Author Archive
Ask Consumers if They Like a Weak Dollar
According to a Washington Post story today, “the weak dollar is one problem the United States loves to have.” The story reports how the fall of the dollar against the euro and other currencies in the past year has boosted U.S. exports and discouraged imports, cutting the trade deficit and allegedly boosting the U.S. economy. A weaker dollar has spurred complaints in Europe and elsewhere, but here at home the Post story leaves the impression the approval is practically unanimous.
Nowhere in the 1,058-word story is the impact on consumers ever mentioned. But it is American consumers who pay the biggest price when the dollars we earn buy less on global markets. We are paying more for oil, which not coincidentally has zoomed toward $80 as the dollar flounders. A weaker dollar means higher prices than we would pay otherwise for a range of goods, from imported shoes and clothing to food, that loom large in the budgets of American families struggling to make ends meet in this difficult economy.
Ignoring consumer interests is widespread in reporting about trade. It reflects the strong bias of elected officials to see trade issues strictly through the lens of producers and never consumers. After all, it is producers who form trade groups and hire lobbyists to promote their exports or protect themselves from imports. Nobody in Washington represents the diffused, disorganized but much more numerous 100 million American households.
The dollar’s value should be set by markets, and I have no reason to believe the dollar is over- or undervalued. But pardon me if I dissent from the consensus that a falling dollar is unambiguously good news.
Filed under: International Economics and Development; Trade and Immigration
Spectator.org Readers Getting “Mad about Trade”
My new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, has sparked a lively exchange this morning over at the American Spectator’s popular web site.
Contributing Editor Shawn Macomber introduces a Q&A with me by telling his readers:
Daniel Griswold is not shy about sharing the high aspirations he harbors for his superlative new book Mad about Trade. Griswold has managed to compose a volume as accessible and persuasive as it is indispensable, as fresh and uplifting as it is firmly grounded in accumulated wisdom–a rare bird, indeed.
A Globalized Reading List
If you are looking for a good book on globalization and trade, an excellent source of ideas is the book review section of the Yale Center for the Study of Globalization. The site features excerpts and reviews of the latest books covering all aspects of the subject.
I have an understandable soft spot for the latest posting, on my new Cato book titled Mad about Trade: Why Main Street America Should Embrace Globalization.
Filed under: International Economics and Development; Trade and Immigration
Bernanke Criticizes Trade Deficit, but Not Trade
In a speech on the West Coast this morning, Fed chairman Ben Bernanke at first glance appears to be agreeing with the critics of trade who blame the trade deficit for much of our economic ills. “Bernanke Calls for Action on Trade Gap,” according to the Wall Street Journal. “Bernanke warns against trade imbalances,” chimes in the French news agency, AFP.
Underneath the headlines, however, Bernanke’s comments offer no comfort for the critics. The real culprit is not “unfair trade” or “currency manipulation,” but misguided tax and spending policies in the United States and other major trading countries.
That is a point I hammer home in Chapter 5 of the new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization:
If our politicians are determined to do something about the trade deficit, the most constructive step they could take would be to promote a higher level of national savings. More domestic savings would reduce the need for foreign funds to finance domestic investment. … The most direct approach would be to reduce or eliminate the federal budget deficit. If the federal government were to borrow a few hundred billion dollars less each year, the pool of domestic savings would rise and more domestic funds would be available for investment. …Ironically, many members of Congress who complain loudest about the trade deficit have voted in the name of economic “stimulus” to plunge us ever deeper in debt.
Chairman Bernanke agrees. His policy prescription was not to raise barriers against imports, but to cut the federal government’s appetite for debt.
Reflections on China’s 1949 “Liberation”
During a speaking trip to China three years ago, the young tour guide in Beijing kept referring to “the liberation.” I soon realized that she meant the October Revolution of 1949, in which Mao Tse Tung and the communists seized power and began their rule 60 years ago today.
Far from liberating China, the reign of Mao represents one of the worst tyrannies in the history of mankind. Opposition parties, free speech and freedom of religion were quickly eliminated. The Great Leap Forward of 1958-61 forced the collectivization of agriculture, resulting in a famine that killed tens of millions. The Cultural Revolution of 1966-76, while not as deadly, unleashed chaos that crippled the economy and scarred a generation. As Gordon Chang writes in a Wall Street Journal op-ed this morning, the celebration by the Chinese people will be understandably muted.
