December 04, 2014
A Washington Post article on President Obama’s efforts to secure fast-track trade authority in order to pass the Trans-Pacific Partnership (TPP) included an incredible comment from Obama:
“‘It is somewhat challenging because of .?.?. Americans feeling as if their wages and incomes have stagnated’ because of increasing global competition, Obama said. ‘There’s a narrative there that makes for some tough politics.'”
Of course President Obama is correct that this “narrative,” which most economists would say corresponds to the reality, makes it difficult to pass more trade deals that will further disadvantage workers in the United States. It’s not clear why President Obama would be surprised that most of the public opposes trade deals that are likely to redistribute more income upward.
According to the article, the administration also inaccurately characterized the nature of the TPP.
“The administration has argued that the trade deals will boost U.S. exports and lower tariffs for American goods in the fast-growing Asia-Pacific region, where the United States has faced increasing economic competition from China.”
The deal will have little impact on tariffs in most of the countries that are parties to the TPP, since they are already low. Furthermore, the deal includes a large amount of protectionism in the form of stronger patent and copyright protection. Higher licensing fees and royalties will make the drug and entertainment industry richer, but are likely to crowd out other exports.
It is also worth noting that jobs depend on net exports (exports minus imports), not exports. (If we increase exports, but imports rise by a larger amount, then we on net lose jobs.) If the administration doesn’t understand that it is net exports that affect employment, and not just exports, then the media should be doing intense ridicule. This would be like Sarah Palin saying she could see Russia from her house, but much more serious.
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