP is a good deal for the United States and average working people. They will completely ignore the record of large and ongoing U.S. trade deficits and the claims that previous trade agreements would end them.

They will also ignore the 5 million manufacturing job lost in recent years and the 60,000 factories closed; or if they bring them up, it will be to claim that technology has replaced all these lost jobs. And any closed factories must have been inefficient and thus could not have been put out of business by currency manipulation, subsidized state-owned enterprises, or foreign dumping of goods below the cost of their production, among other reasons.

For free trade ideologues, whatever happens in the international economy must have happened due to market forces and free trade. No one games the system at America’s expense. And if foreign countries do game the system, great!  They are providing a gift to the American consumer in the form of lower prices.

But to be a consumer, one has to first be a producer. The middle- and working-classes are losing the opportunity to be producers. Many have reached a point where they can no longer consume because the jobs, wages, income, and ability to borrow that supported this consumption are no longer what they once were, thanks to the globalized and manipulated international trading system.

In a little remarked coda after the last debate, Donald Trump was asked in an interview by CNN Squawk Box anchor Joe Kieran if there was any way he would back the TPP. Trump said he could only back it if effective disciplines against currency manipulation were included. Okay, fair enough, as far as it goes. Currency manipulation is a huge problem for American manufacturers and is unaddressed in the TPP. There are no effective disciplines against it.

But Trump’s answer leaves a lot to be desired. Does it mean he is in favor of a trade agreement that leaves untouched the major trade barrier to American exports posed by our TPP partners (except Brunei) in the form of value-added taxes?

These are applied at the foreign border, substantially raising the price of American exports. The U.S. does not have a Value Added Tax (VAT) to respond in kind. Interestingly, both the Cruz and Paul tax plans do propose a value added tax. And either would do much to address the trade imbalance caused by foreign value added taxes. Hopefully, each senator will be given the opportunity by the moderators to discuss how his VAT would help the U.S. international trade position. (BTW, Republicans have historically rejected VATs, so a discussion of the subject without bias would produce some clarity.)

Additionally, does Trump’s answer — that he would sign the trade deal if there were currency disciplines — mean that he has no hesitation to turn over trade policy in perpetuity to the new TPP Commission, an unelected body of international bureaucrats who are not likely to respect the U.S. Constitution or be favorably disposed to America’s national interests? The Commission can alter or adjust TPP rules on the fly, without any input for Congress. How does this Commission square with Trump’s oft-repeated mantra, “If we’re going to have a country” we have to take the appropriate steps.

Outsourcing Congress’s Constitutional responsibility to the new Commission is not a step in the right direction.

Further, Trump continuously vaunts his negotiating skills. But sometimes, the negotiation is not worth the game.  Crony-capitalist, sovereignty-surrendering, unenforceable trade agreements such as the massive TPP are not worth negotiating, period, no matter how good one’s negotiating skills. Better to take steps at home to address currency fraud, VAT taxes, exclusion of state-owned industries, etc — ones that are completely within America’s control — than depend on the kindness of strangers to carry out trade negotiations that have produced massive deficits and the deindustrialization of the American economy over the last half century.

So the challenge for the anti-TPP candidates will be to articulate a vision of how to grow the American economy without succumbing to foreign manipulation under the guise of free trade and globalization. The alleged examples of free trade benefits the moderators will put forth are likely to be phony or out of a larger context.

America has lost its way in negotiating and signing one free trade agreement after another, each one claiming to be the silver bullet that brings economic growth.  However, these deals haven’t yield real growth. They just transfer potential American growth and wealth to our trading partners.

To return to the O’Grady charge in the WSJ, there is a trade war going on. But America didn’t start it, and we are losing now because we refuse to learn and to defend our economic interests. The American people know it. Hence the Trump phenomenon.

The pressure shouldn’t be on the candidates to answer for their TPP stances. It should be on the moderators to show why this agreement is different from all those that came before it and won’t deepen the hole we are already in.

Kevin L. Kearns is president of the U.S. Business & Industry Council (USBIC), a national business organization advocating for domestic U.S. manufacturers since 1933.