Why congress should not grant fast track authority

No, I'm not going to give my perspective. Rather, keeping in line with many of the other blog posts, I will rehash arguments from 1991 or 1992, from the heat of the NAFTA debate. Once again, I draw on words uttered by Craig Merrilees, from a testimony to the House Agriculture Committee (chaired by Rep. Kiki de la Garza, D-Texas). It was a fiery testimony, as evidenced by the very testy exchange with Rep. Thomas Coleman (R-Missouri). Mr. Merrilees outlined the following 6 points as to why Fast-track authority should not be granted to the executive branch:

1. It is anti-democratic. Congress should not sit on the sidelines while the executive branch makes the deals.
2. Scope for secret back-room deals. Lobbyists can influence policy more than what they can do in a more transparent process.
3. Fast-track is not necessary to get a complex agreement. The doom and gloom scenario painted by the administration, if Fast-track is not passed, is scare tactics.
4. Bush (Papa) and Salinas (then President of Mexico) make argument that things will fail without fast-track. Salinas needs the US market, with or without fast-track. You can replace Salinas with any other country engaged in TPP now, though I am not so sure that they need the US now like Mexico needed the US in the 90s.
5. Fast-track gutted GATT discussions because of extremist positions of Carla Hills and government on agriculture, maybe because of the influence of agribusiness.
6. Fast-track makes it impossible for Congress to vote up or down provisions of the trade deal that they find objectionable. The yes or no vote psychologically tilts everyone towards voting yes.

Finally, Mr. Merrilees makes a good and sarcastic comment: Finally, Richard Nixon argued for fast-track because he believed that we needed a stronger executive branch. If that is what you believe, you have a different version of history than I have. Touche!

I think many of the reasons hold true now too. Giving congress the responsibility of coming up with a trade deal on their own seems crazy, especially given the levels of cooperation we've seen over the last few years. I think, though, that on the issue of trade, there might be much better cooperation than on more politically charged issues. 

Free trade - hearings on fast track have started again

There is no doubt that the ills of free trade treaties are much more apparent than the positives. Especially in a time of high unemployment, there is a tendency to ascribe more than the fair share of blame to NAFTA type trade pacts. However, there is no doubt that people from the Bush (papa) and Clinton administrations promised the heavens if NAFTA was signed. Obviously, what we have seen in the US is a reduction in the number of people working in high-wage manufacturing jobs. Many of them have moved elsewhere. Some to Mexico, some to Canada, and some to other parts of the world. However, many of these jobs were newly created. The GM and Ford cars being sold in India are newly created jobs - they have not taken anyone's job in the US. Some portion of the jobs that have been created in Mexico or Canada must be newly created - economists might be able to tell us what fraction that is. Some certainly have been transferred from the US to Mexico and Canada. That, obviously, creates much anxiety in the US and ill-will towards free-trade type deals.

The only entities that seem to come out on top are big corporations which can have subsidiaries in different countries. It is a little like Boeing threatening to leave Washington and relocate in any of the 20 or 22 states which were trying to woo Boeing. They had already done it once before and the threat was real. The end result is that employees have to cave in. The shareholders come out on top because all they are interested in are the dollars and cents. In some sense, this is inevitable. I am sure there are theories of trade that say that trade between a richer country and a poorer one will lift the standard of life in the poorer one and bring it in equilibrium with the richer one. Obviously, it means that the standard of life in the richer one has to fall.

How long it will take depends on the two countries involved. Imagine trade between two countries where the poorer one has a terrible government, which is not uncommon, and a richer one with a reasonable government. It is easy to see how big corporations can exploit the poorer country and benefit much more from the whole arrangement than the poorer country itself. In this context, a large country like China, India, or Brazil has an inherent advantage. The very fact that it is a big market means that companies have to agree to the rules imposed by the governments. It is much easier to browbeat Bangladesh compared to Brazil. For smaller countries, maybe the solution is to form trade blocs.  

All said and done, the people of US are lucky - they've created it for most part. The government is much more answerable to the people here than almost anywhere else in the world. In fact, a non-citizen like me can feel comfortable enough to participate in the political process and critique the government, if necessary. Such openness is not present elsewhere. Institutions to redress grievances due to the adverse impact of trade deals may not be available to citizens of many countries. Despite these misgivings, trade has been good for many countries (need data to back this claim), at least for some in China, South Korea, India, Brazil, etc. Given all the accidents over the last few months, I'm not sure that the people in Bangladesh have really benefited from their trade. But the problem there is not trade but the utter failure of successive governments in Dhaka. 

