Shot In the Foot?

Posted on February 24, 2014 by

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tradeFree-trade between individuals and nations is the backbone of economic growth. The more trade we have and the wider the markets for that trade, the more we will be able to develop and utilize productivity enhancing technological changes that further spur the economic engine. An article in the February 22 edition of The Economist:How to make the world 600 billion poorer” points to the failing of the Obama Administration to finalize two very important trade deals.

If he cannot drag Democrats back to their senses, the world will lose its best opportunity in two decades for a burst of liberalisation. It will also be a signal that America is giving up its role as defender of an open global economy in the same way that Mr Obama has retreated in foreign policy.

Reasonable estimates say that the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) could boost the world’s annual output by $600 billion—equivalent to adding another Saudi Arabia. Some $200 billion of that would accrue to America. And the actual gains could be even larger. The agreements would clear the way for freer trade in services, which account for most of rich countries’ GDP but only a small share of trade. Opening up trade in services could help reduce the cost of everything from shipping to banking, education and health care. Exposing professional occupations to the same global competition that factory workers have faced for decades could even strike a blow against the income inequality that Mr Obama so often decries.

The greatest risk of all is that the political momentum in America, having swung against free trade, will be hard to reverse.

President Obama urged Congress to pass Trade Promotion Authority, known as “fast track”, during his State of the Union address last month. Fast track would allow the President to present a trade bill to Congress for a simple up or down vote. However, both Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi are in opposition to fast track authority for President Obama. If our president is unable to complete these trade deals at this time, which is very likely given the looming midterm elections, he is missing a good opportunity for the United States to return as the global leader supporting free-trade. Or given his record on foreign policy, perhaps he’s completing a stealth policy to continue our nation’s slide to mediocrity.

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