China’s real liberation began not 60 years ago, but 30 years ago, with the reforms of Deng Xiaoping. While China remains an oppressive, one-party state politically, its economy has taken a true great leap forward in the past three decades because of market reforms in agriculture, industry, and trade. China’s liberation has far to go, but the Chinese people today are much more free of government interference in their personal, daily lives than they were in the time of Mao.
When I point to China’s economic progress as an example of what trade liberalization can deliver, my debate opponents will sometimes counter that China is a communist country. But China’s dramatic growth has not occurred because of its residual communism. For 30 years now, its government has been in the process of abandoning the communist economic policies of Mao and his fellow “liberators,” much to the benefit of the Chinese people and the world.
Filed under: International Economics and Development; Trade and Immigration
President Obama’s Trade War on the Poor
A Wall Street Journal story yesterday reports the rising level of poverty in America caused by the steep and lingering recession. As I point out in a Washington Times column that also ran yesterday, one unintended consequence of President Obama’s trade policies so far has been to make the growing number of poor even poorer.
As I explained in the “Economic Watch” column:
America’s highest remaining trade barriers are aimed at products mostly grown and made by poor people abroad and disproportionately consumed by poor people at home. While industrial goods and luxury products typically enter under low or zero tariffs, the U.S. government imposes duties of 30 percent or more on food and lower-end clothing and shoes – staple goods that loom large in the budgets of poor families.
To win favor with organized labor and other opponents of trade liberalization, Mr. Obama has either defended or actually raised barriers on precisely those products of most interest to poor households. …
The $25 billion in revenue raised each year from import duties represent by far the most regressive tax the federal government imposes. Yet the Obama administration and the Democratic Congress have refused to move forward with trade agreements that would lower trade taxes that fall most heavily on the poor. By supporting the farm bill, but not new trade agreements, the president has embraced the status quo rather than change.
Read the full article.
Curbing Free Trade to Save It
In the latest example of “We had to burn the village to save it” logic, Sen. Sherrod Brown (D-OH) argues in a letter in the Washington Post this morning that the way to “support more trade” in the future is to raise barriers to trade today.
Brown criticizes Post columnist George Will for criticizing President Obama for imposing new tariffs on imported tires from China. Like President Obama himself, Brown claims that by invoking the Section 421 safeguard, the president was merely “enforcing” the trade laws that China agreed to but has failed to follow. He scolds advocates of trade for talking about the “rule of law” but failing to enforce it when it comes to trade agreements. Brown concludes, “If America is ever to support more trade, its people need to know that the rules will be enforced. And Mr. Obama did exactly that.”
Nothing in U.S. trade law required President Obama to impose tariffs on imported Chinese tires. As my colleague Dan Ikenson explained in a recent Free Trade Bulletin, Section 421 allows private parties to petition the U.S. government for protection if rising imports from China have caused or just threaten to cause “market disruption” to domestic producers. If the U.S. International Trade Commission recommends tariff relief, the president can decide to impose tariffs, or not.
The law allows the president to refrain from imposing tariffs if he finds they are “not in the national economic interest of the United States or … would cause serious harm to the national security of the United States.”
As I argue at length in my new Cato book Mad about Trade, trade barriers invariably damage our national economic interests and weaken our national security, and the tire tariffs are no exception. If the president had followed the letter and spirit of the law, he would have rejected the tariff.
And since when is causing “market disruption” something to be punished by law? Isn’t that what capitalism and market competition are all about? New competitors and new products are constantly disrupting markets, to the discomfort of entrenched producers but to the great benefit of the general public and the economy as a whole.
Human beings once widely practiced an economic system that minimized market disruption. It was called feudalism.
C/P Mad About Trade
Filed under: International Economics and Development; Trade and Immigration
Congress to Lift the Travel Ban to Cuba?
Bloomberg News reports today that the U.S. House may pass a bill by the end of the year lifting the almost five-decade-old ban on travel to Cuba by American citizens. The step is long overdue. According to the article:
A group of House and Senate lawmakers proposed in March ending restrictions to allow all U.S. citizens and residents to travel to Cuba. [Rep. Sam Farr, a California Democrat] said the legislation, known as the “Freedom to Travel to Cuba Act,” also has enough votes to clear the Senate, where Senator Byron Dorgan, a North Dakota Democrat, and Republican Senator Michael Enzi of Wyoming introduced the legislation.
As Rep. Farr succinctly added, “If you are a potato, you can get to Cuba very easily, but if you are a person, you can’t, and that is our problem.”
