Free Trade: O Reaps What He Sows

A recent WSJ story struck my eye as an excellent illustration of the concept that you reap what you sow.

The story reported that Senate Majority Leader Harry Reid (D-NV) -- normally Obama's loyal lickspittle -- had broken ranks with the White House on free trade.

The background is delicious.  Throughout his brief political career, Obama has parroted the line favored by big labor and leftist populists -- viz., that free trade "costs jobs," a view most economists dismiss as the "lump of labor" fallacy.  Yes, whenever goods flow in from another into ours, some jobs may be temporarily lost, but as more of our goods flow to that country, more jobs get created here, and as prices drop for American consumers, those consumers have more money to spend elsewhere, again creating more jobs.

Obama cheerfully used the lump of labor fallacy as a way to bash his then-primary opponent Hilary Clinton, whose husband had signed into law NAFA, which big labor and populist popinjays have always opposed.  And that Obama was quite serious in his opposition to free trade was shown by his actions in his first term in office.  He immediately began minor trade wars with Mexico and Canada -- wars that cost thousands of hapless Americans their jobs in order to protect a few hundred union jobs (unions that just by pure coincidence had funneled huge campaign donations to Obama).

Then the Obama administration stalled for several years the three free trade agreements (FTAs) that the Bush administration had negotiated but not secured passage of (with Colombia, Panama, and South Korea), allowing them to pass only late in his first term.  And Obama negotiated not one new FTA during his first term.

But last year, Obama decided to come out in favor of an FTA with the EU -- the Transatlantic Trade and Investment Partnership -- and one with a group of Asian nations -- the Trans-Pacific Partnership -- including Japan (though excluding China).  He has requested "fast track" authority from Congress.

When an administration has fast track authority, any FTA deal it negotiates must be essentially voted straight up or down by Congress. Without that authority, any FTA will face endless congressional amendments, which would invariably take the form of protectionist clauses pushed by various special interest groups that would gut the agreement -- leading to retaliation or rescission by the other countries.

However, Obama's call for fast track authority was immediately opposed by Reid, who said, "I'm against fast track. ... I think everyone would be well-advised just not to push this right now."  As John Cornyn (R-Tex.) put it, "[y]ou can kiss any new trade deals goodbye."

In fact, the final nails in the coffin of these two (and any other) FTAs are the growing number of Republicans who oppose them.  In 2002, with the last fast track bill, 27 House Republicans opposed free trade.  Now 60 of them do.

Unfortunately, some Republicans -- mainly the Tea Party ones -- are afraid of free trade for the usual populist economic reasons (the lump of labor fallacy, along with the failure to understand the concept of comparative advantage).  Some Republicans simply don't trust Obama to negotiate in good faith, fearing he may overly push the big labor agenda.  Some are essentially isolationists, fearful of any "foreign entanglements."  And -- to be honest -- some Republicans simply don't feel he deserves any help, given his hyper-partisan tenure in office.  This last feeling is understandable: if you spend 5 years demonizing people, you can't expect them to jump up and defend you when you suddenly need them.

The fact that the president isn't able to get congressional backing for fast track authority has led to some from frustration among our major tracking partners, especially the Japanese.  But then, this administration has been all about disappointing America's allies.  Nothing new there.

A big part of Obama's problem here is his sudden decision to come out in favor of FTAs with the EU and the Asian nations.  Why is he only now espousing the virtues of free trade, after pushing the populist mythology all this time?

The editorial board at the WSJ suspects that Obama and Reid are just playing a disingenuous game.  In this view, Obama and Reid are playing roles in a Kabuki Theater of the Absurd.  The president -- who really doesn't like free trade at all -- gets to pretend he does, so that he can shore up the support of allies abroad and get money from large, globally oriented corporations here, secure in the knowledge that his corrupt puppet Reid will block it.  This insures that big labor -- which genuinely hates free trade with a  monomaniacal zeal -- will not be offended, and will continue to shower the Democrats with hundreds of millions in campaign donations.

While this is certainly not implausible, I don't think that it is true.  I think that Obama really wants these deals, which he thinks he can negotiate in a big-labor-friendly fashion.  He is acutely aware of his plummeting poll numbers, caused in part by the manifest failure of ObamaCare, but also because of the obvious continuing weakness of the economy.  Labor force participation continues to plummet, middle-income wages to stagnate, and productivity and economic growth to lag, and an entire generation of young people are failing to realize their potential.  Even the obviously obtuse Obama is beginning to comprehend that his administration may well go down as the worst in contemporary American history, eclipsing even Carter's ruinous regime.  He seems to be finally waking up to the fact that economic isolationism has its costs.

And I think he views these FTA deals as "tame," in that they are with countries with which the U.S. already trades in a major way.

But the problem he faces is one of credibility.  As William Galston recently noted, Bill Clinton explicitly disavowed protectionism and isolationism when he was campaigning for office the first time.  And he showed he could work with the other party.  This gave him the credibility to push through Congress NAFTA, which had been proposed by Reagan and negotiated by the elder Bush.  It is to this day one of the two great achievements of Clinton's presidency (the other being significant welfare reform).  But Obama has repeatedly trashed NAFTA.

Ironically, Obama shares a major flaw with his predecessor, the younger Bush.  Bush had a marvelous record on free trade, signing more FTAs in his time in office than all other presidents combined.  But he never went to the people and articulated exactly why free trade is so beneficial.

Similarly, Obama has no track record of explaining the benefits of free trade.  His eleventh-hour conversion hardly inspires confidence in his party.  And his vicious partisanship has left him with only enmity in the opposing party.

It is doubtful he will succeed.  And our economy will be the big loser from his political incompetence.

Gary Jason is a philosopher, a senior editor of Liberty, and author of the forthcoming book Philosophic Thoughts: Essays on Logic and Philosophy (Peter Lang publishers).

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