Oxley: The President Must Be Bold on Pacific Trade
While President Barack Obama’s handling of the economy has been criticized by his opponents, one area where he has shown leadership is on trade policy, specifically a free-trade area dubbed the Trans-Pacific Partnership.
Negotiations have been under way for a year and will resume this month in Virginia.
The aim is to lay down a trans-Pacific framework to expand trade and investment. This goal has been embraced by trade and business groups. With long-term growth prospects in Europe looking bleaker, the construction of trans-Pacific pathways to free trade and investment has immense commercial logic for exporters.
In 2011, U.S. exports rebounded from the economic slump in 2010. Worldwide, they increased 20 percent, but to Asian economies they increased 30 percent to 35 percent. And while China’s economy is expected to slow, growth in Asia is still expected to lead the world for the next two decades at least.
Not all major Asian economies are participating in the negotiations. China is not, nor is Japan or South Korea, although both support it and are considering joining. Vietnam, Singapore, Malaysia and Brunei are negotiating, along with Australia and New Zealand, Canada, Mexico, Peru and Chile.
The plan is to create a trans-Pacific agreement that could be expanded to include all members of the Asia-Pacific Economic Cooperation group. China and Russia are members of APEC, along with the rest of the Association of Southeast Asian Nations economies and Japan, South Korea and Taiwan.
Unwisely, the Obama administration has bowed to pressure from organized labor and environmental groups to include measures that work against that goal. It has proposed that the agreement advance labor and environmental standards proposed by U.S. unions and green groups. That’s unwise.
First, it would doom the TPP agreement. Developing countries would see it as a strategy to reduce their competitiveness and growth. They made it perfectly clear at the United Nations Conference on Sustainable Development in Rio de Janeiro in June that labor and environmental standards must fit their economic circumstances.
Meeting U.S. labor standards or imposing Environmental Protection Agency rules, which is the standard U.S. and labor groups want, would instantly make producers in developing countries globally uncompetitive.
That’s what U.S. unions and environmental groups want. The vision of the United Steelworkers is high tariff barriers protecting businesses that build expensive wind turbines to replace U.S. coal-powered electricity generators. This would produce a low-growth economy and low-tech industries. Unemployment would be high, but steel workers would be well-paid.
This is a prescription that will produce the low productivity economies blighting Europe today. Raising trade barriers has been a long-standing ambition of the steel workers union. It has repolished the idea recently as a tool to advance the “green economy.” This allies the union to the environmental movement, whose influence has expanded while organized labor’s has waned.
Such an alliance is an easy fit for groups such as the Worldwide Fund for Nature. With U.S. unemployment at persistently high rates, the group and others like it nevertheless continue pushing for policies that will raise costs and retard economic recovery.
The group has also traditionally opposed free trade and today is urging that import controls be used to leverage governments in trading partners to adopt environmental policies such as restrictions on the importation of biofuels such as palm oil from Malaysia and Indonesia.
These ambitions directly undermine how U.S. business wants to see a trans-Pacific free-trade area work – growing Asian economies and markets. This will build the competitive industries here that will export and expand job opportunities for U.S. workers.
This is also the declared policy of the Obama administration. The challenge is not to allow the national interest to be thwarted by the self-interests of its allies in organized labor and the environmental movement.
Ambassador Alan Oxley is a former chairman of the General Agreement in Tariffs and Trade, the predecessor of the World Trade Organization, and is chairman of World Growth.