I rebut a lot of what Sen. Dorgan has said about free trade and globalization in my new book, Mad about Trade, but on the issue of the Cuban embargo and travel ban, Sen. Dorgan and most of his fellow Democrats are pushing in the right direction, while most Republicans still vote to maintain our failed policies. For more on why the travel ban and embargo should be lifted, read my speech at Rice University in 2005.
Here is one issue where those of use who support less government and more economic freedom really can hope for progressive change.
Trade Delivers Peace and Bargain Prices
For a fair and authoritative (and did I mention favorable?) assessment of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, you can read William H. Peterson’s review in today’s Washington Times.
Dr. Peterson is an adjunct scholar with the Heritage Foundation and the Ludwig von Mises Institute who holds a Ph.D. in economics from New York City University. In his review he writes:
Daniel Griswold’s tour de force explores, reasons and documents how import competition benefits the American consumer, seeing him move ahead toward greater peace incentives, lower real prices, more choices, better quality. Mr. Griswold also tracks how the big-box retailers such as Wal-Mart, Home Depot and Best Buy deliver the world’s goods mostly by sea via millions of big, truckload-size containers. …
So Mr. Griswold would have the United States adopt or maintain trade policies best for most Americans, especially the poor and middle class, no matter what other nations do. Says the author: Let’s drop the remaining barriers separating us from ongoing growth and peace policies enhancing the global marketplace. Bully for him.
Information at the beginning of the review should have given the cover price of the book as $21.95. It is available with a nice discount at Amazon.com along with a peek inside at the table of contents and selected pages.
Learning from Trade Wars Past
David Rockefeller, the former chairman and CEO of Chase Manhattan Bank, makes a compelling historical case in today’s New York Times for pursing free trade policies. Rockefeller has been around long enough to remember the Smoot-Hawley tariff bill of 1930 and the Great Depression that followed. In an op-ed piece titled, “Present at the Trade Wars,” he writes:
I lived through the stock market crash of 1929 and the Great Depression that followed it, and I saw that there was no direct cause and effect relationship. Rather, there were specific governmental actions and equally important failures to act, often driven by political expediency, that brought on the Depression and determined its severity and longevity.
One critical mistake was America’s retreat from international trade. This not only helped to turn the 1929 stock market decline into a depression, it also chipped away at trust between nations, paving the way for World War II.
On the eve of the G-20 summit in Pittsburgh this week, Rockefeller offers a timely warning to President Obama not to repeat the mistakes of the past.
A Super-Majority of Economists Agree: Trade Barriers Should Go
Sure, economists disagree among themselves about a number of public policy issues, but not about the desirability of free trade. The latest edition of Econ Journal Watch, published by the American Institute for Economic Research in Great Barrington, Mass., reports the results [pdf] from a random survey of members of the American Economic Association.
Based on questionnaires returned by more than 100 members, all with Ph.D.s in economics, the survey’s author, Robert Whaples, reports:
- The economics profession continues to show a consensus in favor of unfettered international trade, as 83 percent agree and only 10 percent disagree that the United States should eliminate remaining tariffs and other barriers.
- Other issues in which the economists reached a strong consensus:
- 82 percent disagreed that the U.S. government should ban genetically modified crops; only 7 percent agreed.
- 78 percent agreed that U.S.-government subsidies for ethanol should be eliminated or reduced, compared to 10 percent who want them increased.
- 72 percent agreed that “A Wal-Mart store typically generates more benefits to society than costs,” versus 15 percent who disagreed.
- 72 percent disagree with the proposition that “Employers in the U.S. should be required to provide health insurance to ALL their employees”; 20 percent agreed.
- 70 percent believe the typical American saves too little; 0 percent believe we save too much.
- 70 percent agreed that “The U.S. should allow payments to organ donors and their families,” while 16 percent disagreed.
To learn more about why the economists are right about free trade, see my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization.
20-somethings Will Pay for Big Government
A front-page Washington Post story today notes that the cost of Obama-style health care reform will fall disproportionately on young adults.
Younger workers are typically more healthy than the population at large, and a significant share of them quite rationally choose not to buy health insurance, as my colleague Mike Tanner explains in a recent op-ed. The major health care plans on the table in Washington would force them to buy coverage. As the Post story explains:
Drafting young adults into any health-care reform package is crucial to paying for it. As low-cost additions to insurance pools, young adults would help dilute the expense of covering older, sicker people. Depending on how Congress requires insurers to price their policies, this group could even wind up paying disproportionately hefty premiums—effectively subsidizing coverage for their parents.
