Opinion: Basic Facts are Being Ignored in Trade Debate

Feb 26 2015 |
U.S. Trade Representative Ambassador Michael Froman, pictured at the closing ceremony of the White House Rural Council’s Rural Opportunity Investment Conference. | Photo courtesy U.S. Department of Agriculture

Why can’t government officials see the link between middle class job loss and trade deficits?

The post below is the first in an occasional series of opinion pieces written by award-winning journalist Richard McCormack, the founder and publisher of Manufacturing & Technology News. McCormack also served as the editor of the 2013 book on revitalizing manufacturing, ReMaking America. You can follow him on Twitter at @RichardAMc.

Facts do not matter, surging imports matter less, and manufacturing matters the least in the Obama administration’s aggressive push for the Trans-Pacific Partnership (TPP) and congressional passage of Trade Promotion Authority (TPA).

Just look to U.S. Trade Representative Michael Froman for proof.

Toward the end of a full day of congressional hearings with Froman on Jan. 27, it took until almost the last questioner, Rep. Charles Rangel (D-N.Y.) to state the obvious: Froman is a consummate "diplomat," worthy of the title "Ambassador."

Sitting attentively for four hours in front of the Senate Finance Committee and House Committee on Ways and Means, Froman was adept at deflecting every possible criticism of the Obama administration's trade agenda, with a voice that was soothing, sonorous, and monotone. When pressed, he reverted to well-rehearsed talking points by claiming that the administration's trade agenda "promotes American values and interests, protects American workers and the environment and allows the U.S. to set the rules of trade rather than ceding that authority" to its competitors.

Few members of Congress successfully challenged him on currency manipulation, the lack of transparency in the agreements being negotiated, and the negative impact of surging imports and spiraling trade deficits. The words "imports" and "trade deficit" are not in Froman's lexicon, even though trade is his forte.

When pressed about why President Obama's promised 70,000 jobs from the U.S.-Korea Free Trade Agreement (FTA) have not materialized, Froman responded by saying that Korea has been in an economic slump, a demonstration of the fact that "bilateral trade balances are more a factor of macroeconomics than they are of trade agreements." He noted that every billion dollars of increased exports supports the creation of between 5,400 and 5,900 jobs in the United States. But his response begged a follow-up question that wasn't asked: If $1 billion in exports create that many new jobs, then doesn't $1 billion in increased imports result in the same amount of lost American jobs?

And so it went, with the ambassador engaged in head fakes and dodges and Members of Congress unable to land a single punch. The day was incongruous, with Democrats fighting a central economic policy of a liberal Democratic president as Republicans lavished praise.

According to Froman, there are no reasons for anyone to doubt the potential massive upside benefits of new job creation and GDP growth from the Trans Pacific Partnership. But when asked by Rep. Peter Roskam (R-Ill.) to be more specific and provide Congress with an assessment of "how great would it be — what is the growth we are talking about?" Froman droned on about how the general benefits of trade before saying only that "we are really on the verge of something quite significant in terms of positioning the U.S. going forward in a very positive way." Perhaps having learned from the North American Free Trade Agreement (NAFTA), the normalization of trade relations with China (PNTR) and the Korea FTA, he made no promises that will embarrass him later.

If there have been or could be any loss of American jobs or income, it has nothing to do with free trade agreements, Froman argued. "I would distinguish between [the impact of] globalization and technology and the impact of trade agreements because trade agreements is how we shape globalization and level the play field. The forces that had an effect on wages include technology and globalization and we have the opportunity to shape that."

Can somebody please ask Froman to explain the difference between globalization and trade?

And when it comes to trading high value-added products, there are relatively few congressional districts in the country where manufacturing remains a primary economic activity. Most Members of Congress representing these districts don't have much clout these days, since many of them are Democrats.

In four hours of testimony, there were no questions about advanced manufacturing industries, which conduct the most amount of research and development, pay the highest wages and have the greatest economic multipliers. There was no discussion about electronics, semiconductors, robotics or machine tools. You could count on one hand the number of questions about steel, autos and textiles and apparel.

But there was plenty of concern raised about catfish, shrimp, apples, pears, rice, corn, ethanol, timber, wheat, hay, cotton, pork, beef, poultry, wine, dairy and cheese, cheese and more cheese, cheese and cheese.

In starting his questioning of Froman, House Ways and Means Committee Chairman Paul Ryan (R-Wis.) stated: "This Committee is going to do everything we can to make this work a success. Expanding American trade is going to be one of our top priorities this year."

Then from his perch above the committee room, Ryan held up a large wedge of yellow Wisconsin Gouda. "I am from Wisconsin," he told the assembled. "Our license plate says, 'America's Dairy Land.' But we are quickly becoming the world's dairy land. . . Exports are becoming more important than the entire U.S. dairy sector. It is bigger than the U.S. beef sector." He told Froman that it was important to "open more markets for dairy products."

And so went the day, with the same stultifying discussion as occurred with the Korea FTA, China PNTR, and NAFTA. Little has changed over the past two decades, with yet another president whose economic policy team consists almost exclusively of millionaire graduates from the finance and business sectors and graduates of Harvard University. Despite misgivings leading up to his election seven years ago, Obama has bought in. According to Rep. Mark Pocan (D-Wis.), the president directed members of his cabinet to contact 80 Democratic members of Congress — the ones they are closest to — to convince them of the righteousness of his free-trade cause.

The TPP and TPA debate won't be won on emotion. It won't be won on facts and having a better argument. The terms of the debate are being shaped by the forces that have won every trade debate over the past 30 years: by those from the finance and corporate sectors that control the White House, and from the same sectors that provide Congress with the majority of their campaign contributions.

Which begs two questions: Why haven't more of America's elected officials realized there is a direct link between massive trade deficits, the waning middle class and the decrepit state of America's infrastructure and institutions? And what is it going to take to get the U.S. government to represent the interests of American workers and domestic manufacturers?