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IN CASE YOU MISSED IT: INVESTOR'S BUSINESS DAILY OP/ED: The Conservative Case For Passing Trade Promotion Authority


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Washington, May 11, 2015 | comments

he unions are out to kill a U.S. trade deal with Asia, and they are now joined in an odd-bedfellows alliance with the Pat Buchanan protectionist wing on the right. For this reason the coming vote in Congress on trade promotion authority represents an economic gut-check moment for the GOP.

Passage of this law would allow the completion of the Trans-Pacific Partnership, a free-trade agreement that would cover most of our Asian trading partners (excluding China). The U.S.-Asia trade zone would rival the European Union in size. It would be good for both sides of the Pacific.

There are some things Americans do better than foreigners, and there are other things foreigners do better than Americans. We and they would be foolish in the extreme if we didn't sell foreigners those things we make better than they do in exchange for the things they make better than we do.

This is what David Ricardo called comparative advantage — a classic win-win.

TPA has been the major vehicle by which major free trade agreements over the last 30 years, including the seminal North American Free Trade Agreement (NAFTA) and others with Asian nations, have been approved.

These trade bills have lowered tariffs here in the U.S., thus benefiting American consumers (Wal-Mart's everyday low prices could hardly exist without trade) while expanding export markets for American producers.

Some believe that TPA takes legislative power away from Congress. But it doesn't. TPA simply facilitates negotiating a trade deal and puts it on a fast track that still requires congressional debate and an up-or-down House and Senate vote for final approval.

Republicans have a natural suspicion of what kind of trade agreement Barack Obama will deliver. He's proven himself to be anything but a shrewd negotiator when it comes to foreign affairs — think Cuba. And others worry that he could abuse his executive authority, as he's done on immigration, the IRS and the health care law. But any bad deal that Obama negotiates can and should be voted down by Congress on final ratification. Republicans have large majorities in both houses of Congress that serve as a backstop to prevent a bad bill. But without TPA the process stalls out altogether.

It now appears that due to lobbying from the greens and the labor unions, few Democrats will sign on to a bill that gives the president of their own party more trade-making authority.

Republicans can be excused for wondering why they have to do all the political heavy lifting to put more power into this president's hands when Obama won't lobby for votes from his own party the way Bill Clinton did so effectively in the '90s to get NAFTA and other deals done. The modern Democratic Party, alas, is no longer the party of free-traders like FDR, JFK and Clinton. That's sad.

We worry that some Republicans in Congress want to make the same mistake and go the direction of Herbert Hoover on shutting down trade.

Hoover was the last Republican in the White House who was a protectionist (and remember that Smoot and Hawley, of the infamous Smoot-Hawley tariff bill that wrecked the world economy in the 1930s, were Republicans too). This didn't turn out too well for the country — or the GOP, for that matter.

The protectionist arguments have been consistently wrong: Employment won't decline, wages won't drop, foreigners won't exploit children and there won't be a giant sucking sound coming out of Mexico due to freer trade.

About 1 in 5 manufacturing jobs in the U.S. is tied to exports. With America now enjoying the lowest energy costs among all our industrial competitors, production costs are falling — even with higher wages here. So freer trade will help our manufacturing workers.

The pay of workers in trade-dominated industries is 15% to 20% higher than for workers in industries insulated from foreign competition. This is in part due to industries trading in global markets needing to be more efficient and becoming more capital intensive — which means higher pay.

Over the past decade (2003-13), U.S. exports have doubled from $1.04 trillion to $2.3 trillion. A Heritage Foundation study finds, "International trade has boosted annual U.S. income by at least 10 percentage points of GDP relative to what it would have been without global engagement, which translates into an aggregate gain of at least $1.7 trillion in 2013, or an average gain of more than $13,600 per U.S. household per year." Trade makes us richer, not poorer.

This is not to say we'd blindly back any trade pact that President Obama negotiates. There is a legitimate worry that a final deal would get saddled down with billions of dollars for "trade adjustment assistance" (TAA), which is welfare for the laid-off.

With NAFTA, this was a legitimate concession to get the needed votes of Democrats to seal a deal that has raised living standards in the region by hundreds of billions of dollars. But given that Democrats aren't likely to deliver many votes anyway, it's not clear why the GOP should swallow TAA costs as part of any deal.

Obama may use trade deals to force foreign nations to "harmonize" environmental and labor regulations, which often means adding new regulatory burdens everywhere. A total deal-killer would be if Obama tried to add greenhouse gas emission-reduction requirements as a condition of tariff reductions. We would also oppose retaliatory measures in response to trade agreement violations. If freer trade is better, why on Earth would anyone ever want to impose more trade barriers as a punishment for not removing free trade barriers?

Some conservatives have argued that free trade agreements are a form of corporate welfare for big and rich business interests. Actually, reducing trade barriers is the opposite of corporate favoritism: It cuts down the special-interest protectionist measures put in place by politically powerful industry lobbyists. Free trade creates a level playing field.

Most importantly, free trade is one of the five pillars of growth — the other four being low tax rates, spending restraint, sound money and lighter regulation. If Republicans want to be the pro-growth party, they must be on the side of trade deals that enable America to compete rather than retreat.

 Kudlow, Laffer and Moore are the principals of the Committee to Unleash American Prosperity.

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