At issue are concerns over the scope of the agreement and protections afforded for workers and the environment. Congressional Democrats, leery of the deal in light of what they see as a mixed record for NAFTA and other free trade agreements, are demanding increased protections. They are also Congressional Republicans oppose such measures, while the White House claims they are unnecessary.
What do you think? Would the Trans-Pacific Partnership be beneficial or detrimental to the US economy? Would you support measures proposed by Congressional Democrats to include increased protections for workers and the environment as a precondition for approving the new deal? Why?
The Trans-Pacific Partnership is a new trade deal that encompasses and accounts for 40 percent of the world’s economy. Proponents contend that the deal will increase US exports, drive down import costs, protect intellectual property rights, and establish minimum environmental and labor standards for participants. Opponents contend that the deal would undermine the influence of labor in the United States.
President Obama has sought to fast-track the new deal under a provision known as trade promotion authority. The move has created interesting alliances on both sides, with Congressional Republicans wanting to grant President Obama the authority. On the other side, liberal Democrats in Congress have found a partner in the Tea Party, promoting a populist message opposing the deal.
What do you think? What impact will the TPP have on the US economy? What are the benefits and the drawbacks? Should the deal be fast-tracked? Why?
Although the agreement must still be ratified by the Swiss parliament, the official signing ceremony took place during Chinese Preimier Li Keqiant’s visit to Switzerland last week. Li said that, “This free-trade deal is the first between China and a continental European economy, and the first with one of the 20 leading economies of the globe…This has huge meaning for global free-trade.”
The new agreement adds fuel to the discussion about the relative importance of multilateral versus bilateral trade agreements. When the World Trade Organization came into being in 1995, there was much celebration of its role in reducing global trade barriers. Now, almost 20 years later, the organization seems stuck in the past. It’s been unable to make progress on key issues like agricultural subsidies, and has not successfully concluded a round to talks since it was established…this despite promises to do so in Seattle (1999), Doha (2001), Cancún (2003), Geneva (2004), Paris (2005), Potsdam (2007), and so on. In the wake of its failure, countries seem more inclined to pursue regional and bilateral trade agreements instead.
The advantage of multilateral agreements is that they encourage the establishment of a more equal playing field and generally achieve a wider scope of liberalization. But they are difficult to successfully conclude, as the track record of the WTO suggests. Bilateral agreements, by contrast, permit countries to reach agreements and make progress on liberalizing international trade. But they are not without their critics.
“there is now a danger of creating a hodgepodge of inconsistent and partial bilateral agreements which may lower tariffs, but which also create new inefficiencies and dizzying complexities. A small electronics shop, for example, in the Philippines might import alarm clocks from China under one free trade agreement, calculators from Malaysia under another, and so on—each with its own obscure rules and mountains of paperwork—until it no longer even makes sense to take advantage of the trade agreements at all.”
Interestingly, Clinton called in the speech not for a return to the World Trade Organization or global negotiations, but to regional agreements like the Trans-Pacific Partnership.
More radical critiques of bilateral trade deals focus on the potential inequality between negotiating partners. According to its critics, the US Trade and Development Act (previously known as the African Growth and Opportunities Act, AGOA) was essentially a series of bilateral agreements between the United States and a number of developing countries across Africa that forced African countries to agree to develop stricter intellectual property systems than would otherwise have been required under the WTO agreement—and to refrain from criticizing US foreign policy—in exchange for lower tariffs on textile exports to the United States. By wielding its bilateral muscle, the United States was able to garner greater concessions from its trading partners than it might have been able to in a multilateral negotiation.
But as a result of the (ongoing) failure of the WTO, it seems likely that such bilateral and regional agreements are the wave of the future.
What do you think? Are multilateral trade agreements preferable to bilateral agreements? Take the poll or leave a comment below and let us know what you think.
President Obama shakes hands in the Oval Office with Xi Jinping, the current Vice President (and presumptive next President) of China.
President Obama welcomed Xi Jinping, China’s “president in waiting,” to the White House this week for a high profile visit. Obama warned the visiting leader that China must play by the rules of international trade, a comment reflecting American concerns about Chinese currency manipulation, intellectual property transgressions, and other barriers to free trade. But economic analyst Clyde Prestowitz questions the wisdom of Obama’s “lecture” in his latest blog post:
“It sounded right and fair and slightly tough as it was carefully crafted to do by top White House political advisers, and the president may even believe it. But he shouldn’t have said it.”
