Besides all the political wrangling, there are some serious "nut and bolts" issues behind International Trade Agreements, that always seem to get lost whenever we attempt to rebuild this engine.
Why President Obama Is Wrong on Trade
by David Singh Grewal, huffingtonpost.com -- 04/26/2015
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The economic argument on behalf of free trade is straightforward -- and has been reiterated time and again since its first formulation by early political economists, Adam Smith and David Ricardo. It says, in effect, that eliminating obstacles to the free movement of goods and services across borders allows gains from trade that make both parties better off, allowing each country to exploit its comparative advantage. While this assessment ignores distributional concerns within each country -- who gets how much as the national economies integrate -- the general view is that the winners will gain enough to be able to compensate the losers, at least in theory.
Historically, the most obvious obstacles to free trade have been tariffs -- that is, taxes on imports -- along with export subsidies. These policy instruments have been the traditional target of international trade agreements, which sought to bring them down reciprocally. And across many decades of gradual, post-war economic integration, under the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), tariffs have been brought down -- in many sectors, almost eliminated.
It's that familiar idea of why free trade is valuable and how trade agreements work that the president presumably has in mind when he criticizes the TPP's opponents as irresponsible. But the problem with the president's view is that tariffs are already at unprecedented lows -- indeed, in most industrial sectors, negligible. Today's trade agreements aren't really about reducing tariffs but something much more complex and consequential: harmonizing different national regulatory regimes, often to the advantage of powerful interests.
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Nature may abhor a vacuum -- but can we really say that about Countries just looking to import and export their stuff?
If we don't write the rules -- "somebody" else will? The best defense is a good offense ... and so forth ...
The fallout from the Dems' red hot fight over trade
by Ben White, cnbc.com -- 24 Apr 2015
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Obama on Thursday showed little patience for this line of argument and assured his progressive base that he would never push a trade deal that would be bad for American workers.
"By this logic I would've had to do all his stuff for the last 6½ years and just say suddenly I want to just destroy all of this," he said. "America has got to write the rules of the global economy. If we don't, then somebody is going to write the rules. China is going to write the rules. And when they do it, they'll do it in a way that gives Chinese workers advantages, and Chinese businesses the upper hand."
Obama went on to call TPP "the most progressive trade agreement in our history." And then he got really mad. "When people say that this trade deal is bad for working families, they don't know what they're talking about. I take that personally. My entire presidency has been about helping working families."
Asked for a response to Obama, Warren's office pointed to remarks the senator made Wednesday night to Rachel Maddow on MSNBC. Warren did not take on TPP directly but instead reiterated her complaints about the public not being able to read the working draft of the deal and said senators should not approve "greasing the skids" for the deal (code for fast track). She also complained that most of the people in working groups working on the partnership are executives of companies in industries that will be affected or lobbyists for those companies.
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So this is all about stopping or blocking China?
But I thought we needed China -- to one degree or another. Afterall who's going to supply those replacement "nut and bolts" once those tariffs/subsidy equations, get 'equitably' redefined?
As I recall, most Wal-mart Americans have some sort of love/hate relationship with China.
We love their products, but hate their ... productivity? ... Work-ethic? ... Low prices?
History of trade of the People's Republic of China
wikipedia.org
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Beginning in the late 1970s, China reversed the Maoist economic development strategy and, by the early 1980s, had committed itself to a policy of being more open to the outside world and widening foreign economic relations and trade. The opening up policy led to the reorganization and decentralization of foreign trade institutions, the adoption of a legal framework to facilitate foreign economic relations and trade, direct foreign investment, the creation of special economic zones, the rapid expansion of foreign trade, the importation of foreign technology and management methods, involvement in international financial markets, and participation in international foreign economic organizations. These changes not only benefited the Chinese economy but also integrated China into the world economy. In 1979 Chinese trade totaled US$27.7 billion - 6 percent of China's GNP but only 0.7 percent of total world trade. In 1985 Chinese foreign trade rose to US$70.8 billion, representing 20 percent of China's GNP and 2 percent of total world trade and putting China sixteenth in world trade rankings.
