Tear Down These Tariffs

Column: The economic, diplomatic, and political case for the Trans-Pacific Partnership

Ports of Los Angeles
Ports of Los Angeles / AP
April 24, 2015

Now she knows how I feel. In a statement posted to her campaign website, Sen. Elizabeth Warren of Massachusetts laments that the Obama administration has kept secret the details of the Trans-Pacific Partnership—TPP for short—the decade-in-the-making free trade agreement between 12 Pacific Rim countries that will soon be put to a vote in Congress. "If the American people would be opposed to a trade agreement if they saw it," she writes in bolded text, "then that agreement should not become law of the United States."

Imagine: The White House pushing a dangerous agreement through Congress by hiding, or dissembling about, the details. Shocking.

The looming Iran deal is a far better target for Warren’s outrage. Her fear of TPP, shared by populists left and right, is misplaced. There may be reasons for her union donors to oppose the trade agreement—they dislike competition because it reduces their ranks, and hence their dues. But for classical liberals in general, and for conservative Republicans in particular, the argument for TPP is solid. Economically, diplomatically, and politically, it deserves our assent.

The economic costs of free trade are real, but so are the benefits. It’s a tic of protectionists that they focus on the former truth and ignore the latter one. One center-right opponent of TPP says "100,000 jobs have been directly lost" thanks to a 2012 agreement with South Korea. He provided no citation, so I looked up the figure; it comes from a study produced by a union-backed think tank. Even if this number is accurate, it has to be weighed against the millions of jobs that have been created in the meantime, as well as the U.S. products bought as a consequence of Korean job growth. I call that a net-plus.

It’s an economic truism, known for centuries, that trade in a free economy is not a zero-sum game. The wealth of a newly prosperous Asia comes back to the United States through foreign direct investment and consumer spending and tourists eager to buy. And the vast, tumultuous, innovative American economy is more than capable of absorbing shocks.

No less an eminence than Paul Krugman writes, "I don’t think the proposal is likely to be the terrible, worker-destroying pact some progressives assert." The world economy is already open; "almost everyone exaggerates the importance of trade policy."

But Krugman opposes TPP. Why? "Because as with many ‘trade’ deals in recent years, the intellectual property aspects are more important than the trade aspects." Krugman doesn’t like the arrangement because the rights of U.S. copyright holders would be strengthened. I guess that’s a reason like any other; it’s just not a persuasive one.

If the public has its doubts about free trade, the reason has to be China. The opening of China’s economy in the late 1990s and 2000s was a different sort of experience than entering into the North American Free Trade Agreement in 1993: an economic boom didn’t follow Chinese integration into global markets, and America’s global influence didn’t wax but waned. Introducing a labor pool of more than a billion unskilled workers had a tremendous effect; one study found that "the increase in U.S. imports from China, which accelerated after 2000, was a major force behind recent reductions in U.S. manufacturing employment and that through input-out linkages with the rest of the economy this negative trade shock has helped suppress overall U.S. job growth."

The low-cost imports were a benefit to domestic consumers, but the tradeoff was in manufacturing losses—a tradeoff made worse for those affected by a flood of unskilled workers from south of the border. The U.S. economy has by now probably adjusted to China’s rise; the Communist dictatorship’s economy is slowing, and Chinese wages have increased. Still, America ought to be far tougher in its trade negotiations with Beijing, taking into account Chinese mercantilism, espionage, and human rights abuses. Who you trade with matters.

Which is one of the reasons I support TPP. China isn’t a part of it. I’d have reservations about ceding to a strategic adversary more sovereignty and riches and access to American industry. But the parties to this agreement are our allies, and most are democracies.  A trade deal of this size is more than an economic arrangement; it’s a political arrangement with global consequences. America’s allies are worried about our listlessness, drift, ambivalence; the way Obama draws red lines but doesn’t enforce them; the eagerness with which he solicits rogue regimes. Approving TPP would boost their confidence in U.S. leadership and the liberal world order.

As it builds weaponry and stakes territorial claims, China is also asserting its international position as a counterweight to the United States. The infrastructure bank it recently established is clearly designed to undermine or replace U.S. economic power in East Asia, and its Silk Road plan is a balance against the U.S.-India alliance.

The TPP is therefore a demonstration of American commitment, a means of reassuring friends, a way to promote cooperation among other powers such as Japan and Korea. Obama and his administration have long spoken of a "pivot to Asia" that never really seems to take place; and though a pivot isn’t the right term—it implies a turning away from other important regions such as the Middle East and Europe—the TPP is nevertheless a reminder that the United States remains engaged in the Pacific.

The economic effects of TPP will be positive on the margin. The diplomatic rewards will be great. And for conservatives, there’s a bonus: TPP splinters the opposition. What Paul Krugman most dislikes about it isn’t its anti-piracy measures but its controversial status among Democrats: "Why, exactly," he asks, "should the Obama administration spend any political capital—alienating labor, disillusioning progressive activists—over such a deal?"

Because here—I can’t believe I’m writing these words—the Obama administration sees the national interest as more important than the illusions of "progressive activists." The Warren-Obama grudge match is more than entertaining. It’s a test for the Democratic Party, a measure of whether it puts growth and U.S. power ahead of special interests. Which is why Hillary Clinton is waffling: The TPP is one issue on which she can’t be with both Senator Warren, who she needs to keep out of the primary, and with President Obama, who she needs to win it.

Trade plays the same role in the Democratic Party as immigration in the Republican Party: It’s a wedge between the corporate wing and the grassroots. Clinton’s instincts on TPP are probably more with Lloyd Blankfein than with Richard Trumka, but she’ll need the enthusiastic support of both men if she’s to become president. Back in 2008, the Democrats could pander to labor on trade because they were out of power; they don’t have the same luxury in 2015. So the Democratic frontrunner has a hard choice to make, one that will leave many voters unhappy.

What to do? Relax on the futon, order a banh mi sandwich, have a Foster’s, and watch the Democrats commit seppuku on your Samsung HDTV. It’ll be a hell of a show.