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Short Take: Understanding Trade

As we saw on the broadcast this weekend, trade is both a confusing policy and political issue. Bernie Sanders is against it, the president is for it and Hillary Clinton is somewhere in the middle. Where should you be? We're going to try to give you a place where you can start forming your views.

First a few definitions. You could be forgiven for thinking there's a conspiracy to confuse you-- TPA, TPP, TAA. (Actually, it could be a lot worse). TPA is Trade Promotion Authority, which allows the President to get what's called fast track power - when his administration negotiates a multi-country trade deal, congress can only vote up or down on it - and can't amend it. This gives the president more power at the negotiating table because he can wring concessions from other countries knowing that the promises within the deal he makes to get concessions from other countries aren't likely to be undone by Congress. (This connection between TPA and the actual trade deals it "fast tracks" is why many critics don't like TPA, even though they may not even know the details of the ultimate trade deal).

In this case, the President will use his new authority, under TPA, to negotiate and pass TPP. TPP, or the Trans-Pacific Partnership, is an agreement among 12 pacific countries, including Japan, Australia, Chile, Canada, Mexico and the U.S., that aims to reduce barriers to trade and expand access to those pacific markets for US goods.

Those countries make up 40% of the world's economy. Another trade deal in the works is called TTIP, the Transatlantic Trade and Investment Partnership, that is being negotiated with the European Union to further open European markets to US goods.TPA passed both the House of Representatives and the Senate. The hang-up is what didn't pass the House -- something called TAA. TAA, or Trade Adjustment Assistance, is a federal program that provides job training, financial support and other aid to U.S. workers who've lost their jobs as a result of foreign trade. The vote in Congress where the president was defeated was to reauthorize this program, something democrats have long supported. In this case, liberals said TAA proved that the trade deals were going to cost jobs. This is an evolution: the consensus used to be that the net increase in jobs and economic activity from trade was worth the job losses in some areas that could be softened by TAA.

Now onto the arguments for and against Trade.

Here are some of the arguments supporters make for Trade:

  • The White House Trade Representative says, "The TPP will make it easier to sell Made-in-America goods and services exports to some of the most dynamic and fastest growing markets in the world, and support homegrown jobs and economic growth."
  • The companies that would benefit include ones in the agriculture and services sectors. Companies that manufacture smartphones and other information technology as well as those that profit from royalties from licensing intellectual property would benefit from the protections enshrined in the agreement. A trio of economists wrote in the Washington Post: "[The TPP] would promote trade in knowledge-intensive services in which U.S. companies exert a strong comparative advantage."
  • This trade deal is different than the North American Free Trade Agreement (NAFTA) and other trade deals. It will not have the impact on American workers that NAFTA had. The manufacturing jobs that were lost after NAFTA were largely the result of other forces like mobilization and increased competition from China. Those jobs aren't coming back and blocking this trade deal won't make them come back.
  • The trade bill has protections for new rules to ensure fair trade and labor laws across the member economies so that workers won't be exploited making labor cheaper overseas and therefore more attractive to American companies at the expense of American workers. The deal also includes increased environmental standards so that the increased economic activity doesn't exacerbate climate change or increase pollution.
  • The deal is critical to U.S. foreign policy and national security. By connecting the U.S. and Asian economies, it tightens the relationship between America and Asian countries making them less susceptible to China's influence both economic and political. As a sign of the pressure China already feels, its leaders are trying to fashion their own trade agreements with these countries.

Opponents of the trade deals say:

  • Trade deals are supposed to be about hooking the American worker into the global economy, but it hasn't worked that way. NAFTA didn't lead to more jobs as a result of new markets, it led to outsourcing, which combined with the rise of the Internet and automation have contributed to the wage stagnation and job losses for the American worker.
  • Opponents say NAFTA cost the U.S. more than 700,000 jobs.
  • The trade deals empower multi-national corporations who seek looser regulations for doing business in America than the regulations that bind American firms. For more, here is a letter from Nobel prize winning economist Josepy Stiglitz on "investor-state dispute settlement" or ISDS (Thanks to @susaniniowa)
  • The deals were made in secret and the real details are being kept from the American people. By the time they are announced, it will be too late.
  • The TPP does not stop participating countries from manipulating their currency. Currency manipulation artificially lowers the cost of U.S. imports and raises the cost of U.S. exports, which some, like the Economic Policy Institute, say is what has led to the high U.S. trade imbalance.
  • Enhanced trade helps Wall Street and the pharmaceutical industry by reducing regulations and allowing drug manufacturers to keep prices high throughout the world by extending patents on brand name pharmaceuticals, thereby reducing the availability and competition from lower priced generic drugs.
  • Obama is treating trade opponents like know-nothing children when he says things like, "You don't make change through slogans. You don't make change through ignoring realities. Sometimes you do things that are tough but the right thing to do to prepare us for the future."

Additional reporting by Rob Hendin

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