The Democratic Tea Party

International New York Times | 16 June 2015

David Brooks

Last week, the Congressional Democrats defeated the underpinnings of the Trans-Pacific Partnership trade agreement. Let’s count up the things these Democrats will have done if this policy stands.

Impoverish the world’s poor. There’s an argument over what trade agreements do to workers in the nation’s rich countries, but there is no question they have a positive impact on people in the poorer ones.

The North American Free Trade Agreement, for example, probably didn’t affect the American economy too much. But the Mexican economy has taken off. With more opportunities, Mexican workers feel less need to sneak into the U.S. As Fareed Zakaria has pointed out, a regime that was anti-American has turned into one that is pro-American.

In Asia, the American-led open trade era has created the greatest reduction in poverty in human history. The Pacific trade deal would lift the living standards of the poorest Asians, especially the 90 million people of Vietnam.

As Tyler Cowen, an economist at George Mason University, wrote in his Marginal Revolution blog: “Do you get that progressives? Poorest country = biggest gainer. Isn’t that what we are looking for?”

Damage the American economy. According to a survey by the University of Chicago’s Booth School of Business, 83 percent of the nation’s leading economists believe that trade deals have been good for most Americans. That’s not quite the level of consensus on man-made global warming, but it is close.

That’s because free trade is not a zero-sum game. The global poor benefit the most, but most people in rich countries benefit, too. As Jason Furman, the chairman of President Obama’s Council of Economic Advisors pointed out in a speech at the Brookings Institution, since World War II, reductions in U.S. tariffs have contributed an additional 7.3 percent to American incomes.

Trade treaties have led to significant growth in American manufacturing exports. According to Furman, export-intensive industries pay workers up to 18 percent more than nonexport-intensive ones. Rising imports also give American consumers access to a wider range of inexpensive products, leading to huge standard of living increases for those down the income scale. The authoritative study on the Pacific trade deal, by Peter Petri, Michael Plummer and Fan Zhai, suggests it would raise U.S. incomes by 0.4 percent per year by 2025.

Stifle future innovation. Democrats point out that some workers have been hurt by trade deals. And that’s true. Most manufacturing job losses have been caused by technological improvements.

But those manufacturing jobs aren’t coming back. The best way forward is to increase the number of high-quality jobs in the service sector. The Pacific trade deal would help. The treaty is not mostly about reducing tariffs on goods. That work has mostly been done. It’s mostly about establishing rules for a postindustrial global economy, rules having to do with intellectual property, investment, antitrust and environmental protection. Service-sector industries like these are where America is strongest, where the opportunities for innovation are the most exciting and where wages are already 20 percent higher than in manufacturing.

Imperil world peace. The Pacific region will either be organized by American rules or Chinese rules. By voting against the trade deal, Democrats went a long way toward guaranteeing that Chinese rules will dominate.

As various people have noted, the Democratic vote last week was a miniversion of the effort to destroy the League of Nations after World War I. It damaged an institution that might head off future conflict.

The arguments Democrats use against the deal are small and inadequate. Some Democrats are suspicious because it was negotiated in secret. (They seem to have no trouble with the Iranian nuclear treaty, which is also negotiated in secret.)

Others worry that the treaty would allow corporations to sue governments. But these procedures are already in place, and as research from the Center for Strategic and Internatioanl Studies has demonstrated, the concerns are vastly overblown. They mostly protect companies from authoritarian governments who seek to expropriate their property.

In reality, the opposition to the trade pact is part of a long tradition of populist reaction. When economic stress rises, there is a strong temptation to pull inward. The Republican Tea Partiers are suspicious of all global diplomatic arrangements. The Democrats’ version of the Tea Partiers are suspicious of all global economic arrangements.

It would be nice if Hillary Clinton emerged and defended the treaty, which she helped organize.

Rejecting the Trans-Pacific Partnership will hurt economies from the U.S. to Japan to Vietnam. It will send yet another signal that America can no longer be counted on as the world’s leading nation.