As the president’s trade agenda approaches reality this week, misconceptions about it abound – partly because the noisy arguments for and against it have obscured the issue, and partly because of the emotionalism that trade stirs up.
The trade debate is a combination of both factual information about what’s actually in the legislation and of emotions about job loss, says Gary Chaison, a professor of labor relations at Clark University in Worcester, Ma.
“Trade agreements are always difficult because they are very emotional things,” he says. They invariably benefit some people and negatively affect others. “For the winners we look at the facts, and for the losers we look at emotions.”
On Wednesday, the Senate passed "fast track," which prevents Congress from amending trade bills negotiated by President Obama, by a 60-to-38 vote. That now goes to Mr. Obama's desk for a signature. It also approved assistance for workers displaced by global trade. That goes back to the House for final approval.
With all that in mind, here are five common misconceptions about free trade agreements and the president’s trade agenda.
Figuring job losses and gains from trade is not an exact science.
Opponents argue vigorously that trade deals such as the 1993 North American Free Trade Agreement (NAFTA) are job killers and wage suppressors, while proponents argue they lead to economic growth.
But in April, the independent Congressional Research Service reported that “the overall economic impact of NAFTA is difficult to measure” because trade and investment are influenced by many variables. “NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters,” it concluded.
Predicting losses or gains from the pending Trans-Pacific Partnership – the historic trade deal that the US is negotiating with 11 other Pacific Rim nations – is even harder because it involves so many countries, says Steve Bell, senior director of economic policy at the Bipartisan Policy Center think tank in Washington.
It’s “virtually impossible to estimate with any reliability the job impact or the cost impact or the [economic] impact. People who say that are pretty much making that stuff up,” he says.
For that reason, he and others argue, trade deals should be judged on whether they expand America’s positive influence in the world, whether they break down export barriers to US goods, and whether they improve labor, environmental, and human rights standards abroad.
Professor Chaison argues they must be accompanied by assistance for displaced American workers, because “we don’t fully appreciate” the radical way in which real people’s lives can be harmed by trade.
China is not part of the Pacific trade agreement, or any US trade deal.
Lawmakers and labor often point to jobs lost to a China trade deal. For example, Rep. Barbara Lee (D) of California recently said that communities of color have disproportionately suffered because of a “US-China trade deal.”
Yes, minorities have disproportionately suffered job losses over the years, but the way it's described makes it sound like the losses come from America's trade agreement with China. There is no US-China trade deal.
Representative Lee is getting her data – 35 percent of minority jobs lost to China along with a 30 percent drop in wages – from the Communications Workers of America. The union cites “the China deal,” but what it’s really referring to is China joining the World Trade Organization in 2001.
Being in the WTO is not the same as entering into a negotiated free trade agreement, which could be potentially stricter, between two countries or even a dozen countries. Some argue that China should be part of the Pacific Rim deal or some future US free trade agreement because it’s too big to ignore.
But for now, the Obama administration is arguing that the Pacific agreement is needed as a geostrategic counterweight to China.
Globalization and free trade deals are not the same thing.
When opponents of free trade agreements cite job losses, lower wages, or outsourcing, they often lump in the phenomenon of “globalization” with free trade agreements.
But they’re opposites.
Globalization is what’s happening with the world economy and culture – the spread of interconnectedness hastened by the digital age. Its downside can mean Americans losing business to international retailers over the Internet, losing call centers to India (with which the US has no trade agreement), or being undercut by Chinese currency manipulation.
Free trade agreements try to bring structure to this free-wheeling world by setting up common standards. They, too, have downsides that result in job losses in some sectors, but the deals are an attempt to bring order to globalization.
“Globalization is an economic evolution. A trade agreement is just the opposite. It’s a construct,” says Bell.
The secrecy surrounding the Pacific trade deal is not so unusual.
It’s true that members of Congress have to go to a special room to read the draft Pacific trade agreement; that they must surrender their cell phones before going in; that they can take notes – but not with them when they leave; that they may not divulge its contents to outsiders, even experts who might help them better understand the contents.
Why the secrecy? The administration says it’s to protect its negotiating power. How can it negotiate sensitive points with 11 countries while 535 members of Congress and the general public weigh in? Besides, any member of Congress will be able to go to the trade negotiations or consult with the administration. And the final deal will be available to the public for 60 days before it’s voted on in Congress.
Deal-making in secret is not an unusual negotiating strategy, supporters say.
“This is really not substantially different than how labor unions themselves negotiate their contracts,” says Rep. Gregory Meeks (D) of New York, one of the president’s few Democratic trade supporters in the House. For example, top union officials negotiate contracts, and then take the results back to the members for ratification.
This week’s votes are not on a trade deal.
On Wednesday, the Senate approved fast track trading authority for the president.
But this was a vote about process, not a vote on a trade agreement. Fast track allows the president to negotiate a trade deal with the assurance that Congress can’t change it once he’s sealed the deal; it can only approve or disapprove it. The actual vote on a trade deal would come only after it’s finalized.
This week’s votes also include assistance to help workers displaced by global trade. Republicans generally view such aid as welfare, but it’s the price that Democrats, including the president, are demanding because trade deals inevitably displace some workers (see point No. 1).
After a difficult journey through Congress, both fast track and help for displaced workers are expected to reach the president for signature by the end of this week.