Bad arguments against trade

Trade debates are making for strange bedfellows. Republican Sen. Jeff Sessions (Ala.) this week published a set of concerns on trade promotion authority (TPA) that look like they were drafted by a labor union. The concerns include statements about trade deficits, immigration and other matters at odds with both facts and conservative economic principles.

The pure economic issues are trade deficits and currency manipulation. Here, Sessions’s belief is essentially that it’s bad to buy imports. The same view urges the government to slap taxes on imported goods — taxes on ordinary Americans — so people will not buy what they truly want. It’s hostile to free and open commerce.

It’s also wrong on the facts. Most protectionists, apparently including Sessions, think more imports mean fewer jobs. No one can ever show this in the real world; instead, it’s just assumed to be true. But jobs are not lost when imports rise.

{mosads}In the real world, our trade deficit set a record high in 2006. Unemployment was just 4.6 percent. The trade deficit fell more than $300 billion in 2009, yet unemployment that year soared from 5.8 percent to 9.3 percent.

Last year’s trade deficit was $200 billion smaller than in 2006, which protectionists consider progress. But labor force participation — the share of people having or seeking work — was 3.5 points lower last year than 2006. Our job market is going in the wrong direction.

How can this happen? When our economy is strong, we import more. And when our economy is strong, there are plenty of jobs. It’s no different from one member of a family finding a job and the family then being able to buy more. The U.S. has the world’s largest economy and the health of our economy drives trade, not the other way around.

Current manipulation is similar. While currency does not get much attention from Sessions, the only reason it’s a major issue is that currency manipulation can cause trade deficits and people wrongly believe trade deficits cost jobs.

Japan, our biggest partner in the under-negotiation Trans-Pacific Partnership (TPP), is often said to be a currency manipulator. Japan is not mentioned in Sessions’s concerns.

China is not in the TPP, but is mentioned twice. In 1994, China deliberately made its currency weaker to try to gain an advantage, yet we had a very strong economy for years after. In 2005, China started slowly making its currency stronger (as protectionists want) and our economy deteriorated. In the real world, a cheap Chinese yuan does not cost American jobs.

Sessions’s other concerns — presidential power, immigration and American sovereignty — are partly political. A quote from the TPA legislation makes clear that congressional, state and local authority are to be maintained, and American sovereignty thus preserved:

No provision of any trade agreement entered into under section 3(b), nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States, any State of the United States, or any locality of the United States shall have effect. … No provision of any trade agreement entered into under section 3(b) shall prevent the United States, any State of the United States, or any locality of the United States from amending or modifying any law of the United States, that State, or that locality.

Immigration accounts for the bulk of the discussion in Sessions’s list and ties directly to the concern over presidential power. For both these topics, the supposed threat switches back and forth between TPA and TPP, when trade actually has nothing to do with it.

The TPP is a specific agreement that isn’t finished yet, much less ready to be voted on. The chairman of the House Judiciary Committee, Rep. Bob Goodlatte (R-Va.), has stated that the current TPP draft in no way facilitates unilateral executive action on immigration, such as occurred in January.

Further, the immigration provisions Sessions fears must be made public well before any vote on TPP. They cannot be snuck in.

TPA is a procedure for Congress to consider trade agreements — the president agrees to consult Congress and make the agreements public for several months in exchange for having an up-or-down vote. The term of the bill is five years, which would be 20 months under President Obama and 40 months under the next president.

Sessions seems to greatly fear abuse of executive authority in the next 20 months. But his fears are not based on trade. On TPP, if impactful immigration provisions somehow appear, the Congress can vote the deal down. On TPA, the current bill does not address immigration at all. The word does not appear in the text once.

Sen. Sessions’s list of concerns would not be surprising coming from Sen. Elizabeth Warren (D-Mass.). It’s just as wrong from him as from her.

Scissors is a resident scholar at the American Enterprise Institute (AEI), where he studies Asian economic issues and trends.