I’m beginning to see a pattern. Those same young workers will be forced to pay the bills for soaring Social Security and Medicare expenditures when the Baby Boomers begin retiring en masse a decade from now. And of course, they will be the ones paying off the $9 trillion in additional federal debt expected to be wracked up from the current explosion in federal spending.
I always thought parents were supposed to support their kids, not saddle them with bigger bills and huge debts.
Filed under: General; Health, Welfare & Entitlements
Rep. Flake’s Wise Counsel on the Tire Tariff
Earlier today, Congressman Jeff Flake, Arizona Republican, sent a letter to President Obama urging him to reconsider his decision to impose a 35 percent tariff on tires imported from China.
Rep. Flake makes all the right points in his letter, reminding the president that:
Your decision to impose duties on Chinese tires is likely to encourage other domestic industries to file their own petitions for relief under Section 421. The potential for an endless cycle of U.S. restrictions and subsequent retaliation from China is the last thing our economic recovery needs.
I wish there were more members of Congress like Rep. Flake. Our Trade Vote Records feature on our web site offers a searchable data base of all major trade votes going back to the mid-1990s. Our data base confirms that Rep. Flake is the most consistent supporter in all of Congress in opposing both subsidies and barriers to trade.
The president should heed Rep. Flake’s wise letter.
Filed under: International Economics and Development; Trade and Immigration
Obama’s Tire Tariff Could Raise Prices by 20 to 30 Percent
President Obama’s decision to impose a 35 percent tariff on imported tires from China was not an act of statesmanship. The White House admitted as much by announcing its decision at 10 p.m. on Friday evening in order to minimize news coverage.
A few union leaders are cheering, but in just about every other way our country is worse off. Among the biggest losers will be low-income American families. The tariffs apply to lower-end tires that sell for $50 or $60 each, compared to $200 for higher-end tires. As The Wall Street Journal reported this morning:
The low end of the market will feel the impact of the tariff most, as U.S. manufacturers, who joined the Chinese in opposing the tariffs, have said it isn’t profitable to produce inexpensive tires in domestic plants.
“I think within the next 60 days you’ll see some pretty significant price increases,” said Jim Mayfield, president of Del-Nat Tire Corp. of Memphis, Tenn., a large importer and distributor of Chinese tires. He estimates prices for “entry-level” tires could increase 20% to 30%.
The anti-poor bias of U.S. tariffs is one of the themes of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization. With his decision Friday, President Obama has revealed himself to be a friend of the status quo.
Filed under: International Economics and Development; Trade and Immigration
A Flat Tire for Low-Income Drivers?
Will the President raise taxes on new tires?
President Obama will need to decide any day now whether to impose tariffs on lower-end automobile tires imported from China. As my colleague Dan Ikenson has ably argued, the decision will tell us much about whether the president believes trade policy should serve the general interest of all Americans, or whether it is simply a political tool to satisfy key constituencies.
Neglected in the news coverage of the pending decision is the impact it could have on consumers. The imported tires targeted by this Section 421 case are of the cheaper variety, the kind that low-income Americans would buy to keep their cars on the road during a recession. If the president decides to impose tariffs, his union supporters will cheer, but “working families’ will find it more difficult to keep their cars running safely.
A central theme of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, is that import competition is a working family’s best friend, especially imports from China. As I write in an excerpt published in today’s Washington Examiner,
Imports from China have delivered lower prices on goods that matter most to the poor, helping to offset other forces in our economy that tend to widen income inequality. …
Imposing steep tariffs on imports from China would, of course, hurt producers and workers in China, but it would also punish millions of American consumers through higher prices for shoes, clothing, toys, sporting goods, bicycles, TVs, radios, stereos, and personal and laptop computers.
We will see shortly if President Obama will punish low-income Americans who drive.
In Massachusetts, the Rule of Law Dies
Lawmakers in the Bay State are rushing to change state law to make sure the late Sen. Edward Kennedy’s seat is filled as soon as possible with a reliable Democratic successor.
Never mind that as recently as 2004 the same state legislature had changed state law to mandate that a vacant Senate seat could only be filled by a special election to be held within five months of the vacancy.
Before then, as in most other states, vacancies were filled by an appointment of the governor, with the seat coming up for a vote at the next federal election. But in 2004, the Democratic legislature changed the law to prevent then-governor Mitt Romney, a Republican, from naming a Republican to replace Democratic Sen. John Kerry if he were to be elected president. Kerry lost to George W. Bush, but the law remained on the books.
