Friday, May 15, 2015

"We Are Already Living in a Free Trade World"

Fareed Zakaria makes an argument in favor of the Trans Pacific Partnership (TPP) trade agreement.
For those who worry that, after the TPP, the United States would have to compete against low-wage countries — it’s too late. As Zachary Karabell notes, we are already living in a free-trade world.
That view is echoed by Paul Krugman.
The first thing you need to know about trade deals in general is that they aren’t what they used to be. The glory days of trade negotiations — the days of deals like the Kennedy Round of the 1960s, which sharply reduced tariffs around the world — are long behind us...

There’s a lot of hype about T.P.P., from both supporters and opponents. Supporters like to talk about the fact that the countries at the negotiating table comprise around 40 percent of the world economy, which they imply means that the agreement would be hugely significant. But trade among these players is already fairly free, so the T.P.P. wouldn’t make that much difference.

Meanwhile, opponents portray the T.P.P. as a huge plot, suggesting that it would destroy national sovereignty and transfer all the power to corporations. This, too, is hugely overblown. Corporate interests would get somewhat more ability to seek legal recourse against government actions, but, no, the Obama administration isn’t secretly bargaining away democracy.
In the article Zakaria linked to by Karabell is a fact of history that we rarely see acknowledged in these debates.
It was true that the American middle class enjoyed higher-wages relative to costs until the end of the 1970s, before NAFTA and the World Trade Organization, but that was when the United States accounted for a disproportionate share of the global economy and of global trade in the decades after World War II. The world then became a more diverse and competitive place, which has indeed put downward pressure on U.S. wages as companies have taken advantage of the glories of the information technology revolution to disperse supply chains.
It is true that a globalized economy has hurt American workers. That's because this country no longer has a monopoly on being the broker of the world's goods and services as we did at the end of WWII. Liberals are right to point to the development of the labor movement as a factor in the rise of this country's middle class. But we also have to acknowledge that happened at a time when a world war (combined with the debilitating effects of colonialism) meant that we had very little by way of competition. All that was bound to change...eventually. Liberal arguments wrapped up in trying to recreate the past on this one can wind up sounding an awful lot like conservative arguments against opening diplomatic ties with Cuba. It's time to move on.

Ultimately the question isn't whether or not we can stop these changes from happening. It is rather, how do we lift up American workers in light of them? President Obama suggests that keeping foreign markets open to our goods and services will help. But I think he would admit that an agreement like TPP will only do that marginally. Domestic solutions that have to do with raising the minimum wage, free community college, investments in infrastructure, etc. are where the real action is on that issue.

Getting back to Zakaria's article, he hits on something I've been thinking about lately that might explain President Obama's robust support of TPP.
In an essay in Foreign Affairs in 1993 on the North American Free Trade Agreement, Paul Krugman said that NAFTA was not going to have much of an impact on the vast U.S. economy one way or the other. It was really about foreign policy. The economic effects of NAFTA have been heavily debated, but the foreign policy consequences are clear — and clearly positive.
Zakaria goes on to talk about how NAFTA had a positive impact on the relationship between the U.S. and Mexico. But I was thinking much bigger than that.

We've all seen how President Obama has used the interconnectivity of trade as a way to respond to Russia's incursion into the Ukraine and as a way to get Iran to the negotiating table on their nuclear weapons program. And so I was reminded of something Max Fisher wrote about the former.
The lesson that Putin is learning is that Russia depends on the global economy, whether it likes it or not, and the global economy doesn't like it when you go invading other countries and tempting the richest nations in the world to maybe consider sanctioning you. This is actually a significant change for Russia, which at the height of its Soviet power was not integrated into the global economy and so didn't have to worry about things like investor sentiment. But now it is and it does.

What's cool about this is that it theoretically could apply to lots of other possible acts of international aggression around the world. This is something that economists and political scientists have been predicting since World War One: that integrating all the national economies into the global economy wouldn't just make all of us richer; it would make war more economically painful for the people starting it and thus less likely to happen.
In other words, the more countries around the globe recognize our interconnectivity via things like trade, the less likely we will be to go to war with one another. I suspect that is exactly what President Obama has been aiming for all along.
For human history has often been a record of nations and tribes -- and, yes, religions -- subjugating one another in pursuit of their own interests. Yet in this new age, such attitudes are self-defeating. Given our interdependence, any world order that elevates one nation or group of people over another will inevitably fail. So whatever we think of the past, we must not be prisoners to it. Our problems must be dealt with through partnership; our progress must be shared.

5 comments:

  1. Thank you! This has been my thinking as well, but you expressed it much more thoroughly than I could have. Here's another foreign-policy benefit of free trade: If people in poorer countries have good jobs that feed, clothe, and shelter their families, they are less likely to turn to violence and terrorism. Health benefits: Raising standards of living in poorer countries will help prevent outbreaks of infectious diseases like bird flu that can "go viral." It really is multidimensional chess, but you have to look at the WHOLE board, to figure out the best move.

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    1. Excellent points!!!

      Sometimes I feel like the anti-TPP crowd are so obsessed with being angry at corporations that they can't see anything else. So they completely miss the WHOLE board.

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  2. This is why you should be a much more heard voice than you are, Nancy. Your ability to place things in this kind of context is a real gift.

    Gotta say that over the last few months I'm getting a real education about just how reactionary and conservative the left can be. This post really underscores that and helps me articulate this uneasiness I feel much better. I've have been finding myself really not liking Labor locally, and this is part of that equation. Their desire to hold on to the way things were in the 50s to 70s instead of finding a way to deal with the way things are now is blinding them to better options. Brilliant stuff, Nancy.

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  3. Or, as Bob Cesca tweeted (on the 25th of April):

    "Trade prevents war".

    to which I replied:

    "Exhibit 1: The European Union".

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