Anyway, about the senate hearing on granting the Trade Promotion Authority to the Obama administration. You can watch the entire hearing here. Senator Sherrod Brown brought up a good point about how free trade deals can empower corporations to take steps which seem simply wrong. In the hearing on Jan 16, 2014, he talked about how Philip Morris, the tobacco giant, took the government of Australia, not a tiny and corrupt country, to court over a legislation passed by the government. If you want further details about this, please read through this page. A few key excerpts are given here:

On 1 December 2011 the Tobacco Plain Packaging Act 2011 received Royal Assent and became law in Australia.
The Act forms part of a comprehensive Australian Government strategy to reduce the rate of smoking in Australia. Smoking is one of the leading causes of preventable death and disease in Australia.
Philip Morris Asia is challenging the plain packaging legislation under the 1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments. On 21 December 2011, the Australian Government provided its response to Philip Morris Asia's Notice of Arbitration.

So, some kind of free trade deal with Hong Kong gives Philip Morris to challenge Australia over the decision of a democratically elected government. To some extent, this should be allowed. But trade deals cannot be loopholes by which to assault public policies. Again, if this can happen to Australia, imagine what could happen to some tiny, usually badly managed, country. BTW, David Cote, the CEO of Honeywell International, did not reply to the question posed by Senator Brown about the ability of corporations, such as Philip Morris and Honeywell, to take countries to international courts because of disagreements with public policies deleterious to their bottom-line.

To be continued....

The Magnificently Moustached Craig Merrilees

The received wisdom is that free trade is good for all. At least, that is what most economists and policy makers believe. So, if you want to read or hear arguments against free trade as it is practiced now, you would have to scour carefully for sources. I dont watch any of the TV channels - so FOX, MSNBC, etc are useless to me. My sources are usually public talks and congressional hearings on these topics. Once in a while, you encounter the same person in multiple such talks and you realize that this person might have contributed in one way or another to  the debate on free trade. It is important to stress that these people are not necessarily critics of free trade as much as they are of trade policy.

One such person is Craig Merrilees and I got to know of him through his testimonies to the USTR and the House Agriculture Committee (chaired by Rep. De La Garza) during the NAFTA debate. Yes, from 1991. Sadly, when I tried to find if any of the newspapers had written about him or his testimonies, I found nothing, at least in the archives of New York Times. When I did a more extensive search on Factiva, which is owned by Dow Jones, I found few articles. It turns out that Craig Merrilees had been quite active in the environmental and labor movements. I'm not sure what it takes to be a spokesman for different causes, but Mr. Merrilees has been one for various organizations. In fact, before he became a spokesman for organizations interested in trade related issues, he was one for "Veterans Peace Convoy," an organization opposing the invasion of Nicaragua. You can find here an article related to a demonstration by the peace convoy at the White House. Since he was involved with opposing the invasion of Nicaragua, I wonder if Mr. Merrilees was a colleague of Mr. De Blasio, the current mayor of New York City.

A good article on the opposition to NAFTA in, what we would now call the mainstream press, is by Bob Davis ("Fighting NAFTA: Free-Trade Pact Spurs a Diverse Coalition of Grass Roots Foes." Wall Street Journal, December 23, 1992). Since this article is not available online, I post here some excerpts. 

"The anti-free-trade movement began to branch out from its labor-union roots in 1987 when a Minnesota farm activist named Mark Ritchie became fascinated with GATT. The 40-year-old organizer of food co-ops and the early-1980s Nestle infant-formula boycott (based on the Swiss company's pushing formula in the Third World) moved his family to Brussels for six months to study the workings of the intricate trade organization.
 

He hit on a little-known facet of the broad round of trade liberalization being negotiated: Under new GATT rules, foreign governments would have firmer ground for challenging U.S. environmental laws as barriers to trade. Returning home, Mr. Ritchie, a mesmerizing speaker, spread the alarm in meetings with environmentalists and foundations over the next three years. With family-farm groups, already fearful of Reagan administration efforts to slash farm subsidies, he preached that a free-trade pact would further reduce prices for farmers.
 

He hit pay dirt when Barbara Dudley, executive director of the Veatch Program, a Unitarian Church charity that bankrolls environmental causes, heard a talk at an Adirondack Mountain lodge in early 1990 and donated $50,000 to his cause. Mr. Ritchie hired Mr. Merrilees, a veteran environmental organizer, and they launched the Citizen Trade Campaign. "We weren't just talking about tariffs," Ms. Dudley says. "We were talking about threats to environmental, health and safety regulations." 

That is how Mr. Merrilees comes into the picture. In any case, Mr. Merrilees makes pretty powerful case for opposing Fast Track, or the Trade Promotion Authority. This video clip, in particular highlights all the points that opponents of Fast Track are now making. Basically, the reasons have not changed much. Just that the country has changed - its no longer Mexico. You'll see that he comes across as a passionate opponent to Fast Track.

