By Howard Richman, Raymond Richman and Jesse Richman, Guest Bloggers
Supporters of Fast Track trade promotion authority are selling it with the same lies that were used to sell previous bad deals. In an April 22 commentary, Representative Paul Ryan and Senator Ted Cruz claimed that Fast Track would produce jobs by reducing America’s huge trade deficits. They are wrong, as the history of previous trade agreements shows. They wrote:
The American worker can compete with anybody, if given a fair chance. If you add up all 20 countries that the U.S. has a trade agreement with, American manufacturers run a $50 billion trade surplus with them. The problem is that not all countries have a trade agreement with the U.S.: American manufacturers run a $500 billion trade deficit with those nations.
Their $50-billion surplus number is deeply deceptive. It involves selecting some goods exports and imports while excluding others. A complete measure of the balance of trade for all goods indicates that the U.S. ran a deficit of 61.7 billion dollars in 2014 with our Free Trade Agreement (FTA) partners.
Even worse, our trade deficits with the FTA partners got worse after the free trade agreements were negotiated. In the year prior to implementation of each FTA, our average deficit with each FTA partner was less than $0.8 billion. By 2014, our average deficit with each FTA partner was over $3 billion.
Case in point is the “free trade” treaty that Presidents G.W. Bush and Obama negotiated with currency-manipulating South Korea. This FTA grew the overall U.S. trade deficit (goods plus services) with South Korea from $5.4 billion in 2011 to $13.3 billion in 2014, costing the United States about 100,000 jobs according to the calculations of University of Maryland economist Peter Morici, former director of the Office of Economics at the U.S. International Trade Commission.
Fortunately, our trade agreement with South Korea lets only one country grow its economy at our expense. The treaty that Obama is currently negotiating would involve 11 other countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam), three of which (Japan, Malaysia, and Vietnam) are active currency-manipulators committed to blocking U.S. efforts to end currency manipulation. Additional currency-manipulating countries are expected to join later.
The worst aspect of April 22’s Fast Track votes in the Senate Finance Committee and the House Ways and Means Committee were their implicit endorsements of mercantilist currency manipulation, which is the chief way that countries subsidize their exports and place hidden tariffs on their imports. The words “free trade” should not be applied to a document that encourages currency manipulation.
As we documented in our book Balanced Trade, by manipulating their currencies to unbalance trade, trade surplus countries gain
- More factories.
- More research and development. (R&D often needs to be near factories.)
- More economic growth.
The trade deficit countries experience the opposite effects:
- Reduced factories.
- Reduced R&D.
- Reduced economic growth.
Five Republicans and six Democrats in the Senate Finance Committee (Senators Grassley, Crapo, Enzi, Burr, Portman, Schumer, Stabenow, Menendez, Cardin, Brown, and Casey) voted for an amendment that would have the new treaty oppose currency manipulation. But their amendment was defeated. In the House Republicans defeated a similar amendment on a party line vote.
But even if these anti-currency manipulation amendments had passed, they would not have been sufficient, since governments can easily hide their currency manipulations in seemingly innocent activities. For example, the Japanese government has its government pension investment fund sell massive numbers of Japanese bonds, using the proceeds to buy foreign stocks and bonds. Through such techniques, the Japanese government brought the exchange rate of the yen down from 1.02 U.S. cents per yen in October 2013 to 0.85 cents today.
Although governments can hide their currency manipulations, they can’t hide their trade surpluses. Trade agreements should provide mechanisms for balancing trade, such as by letting trade deficit countries place trade-balancing tariffs upon the products of countries with which they have trade deficits.
The Richmans co-authored the 2014 book Balanced Trade: Ending the Unbearable Costs of America’s Trade Deficits, published by Lexington Books.
Read the full article originally posted on American Thinker here.