That was then; now is now. With Democrats in Washington wanting to maintain their 60-vote caucus in the Senate, a five-month delay to let the people of Massachusetts actually vote on who will replace Kennedy has become an intolerable roadblock to progress. According to a report from Bloomberg News this morning, the Democratically-dominated legislature in Massachusetts is about to change the law back to allow the now-Democratic governor to appoint a successor within a month.
This is a textbook example of how politicians routinely ignore The Rule of Law in pursuit of political aims.
In his book, The Road to Serfdom, Friedrich Hayek devoted an entire chapter to the importance of the rule of law to a free society. “Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principles know as the Rule of Law,” Hayek wrote. He defined the phrase to mean “that government in all its actions is bound by rules fixed and announced beforehand,” and not subject to be changed arbitrarily depending on circumstances.
The Bloomberg story contained a less scholarly but equally sound critique of what is going on in Massachusetts: “It shows Democrats don’t care about principle,” said Massachusetts House Minority Leader Bradley Jones, a North Reading Republican. “They don’t care about debate. They don’t care about the rules. It really is disgusting.”
Have Mexican Dishwashers Brought California to Its Knees?
An article published this week by National Review magazine blames the many problems of California on—take a guess—high taxes, over-regulation of business, runaway state spending, an expansive welfare state? Try none of the above. The article, by Alex Alexiev of the Hudson Institute, puts the blame on the backs of low-skilled, illegal immigrants from Mexico and the federal government for not keeping them out.
Titled “Catching Up to Mexico: Illegal immigration is depleting California’s human capital and ravaging its economy,” the article endorses high-skilled immigration to the state while rejecting the influx of “the poorly educated, the unskilled, and the illiterate” immigrants that enter illegally from Mexico and elsewhere in Latin America.
Before swallowing the article’s thesis, consider two thoughts:
One, if low-skilled, illegal immigration is the single greatest cause of California’s woes, how does the author explain the relative success of Texas? As a survey in the July 11 issue of The Economist magazine explained, smaller-government Texas has avoided many of the problems of California while outperforming most of the rest of the country in job creation and economic growth. And Texas has managed to do this with an illegal immigrant population that rivals California’s as a share of its population.
Two, low-skilled immigrants actually enhance the human capital of native-born Americans by allowing us to move up the occupational ladder to jobs that are more productive and better paying. In a new study from the Cato Institute, titled “Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” this phenomenon is called the “occupational mix effect” and it translates into tens of billions of dollars of benefits to U.S. households.
Our new study, authored by economists Peter Dixon and Maureen Rimmer, found that legalization of low-skilled immigration would boost the incomes of American households by $180 billion, while further restricting such immigration would reduce the incomes of U.S. families by $80 billion.
That is a quarter of a trillion dollar difference between following the policy advice of National Review and that of the Cato Institute. Last time I checked, that is still real money, even in Washington.
The President Drops by to Tout Immigration Reform
I’m back at my desk after a meeting this afternoon at the White House on comprehensive immigration reform. [For small fish like me, "the White House" never means the Oval Office or the West Wing but the Eisenhower Executive Office Building next door.] The meeting was presided over by Homeland Security Secretary Janet Napolitano, and included about 100 representatives of groups interested in reforming the current system. It also featured a surprise guest speaker.
The meeting began with Secretary Napolitano expressing the administration’s commitment to comprehensive immigration reform, a goal that I have been advocating for several years. The phrase has come to mean legalization of low-skilled immigrants, both those already living here illegally and future inflows of workers, with the promise of more vigorous enforcement against remaining illegal immigrants and those who hire them.
After the secretary’s opening remarks we broke up into smaller roundtable discussions of about 15 people each moderated by DHS officials. In our group I made the point that any reform worthy of the name must include a temporary worker program with a sufficient number of visas to meet the future labor-force needs of our economy. I invited those around the table to read our latest study, “Restriction or Legalization?: Measuring the Benefits of Immigration Reform,” that finds significant income gains ($180 billion, anyone?) for U.S. households from legalization.
After the roundtables, we reconvened in the auditorium where the secretary began to summarize the main points discussed in the breakouts groups. Then, with the usual bodyguard of Secret Service agents, President Obama entered the auditorium and strode to the podium about 20 feet from where I was sitting.
Speaking in generalities, the president said his administration is committed to an immigration policy that is true to “our history as a nation of immigrants and a nation of laws.” He said he had attended a “terrific bipartisan meeting” on immigration reform that included Republican Senators John McCain (AZ), Lindsey Graham (SC) and Jeff Sessions (AL). The president said we need “a legislative solution to a broken immigrant system,” which I interpreted hopefully to be an acknowledgment that ramped up enforcement alone will not solve illegal immigration. He concluded by saying, “Immigration is a problem begging to be fixed.”