Anyway, Mr. Merrilees is now a communications director for the International Longshore and Warehouse Union (ILWU). If you see the video clip, you'll see why the title of this post is right. He looks like a left-leaning version of John Stossel!

An update to this post: Bob Davis, whose article I referenced above still writes for WSJ. He mostly writes on business/economics in China. He is also the co-author with David Wessel of a book titled "Prosperity: The Coming Twenty-Year Boom and What It Means to You." Written in the throes of the tech boom, it would be an understatement to say that Bob and David did not foresee the future. I've not seen any interviews of Bob Davis but David Wessel, whenever he has to talk about this book, admits gracefully that he was way off target. 

Fast Track and Free Trade

Fast track negotiating authority, or the more benignly named Trade Promotion Authority (TPA), is a Presidential authority granted by the Congress to negotiate trade deals with other countries. Under this process, once a trade deal has been signed, Congress can vote only to accept or reject it in toto. The Congress does not have the right to modify any portion of the trade deal. In addition, it has only 60 working days to study and discuss the deal.

Unless you don't follow any politics, you would have no doubt come across a few articles with words like "TTIP", "TPP", or "TAFTA" in the headlines, and most likely ignored it because it did not seem related to the economy. Well, wrong decision. The Obama administration, i.e. the executive branch, is seeking fast track or TPA authority once again to negotiate trade deals with EU (TTIP - Trans Atlantic Trade and Investment Partnership and TAFTA - Trans Atlantic Free Trade Agreement) and a bunch of Asian countries (TPP - Trans Pacific Partnership). All these trade deals are made under the assumption that increased trade benefits all parties involved. There is, perhaps, recognition that it affects adversely at least some segments of society, but that the overall benefits outweigh them.

I'm not sure what kind of public discussion took place when the original fast track authority was granted to the Nixon/Ford administrations in 1974-75. I could go back to newspaper articles from then to find out what was happening. For reasons I will explain below, I don't expect to find much in the newspapers. The most famous or infamous free trade deals signed under the fast track authority are the Canadian-American Free Trade Agreement (CAFTA), which was signed in 1988, and the North American Free Trade Agreement (NAFTA), which was signed in 1993. Actually, I'm not sure about when exactly these deals were signed. There is some time lag (the 60 days) between the USTR (United States Trade Representative) signing the deal and it coming into effect. Still, 1988 and 1993 seem quite right.

When you try to look into accounts of public discourse on these trade deals in the US newspapers, you hardly come across anything substantive. Apparently, there was quite some discussion about CAFTA in Canada. Hardly anything in the US. By the time it came to NAFTA, because Mexico was involved, there was lot more discussion in the US. I'm not sure how much was reported (I really dont know - I did not scour through the nytimes archives). One important source of information - first person accounts - is CSPAN. Search for "NAFTA" and you'll have at your fingertips hours and hours of videos of discussions on free trade from 1987 to 2013. Of course, listening to hours and hours of video is, unless your work is related to aspects of trade policy, a terrible pain. Fortunately, CSPAN allows you to make clips from videos and I have identified a few videos from the CSPAN archive that I found particularly useful in becoming better educated about trade policy. You can find the full videos and clips here. I will write more about the contents of the videos themselves in a few days.

In the meantime, if you are interested in reading about trade, you can read some of the articles by Alan Tonelson, who writes incessantly on trade related issues at www.americaneconomicalert.org, literature at Global Trade Watch, and a book titled "Taking Trade to the Streets: The Lost History of Public Efforts to Shape Globalization" by Prof. Susan Ariel Aaronson, now at George Washington University. I'm sure there are many other books on this topic but this the only one I've read a little of and it is interesting. Lori Wallach, one of those few people who tried to argue against NAFTA and Fast Track in 1991 and also against TPP/TTip/Fast track now is out with a book "The Rise and Fall of Fast Track Trade Authority," which from her involvement on this issue then and now, seems to be worth reading. How can I forget to mention DemocracyNow?

You can also listen to some of the events related to trade at well-known think tanks. However, you will be sorely disappointed if you think there will be debate. Almost all of them believe that free trade is manna from heaven. I have rarely seen substantive debate on these issues at the think tanks. Even left-leaning think tanks like Center for American Progress hardly pay any attention to trade related issues or the trade deficit. What is sad is that newspapers do not write enough about this. It looks like in business and economics journalism, writing about trade and labor related issues is not sexy enough! Wall Street Journal may create a twitter handle called @WSJCentralBanks but I doubt they'll ever create one called @WSJTrade or even @WSJFreeTrade and report all that is unreported on this issue.