The president needs the authority to finish two vital trade agreements. Please give it to him.
The Wall Street Journal; Feb. 19, 2014
By Myron Brilliant
President Obama in his State of the Union address called for Congress to grant him Trade Promotion Authority to “open new markets to new goods stamped ‘Made in the USA.’ ” The next day Senate Majority Leader Harry Reid warned that “Everyone would be well-advised not to push this right now.” House Minority Leader Nancy Pelosi said last Wednesday that the bipartisan TPA bill introduced in January was “out of the question.”
TPA, often referred to as “fast-track,” requires the executive and legislative branches to work together on trade agreements. Under TPA, Congress sets negotiating objectives, the administration consults frequently with legislators, and any agreement is subject to an up-or-down vote.
The opposition to TPA is unfortunate, as new agreements like those being negotiated with European and Asia-Pacific countries would help American workers, farmers and companies. Freer trade would also be a boon to economic productivity, creating more jobs at good wages.
Imported manufactured goods face U.S. tariffs averaging a mere 2%, with a few exceptions for protected industries such as apparel, footwear and sugar. But U.S. manufacturers and farmers often face far higher tariffs and other steep trade barriers when entering foreign markets, beginning every game a dozen points behind.
Take the U.S. auto industry, which has made a comeback after the recession. Automobiles made in the U.S. face a 35% import tariff in Malaysia, shutting American manufacturers out of the market. Though the U.S. is the largest agricultural exporter in the world, Vietnam levies double- and triple-digit duties on U.S. farm goods. The country recently raised taxes on a number of products ranging from walnuts to tomato sauce. Express shippers, insurers and banks are at a major disadvantage in Japan, where regulations prop up a state-owned company called Japan Post Holdings.
The interference damages the U.S. economy. In 2010, the Commerce Department estimated that foreign tariffs reduce the earnings of U.S. factory workers by as much as 12%. The impact spreads to other sectors such as agriculture due to non-tariff barriers including unscientific sanitary requirements. The way to fix these inequalities? New trade agreements that demand accountability and fairness.
Free trade agreements have eliminated disadvantages in the past. America’s 20 trade-agreement partners represent 10% of the global economy, but they buy nearly half of our exports. Citizens of these countries purchase 12 times more U.S. exports per capita than citizens of countries without trade agreements. The U.S. boasts a trade surplus in manufacturing, agriculture and services with these 20 partners, unlike the trade deficit it runs with the rest of the world.
American workers reap the benefits. Earnings are 18% higher for workers in factories that export than in those that don’t, according to a 2010 Commerce Department report.
Small businesses also stand to gain from freer trade. Large firms often find a way to work around foreign trade barriers, but tariffs are often a deal-breaker for small companies. Creating new trade agreements would significantly help the U.S.’s 300,000 small exporters.
TPA would give the administration the ability to finish the job in two ongoing trade negotiations. In Asia, the U.S. is taking part in talks for the Trans-Pacific Partnership, which includes 11 other Asia-Pacific countries. If ratified, the agreement could help upend barriers in Malaysia, Vietnam and Japan. Furthermore, the TPP would unleash economic growth for U.S. exports. Two billion Asians joined the middle class in the past 20 years, and another 1.2 billion will do so by 2020, according to International Monetary Fund projections. The TPP will allow U.S. goods and services to be sold freely in these booming markets.
In Europe, the U.S. is talking with the European Union to negotiate a Transatlantic Trade and Investment Partnership. Trade between the U.S. and the EU reaches $1 trillion annually and employs 15 million Americans and Europeans. Even eliminating the relatively modest tariffs on U.S.-EU trade would boost our combined GDP by $180 billion within five years, according to a 2010 study by the European Centre for International Political Economy.
But to tackle any of these inequalities, Congress must first approve TPA. The Constitution grants Congress the authority to regulate international trade, but it gives the executive the authority to forge agreements with foreign governments. TPA allows each branch to perform its constitutional role.
Without TPA, U.S. exports will remain at a profound disadvantage. Renewing TPA would help restore fair competition in trade—and put economic growth in the U.S. ahead of partisan politics.
Mr. Brilliant is executive vice president and head of international affairs at the U.S. Chamber of Commerce.