For those of us who want to legalize low-skilled immigrant labor, President Obama’s words were short on specifics but they were mostly pointing in the right direction. According to other people at the meeting, the chairman of the Senate Judiciary Committee, Patrick Leahy of Vermont, has said the committee will mark up and vote on an immigration reform bill sometime after returning from the August recess, and Senate Majority Leader Harry Reid has said he will schedule a floor debate and vote before the end of the year. Perhaps the third attempt at passing comprehensive immigration reform will be a success after failed efforts in 2006 and 2007.
Stay tuned.
Filed under: International Economics and Development; Trade and Immigration
Obama Administration Sides With Special Interests and Status Quo on Sugar Imports
Pardon me while I pile on the post earlier today by my colleague Sallie James about the Obama administration refusing to allow more sugar to be imported to the United States. The U.S. Department of Agriculture this week declined to relax the quotas the federal government imposes on imported sugar despite soaring domestic prices and understandable complaints from U.S. confectioners and other sugar-consuming businesses about potential shortages.
For all his talk about change, President Barack Obama has shown no inclination to pursue meaningful reform of U.S. agricultural programs. He supported the subsidy-laden and protectionist farm bill that finally passed Congress in 2008. On the eve of the U.S. presidential election in October 2008, he wrote a letter to the U.S. sugar industry reminding growers that they were one special interest that had nothing to fear from an Obama administration.
In his letter, he offered the sugar lobby this assurance:
With respect to the sugar program specifically, while it’s true I have had concerns about the program, I will commit to listening and working with you in the future to ensure that we have a safety net that works for all of agriculture.
He then went on to criticize his opponent John McCain for opposing the farm bill and voting consistently against the sugar program (or, as Obama put it, “against sugar growers”).
In my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, I call the sugar program “the poster boy for self-damaging protectionism.” As I write in the book,
When the program is not raising prices for consumers at the store, it is savaging the bottom line for American companies. Artificially high domestic sugar prices raise the cost of production for refined sugar, candy and other confectionary products, chocolate and cocoa products, chewing gum, bread and other bakery products, cookies and crackers, and frozen bakery goods. Higher costs cut into profits and competitiveness, putting thousands of jobs in jeopardy.
If the president is looking for good bedtime reading on why he should dump the sugar program, I suggest he go straight to pages 147, 154-55, 160-62, and 170-72.
GAO Finds that Trade Agreements Promote Trade
The Government Accountability Office (GAO) released a report today that found that four trade agreements implemented during the Bush administration “have largely accomplished the U.S. objectives of achieving better access to markets and strengthening trade rules, and have resulted in increased trade.”
That is a finding that will be controversial only to the most hardened opponents of trade liberalization.
The GAO examined trade agreements with Jordan, Chile, Singapore, and Morocco, all enacted since 2001. Here’s the nut graph from the report:
While varying in details, the FTAs have all eliminated import taxes, lowered obstacles to U.S. services such as banking, increased protection of U.S. intellectual property rights abroad, and strengthened rules to ensure government fairness and transparency. Overall merchandise trade between the United States and partner countries has substantially grown, with increases ranging from 42 percent to 259 percent. Services trade, foreign direct investment, and U.S. affiliate sales in the largest partners also rose.
No big news here. Trade agreements are supposed to promote more trade, and each one of these agreements has delivered on that central objective. They have delivered the “level playing field” between U.S. producers and those in the FTA countries that members of Congress are always demanding. And as we have amply documented through the years, more liberalized trade delivers faster growth, more consumer choice, better jobs, and higher living standards.
Opponents of trade have attempted to thwart such a straight-forward agenda by demanding that trade agreements become vehicles for enforcing more stringent labor and environmental standards in the partner countries. On this front, the GAO found that “FTA negotiations spurred some labor reforms in each of the selected partners, according to U.S. and partner officials, but progress has been uneven and U.S. engagement minimal.”
Critics will interpret this as a failure, but it really shows the limitations of FTAs as a club for imposing our social standards on what are often less developed countries. After all, we are talking about internal regulations of sovereign countries. The real question is not whether every provision of these agreements has been fully enforced, but whether most people in the participating countries are better off than they would have been without the increased trade promoted by these agreements. As the GAO report confirms, the answer is a clear, “Yes.”
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