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Tue. September 25, 2018
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Fear Stalks The Andes
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The just-approved free-trade deal between the U.S. and Peru is said to be the last such arrangement. There are just so many reasons to fear foreign trade and overseas competition. Competition itself is unsettling, but when it benefits people whose name you can't pronounce, is it really worth risking your market share for?

Congress, wary of negotiated deals that open wider the doors to international commerce, surprises only when it approves them. Rep. Marcy Kaptur, D-Ohio, states the anti-free-trade case eloquently: "If these agreements were working, America wouldn't have an $800 billion trade deficit with 20,000 jobs lost for every billion dollars of that deficit. What an unprecedented wipe-out of jobs and productive wealth in this country."

Why trade at all then? Could Kaptur have left something out of the equation? The disruption she describes is precisely the price for national economic success. U.S. unemployment has remained remarkably low, averaging below 5% since 1997--paralleled by greater inter-penetration of American and foreign markets, the collapse of the tech bubble and post-Sept. 11 turbulence in financial markets.

Joseph Schumpeter called it "creative destruction," and how you feel about it depends on whether you focus on the creative part, or the destructive. On politics-is-local grounds, candidates put protecting the jobs and livelihoods of their constituents ahead of such grand concepts as the gross domestic product. Economists and investors understand the power of markets to create jobs, wealth and industries never thought of before. Politicians focused on national economic success agree, but in psychological terms, the real threat of loss always outweighs the theoretical gains, however great they may be.

That's the dilemma, in a nutshell. Vote for free-trade deals and your constituents may toss you aside. Yet trade deals have generally won congressional approval, the choice made easy by letting a strong minority vote against them and win favor with the home folk.

The Peru Free Trade Association, with tremendous export advantages to the U.S., should have been an easy vote. But it got through the House only after hard-negotiated concessions to organized labor and green lobbyists.

The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America and the Sierra Club expressly endorsed this ascent on the Andes (plenty cause for wariness!) because it uses trading mechanisms to enforce International Labor Organization standards in Peru and stiffens environmental rules, respectively. The Sierra Club and friends got to require Peru to rewrite its forest-management laws.

Clearly we are outside the realm of economic exchange here, deep into political triangulation. Congress embraces the virtues of trade but only at an increasingly stiff regulatory price. It doesn't matter whether the regulations in question are good or bad. Trade negotiations have become a vehicle for a multitude of other agendas, so the Marcy Kapturs can say, "We're destroying ourselves with free trade, but we saved trees in Peru."

The problem is the political nature of trade deals. The Kaptur argument applies with equal force to New Haven, Conn., trading with Jersey City, N.J., or Las Vegas with Branson, Mo. But the U.S. Constitution presumes the freedom to trade domestically, so there's seldom a legislative smoking gun to point to. Not so with negotiated trade arrangements, which compound controversy with concerns over sovereignty and national identity.

Noting the Democratic split in the House vote on the Peru deal, The New York Times asserted that "trade deals ... have generally been opposed by labor unions, environmental groups and left-of-center activists hostile to the forces of globalization. Democrats, as a result, have rarely given their approval." Except that Democrat-controlled bodies approved FTAs with Israel and Jordan, as well as the North American Free Trade Agreement, the mother of all FTAs. Virtually no trade deal could have been approved without Democratic votes.

The real issue is not whether Democrats vote for free trade, but what their price is. Sen. Hillary Clinton, D-N.Y., voted for the Peru FTA but says she will oppose other such deals. Republicans triangulate too, but at least have a knee-jerk inclination toward free markets.

As the price of negotiated trade goes up, perhaps we need to look elsewhere for our creative destruction--unilateral openings to free trade in goods and services (works wonders for New Zealand and Australia), and letting the Internet continue eroding national barriers to commerce.

Politics has its place, and we should never fear to negotiate. Yet sometimes it is best to step back and let the natural human aspiration toward economic freedom take its course.

Jens F. Laurson is editor in chief of the International Affairs Forum. George A. Pieler is senior fellow with the Institute for Policy Innovation.

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