Who Needs Balanced Trade? Who Needs Balance Budgets: A New Book on Trade and Fiscal Policy
The intensity of the conflict over the Trans-Pacific Partnership (TPP) has died down since last June, after the Administration won its victory in getting Trade Promotion Authority (TPA) through Congress. During the Intervening months, the efforts of the Special Trade Representative (STR) to complete TPP negotiations have continued. At the end of June, the goal was to complete negotiations by August so that the Administration could send the Agreement to Congress in enough time to start the clock on the 90-day countdown period Congress has to vote on an agreement negotiated under the TPA, and to schedule a ratification vote on it before the end of 2015.
That “plan” however, if it was that, rather than a forlorn hope, was quickly dashed by an assessment of the issues still outstanding at the end of July. At that time (on July 24th) Lori Wallach of Public Citizen, one of the leading policy analysts participating in the fight over the TPP, gave the following estimate:
TPP proponents are eager for Congress to vote on a Trans-Pacific Partnership (TPP) deal in late 2015. But to do so, given Fast Track’s statutorily-required timeframe of notice periods and pre-vote reports, TPP negotiations must be completed – and the TPP text itself – by the end of July. If notice to Congress of intent to sign the TPP were sent by August 1, a final TPP vote could be held the last week Congress is in session in December.
Assuming the quickest timeline conceivable under the Fast Track rules and that somehow a required International Trade Commission (ITC) report on TPP impacts could be completed faster than has ever occurred for past pacts*, a TPP vote could take place about four and one half months after Congress is given notice of intent to sign a deal. Thus, negotiations must conclude at the July 28-31 TPP ministerial and a text must be ready for notice of intent to sign by August 1. That text must be publicly posted on August 30. This would allow for a vote the week of December 14. After that, Congress goes on recess and a vote would roll to 2016.
The political costs of an unpopular “yes” vote for the TPP will escalate if voting rolls into the 2016 presidential election year. Already Democratic and GOP presidential candidates have begun attacking the TPP and their public criticism is generating public attention on the pact’s potential threats of job loss and more. A 2016 TPP vote also would increase the risk that voters could punish those who vote “yes” on the TPP during the November 2016 congressional election.
Minimum Timeframe: 4.5 Months between End of Negotiations and Votes in Congress
It is now; the end of September, not the end of July, and there are enough difficulties in the way of completion mentioned by Politico today to suggest that completion before the end of October is highly unlikely, and probably also another forlorn hope for those favoring the TPP. That Michael Froman, the STR, is now talking in public as if the Administration cares more about getting the TPP right than getting it done soon suggests that the expectations of our trade negotiators for quick completion of the TPP negotiations are now scaled down considerably. Politico says:
FROMAN: U.S. WON’T RUSH TPP DEAL — U.S. trade officials are talking up the benefits of the proposed Trans-Pacific Partnership agreement even before it’s complete. But they’re also pushing back at any suggestion they’ll rush to get the pact done in Atlanta this week no matter what.
“The president has made clear that he will only accept a TPP agreement that delivers for middle-class families, supports American jobs and furthers our national security,” U.S. Trade Representative Michael Froman said in a statement to POLITICO Pro. “The substance of the negotiations will drive the timeline for completion, not the other way around.”
While the possibility of not completing the nearly six-year-old talks this week is real, “I have no doubt they’re making a major push,” said Cal Cohen, president of the Emergency Committee on American Trade, who is in Atlanta for the meeting. The remaining issues are “very doable. But there has to be a readiness to compromise,” he said.
There are many issues related to trade in agricultural products to be resolved. Also, rules pertaining to auto manufactures, and a big fight over how many years of exclusivity protections new “biologics” ought to get, with the US insisting on 8 years of monopoly protections, while other nations want either five years or less ranging down to no years at all. A recent statement from Public Citizen outlines the issues.
So, let’s say the Administration did get this done by October 31, 2015. If one then adds the minimum 4.5 months to get the agreement ratified, then, one is looking at the final vote about March 15, 2016, right in the middle of the primary season, both for presidential candidates and for both Houses of Congress. A controversial vote at that time is poison for office holders wanting to win office again. It is poison for Republican candidates for President and for Hillary Clinton on the Democratic side. No one is going to want to take an unpopular vote in favor of the TPP and take the thunder from the right and the left about the various issues surrounding the treaty.
The votes for the TPA were very difficult for both Houses of Congress, and Democratic Congressmen who voted for it have come under heavy fire. These Congressmen and some Republicans who ignored the TPP sovereignty issues raised by some of the more conservative Republicans will get challenged in the primaries for their TPA vote.
Will they then vote for the TPP in the middle of their campaigns and then, even if they win their primary, face opposition from the other Party in the fall making their vote on trade a political issue aligning them with the multinationals against the American people? I’m afraid I don’t see that happening.
