Free-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.
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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.
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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.
calebjhull
February 24, 2014
I don’t understand why we are moving further away from a free market when free markets or very close to free markets have succeeded in the past
David Miller
February 24, 2014
Return as the global leader supporting free-trade? Are we not the leading the support on free trade right now? If not the United States than then who is?
Bert Wheeler
February 24, 2014
David – good question. If you look at the Heritage’s Index of economic freedom 2013 (trade freedom is an important part of the index) you see that the US is tied for 37th among the nations ranked. Hong Kong is 1st. The following is the methodology used:
Trade freedom is a composite measure of the absence of tariff and non-tariff barriers that affect imports and exports of goods and services. The trade freedom score is based on two inputs:
The trade-weighted average tariff rate and
Non-tariff barriers (NTBs).
Different imports entering a country can, and often do, face different tariffs. The weighted average tariff uses weights for each tariff based on the share of imports for each good. Weighted average tariffs are a purely quantitative measure and account for the basic calculation of the score using the following equation:
Trade Freedomi = (((Tariffmax–Tariffi )/(Tariffmax–Tariffmin )) * 100) – NTBi
where Trade Freedomi represents the trade freedom in country i; Tariffmax and Tariffmin represent the upper and lower bounds for tariff rates (%); and Tariffi represents the weighted average tariff rate (%) in country i. The minimum tariff is naturally zero percent, and the upper bound was set as 50 percent. An NTB penalty is then subtracted from the base score.
Josh Petrel
February 24, 2014
It is interesting that President Obama and past presidents have gone against the constitution when it comes to fast track. Fast track has only been institutionalized in our nation 16 times, often to act in favor of controversial trade acts. Fast track is allowing the executive branch to control the voting schedule of congress. Overall, fast track allows for a dramatic shift in the power of branches in our government.
Andrew B Robertson
February 24, 2014
I am surprised that both Republicans and Democrats are not racing to support this bill. With the elections only a few months away, I would have assumed that politicians of all kinds would be doing practically anything to make it look like they were key players in doing something to boost the economy.
Peter Martin
March 25, 2014
I do not understand why President Obama has requested to fast track these trade deals? It seems to me that the benefit these two trade bills would be a unanimous decision by anyone in Congress and render a fast track unnecessary. Regardless, it is extremely important for the United States to recapture its position as the world leader in free-trade.
bethanygustin
May 1, 2014
It is becoming more and more obvious that a contradiction on any particular issue between the president and democratic congressional leaders is intended to cast the president in the best light. Since a free trade agreement would help the American economy and be beneficial in a free capitalist society, it would be at odds with the “fundamental change” promised by the president. Whatever the apparent political posturing seems to be on the surface, the underlying change goes on.