Why shouldn’t Obama have criticized China for not playing by the rules? Prestowitz argues that there are no universally agreed upon rules for international trade; rather, there are (at least) two different games being played simultaneously, by different actors, with different sets of rules. Some states embrace economic liberalism, or free-market capitalism, which emphasizes comparative advantage, free trade, and limited government intervention in economic affairs. Others–particularly those who are not benefiting from the trend toward greater globalization and free trade–favor mercantilist policies, which emphasize national wealth and the protection of domestic industries from foreign competition through tariffs and other trade barriers. Prestowitz spells out which parts of the world are playing each game:
“The global economy is, in fact, sharply divided between those who are playing the free trade game and those who are playing some form of mercantilism. Of course, there is a spectrum of attitudes and policies, but roughly speaking the Anglo/American countries, North America, and parts of Europe are playing free trade. Most of Asia, much of South America, the Middle East, Germany and parts of Europe are playing neo-mercantilism. It’s like watching tennis players trying to play a game with football players. It doesn’t work, and insisting on playing by the rules doesn’t help, because both sets of teams are playing by the rules — of their game.”
What do you think? Are America and Europe really playing by their own rules of free trade? Is free trade or mercantilism (or some combination of the two) a better approach for achieving prosperity? Does America have the right to tell China how to play the game of international trade?
The U.S. Congress is considering legislation that would retaliate against China for manipulating its currency to the detriment of U.S. jobs.
The United States runs a $273 billion annual trade deficit with China, meaning it imports much more than it exports to the rising Asian power. The Economic Policy Institute (EPI) recently estimated that this U.S.-China trade deficit cost the U.S. 2.8 million jobs between 2001 and 2010, with all 50 U.S. states affected by job losses in the manufacturing and services sectors. As EPI notes, “increases in U.S. exports tend to create jobs in the United States, and increases in imports tend to lead to job loss. Thus, a growing trade deficit signifies growing job loss.”
American leaders have increasingly blamed this trade deficit on China’s unwillingness to “play fair” when it comes to trade by keeping its currency’s value artificially low relative to the dollar. While a weak currency doesn’t sound like a good thing, it makes a country’s exports cheaper abroad and it makes other countries’ imports more expensive at home. This means goods and services produced in China are more competitive both in China and abroad, which creates jobs and economic growth in China and harms competing countries’ economic prospects.
In retaliation for China’s currency manipulation, the United States Congress is now considering legislation that would impose tariffs (essentially a tax) on Chinese imports. China has claimed that such action would violate the rules of the World Trade Organization, which focuses on lowering trade barriers worldwide, but Congressional supporters of the legislation dispute that. Proponents claim these steps could ultimately create up to 2 million American jobs. The Senate is in favor of the bill but House leaders have blasted it as “dangerous” and President Obama appears unenthusiastic but noncommittal. For its part, China has warned that such action could lead to a trade war, which would not be good for America’s economy. In New York Times editorial last week noted economist Paul Krugman downplayed the risks of a trade war:
“And the reality of the unemployment disaster is also my answer to those who warn that getting tough with China might unleash a trade war or damage world commercial diplomacy. Those are real risks, although I think they’re exaggerated. But they need to be set against the fact — not the mere possibility — that high unemployment is inflicting tremendous cumulative damage as we speak.”
What do you think? Should the United States get tough on China for its currency manipulation? Why is President Obama hesitant to join his fellow Democrats in supporting this legislation? What will be the economic and political consequences if the U.S. imposes tariffs on Chinese imports?
3. The counting process in the Afghan elections continues to drag on. Although incumbent President Hamid Karzai now has enough votes to win the disputed presidential election outright, according to the most recent results of the Independent Election Commission, widespread irregularities have led to calls for partial recounts. On Sunday, the IEC agreed to move forward with discussions on a recount, but it stopped short of spelling out precisely what votes would or would not be included. The Electoral Complains Commission, a body established by the United Nations to observe elections and investigate allegations of fraud, noted “clear and convincing” evidence of fraud and vote rigging in southern provinces which went heavily towards Karzai.
5. The government of Guatemala last week declared a “state of calamity” in response to the widespread hunger gripping the country. The World Food Programme estimated that the country would require an immediate shipment of 20 tons of food the worst affected areas in order to stave off starvation. Alvar Colom, Guatemala’s president, said that global climate change was affecting the El Niño, causing a massive drought in the northeastern portion of the country. But Colom was also critical of the high level of inequality in the country, observing that “There is food, but those who go hungry have no money to buy it.” Critics also note that poorly defined land rights, narcoviolence, and alleged corruption have also undermined food production. According to the World Food Programme, half of all children under five in Guatemala suffer from malnutrition.
4. The status of forces agreement between the United States and Iraqi signed last week faced its first real challenges, as thousands of protestors backed by Shia cleric Moqtada al-Sadr took to the streets on Friday in protest. The rally of at least 10,000 peple demanded the immediate withdrawal of American forces from Iraq. However, al-Sadr’s group does not appear to have the ability to defeat the agreement.
5. Local elections on Sunday in Venezuela are projected to presenet a challenge to incumbent president Hugo Chavez. The president’s party rode a tidal wave of support in 2004, when it won all but two governorships in the country. But opinion polls suggest he could lose between six and nine seats, undermining the president’s ability to deepen his revolutionary transformation of Venezuela.