Instead, I see the President being told by the leadership of both Houses that if he submits the TPP to Congress on a schedule to get a vote for it in March or April of next year, then the TPP will be voted down. I see Hillary Clinton telling him not to force that vote then, or she will be forced to publicly oppose it, and to use her influence to defeat it for fear of compromising her own chances to win the Democratic Party nomination. I also see a wholesale rebellion among Democratic Congressmen against their lame duck President who is trying to build his legacy by making them take a poison pill ruining their re-election chances, and I don’t think the President will be able to get near the number of Democratic votes for the TPP, that he was able to get for the TPA, in June. I then see the President trying to make a deal with the leadership in both Houses to get a vote during the lame duck after the election.
But whether that happens or not will depend on the results of the election and the extent to which there is a reaction against the corporate establishment expressed in them. If there is, then I doubt that the trade deals will be back for some time to come. If there is not, then there will be another fight during the lame duck to do everything possible to stop the TPP.
But, regardless, of the exact scenario in the coming months, the TPP is coming up for Congressional consideration, and when it does, it will be the most intense struggle between neoliberal forces in both parties, and anti-corporate forces among both progressives and conservatives, we’ve seen yet. In addition, there will be more new developments such as the ones here and here, about the Trans-Atlantic Trade and Investment Partnership (TTIP), and the Trade in Services Agreement (TiSA), perhaps the most dangerous of the three major current trade agreements in negotiation, which will impact perspectives on the TPP in Congress, and the eventual fate of all three agreements.
To contribute to the debate on the trade agreements, and to provide arguments for the opposition to them, I’ve published two new e-books. I released the first in July 2015. That book, Declarations of Dependence: Trade Tyranny, Sovereignty, and Democracy, focused on a critique of the TPP primarily from the viewpoint of the damage it would do to our constitutional order, and to our democracy. It also, addressed the political process in Congress passing the TPA, and the justification used to support the TPA and the coming trade deals, as well as the question of what kind of trade policy the US ought to have.
Now, I’ve published a second e-book on trade focusing principally on the larger context of these trade deals and the issues raised by that context arising out of the negative impacts previous “free trade” deals have had on American society. Here is a little more about the context.
The United States has run trade deficits for nearly 40 years now. Many are convinced that this is the primary factor explaining the migration of “American jobs” overseas, a stagnant economy, and our accelerating levels of inequality. A balanced trade policy, reducing trade deficits to near zero, will, it is claimed, support lower unemployment by keeping “good jobs” here, drive wages up rather than down, be more sustainable, and won't contribute to a collapse of the global economy.
But, there is an important truth of macroeconomics to be considered. “Exports are real costs; and Imports are real benefits.” So, an important issue is: would we rather send US fiat money (our electronic reserves) to other nations and add to our real wealth by getting goods in return, or would we rather add to their real wealth and get their fiat money, or our old fiat money back in return? Other things being equal, we'd prefer the first alternative rather than the second: trade deficits are better than trade surpluses, at least in the short run because they add real wealth to our nation.
Other things are not equal, however, since if the Government running trade deficits does nothing to compensate for their shorter and longer-term effects, then these will create a political reaction de-stabilizing any trade policy resulting in continuous trade deficits. (That political crisis has been building for a very long time and is coming to a head in the struggle over the TPP.) However, the negative effects of these continuous trade deficits can be avoided without implementing “balanced trade” as a continuous policy. How that can be done is the subject of my new e-book Who Needs Balanced Trade? Who Needs Balanced Budgets? which was published on September 29, 2015 at Amazon.
My new book looks at trade policy in the broader context of budgetary and fiscal policy, and the relations among the foreign, domestic private, and government sectors of the economy. And, since the trade balance impacts the private sector and the government balance, it argues for an integrative view of trade and fiscal policy in relation to public purpose, and also proposes changes to Government institutions to facilitate planning, analysis, and evaluation of integrated trade and fiscal policy. I think this integrative approach to trade and budgetary/fiscal policy has been implicit in the literature on Modern Money Theory (MMT) for a long, long time. One contribution of this book is to make this approach to integrated policy explicit within the context of the idea of net benefit for “public purpose.”
The book chapters cover: Free Trade Policy; Balanced Trade Policy; three variants of Fair Trade Policy; Trade for Public Purpose Policy; Impact Assessment for Trade Policy; Balanced Budget Fiscal Policy; Deficit Neutrality in the Long Run Fiscal Policy; Budgeting for Public Purpose Fiscal Policy; A Holistic Approach to Trade and Fiscal Policy; and A Critique of the Current Trade Deals. Finally, the concluding chapter presents the book’s may conclusions, including some about the pending trade deals being negotiated by the Obama Administration, and an agenda relating fiscal and trade policies to public purpose.
Who Needs Balanced Trade? Who Needs Balanced Budgets? will be on no cost promo at Amazon at the link provided earlier on October 1st.
(Cross-posted from New Economic Perspectives.)