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The United States banned trade with China until the early 1970s. Thereafter trade grew rapidly, and after the full normalization of diplomatic and commercial relations in 1979, the United States became the second largest importer to China and in 1986 was China's third largest partner in overall trade. Most American goods imported by China were either high-technology industrial products, such as aircraft, or agricultural products, primarily grain and cotton.
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Today, China's main export markets, in order of importance, are the European Union (20.4%), United States (17.7%), Hong Kong (13.4%), and Japan (8.1%). China's main import markets, in order of importance, are Japan (13.3%), European Union (11.7%), South Korea (10.9%), Taiwan (9.1%), and the United States (7.2%).
And isn't China supposed to be a "prime holder" of all our USA debt? I wouldn't want to go and upset that apple cart too abruptly. Would you?
How Much U.S. Debt Does China Really Own?
by Tom Murse, US Government Expert, usgovinfo.about.com
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China and U.S. Debt
The largest portion of U.S. debt, 68 cents for every dollar or about $10 trillion, is owned by individual investors, corporations, state and local governments and, yes, even foreign governments such as China that hold Treasury bills, notes and bonds.
Foreign governments hold about 46 percent of all U.S. debt held by the public, more than $4.5 trillion. The largest foreign holder of U.S. debt is China, which owns more about $1.2 trillion in bills, notes and bonds, according to the Treasury.
In total, China owns about 8 percent of publicly held U.S. debt. Of all the holders of U.S. debt China is the third-largest, behind only the Social Security Trust Fund's holdings of nearly $3 trillion and the Federal Reserve's nearly $2 trillion holdings in Treasury investments, purchased as part of its quantitative easing program to boost the economy.
There must be a reason why our prime international Banker/Exporter wasn't invited to the TPP Party -- could their use of this next archaic Economic lever, really be it?
It seems to be very much on Clinton's strategic radar ...
Hillary Clinton tees up an argument for opposing the TPP
by Jon Healey, latimes.com/opinion -- 04/18/2015
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On Friday, Hillary Clinton's spokesman appeared to set a condition for her supporting the 12-nation TPP that is impossible to satisfy.
In a statement to the New York Times, Nick Merrill said Clinton would support the deal only if it improved the lot of U.S. workers and strengthened national security. That's a brilliant bit of framing because no matter what's in the deal, supporters will argue that it passes Clinton's tests, opponents will argue that it fails, and both will be speculating.
Merrill went on, though, to give Clinton a sure argument against the deal. Among other things that Clinton will be "watching closely," his statement said, she wants to see "what is being done to crack down on currency manipulation."
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Economist Dean Baker explains how the local "currency manipulation" trick works on the international playing field -- sounds like it's just as efficient as any tariffs/subsidy trick, hoping to 'tilt' the Trade Imbalance into your Country's playing-field favor ...
A key to healing U.S. economy? Curbing currency manipulation
by Dean Baker, latimes.com/opinion -- 04/07/2015
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To understand the relationships at work here, imagine that the dollar suddenly rose in value by 20% against the Vietnamese dong and the Japanese yen. Since we sell our goods and services in dollars, people living in Vietnam and Japan would then need 20% more of their currency to buy products from the United States.
This means that a Ford or General Motors car produced in the United States would cost 20% more for a person living in Vietnam or Japan. The same would be true of Microsoft's software or any other item that we might try to sell overseas. Naturally when our prices rise, we expect that people will buy fewer goods and services from us.
The opposite happens on the import side. Our dollar would buy 20% more Japanese yen or Vietnamese dong. So we might be more inclined to buy Japanese cars because they would cost us 20% less than they would have before the rise in the dollar.
If we sell fewer goods to other countries even as we buy more goods from them, we end up with a larger trade deficit. Currently the U.S. trade deficit is running at more than a $500 billion annual rate, roughly 3% of our GDP. This has the same impact on demand in the U.S. economy as if families or businesses just pulled $500 billion out of circulation and stuffed it under their mattresses.
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But the responses of the Labor Secretary do not seem to place "curbing currency manipulation" very high on the
TPP to-do list, Senator Clinton's concerns, notwithstanding.
This leveling of the playing field is some complex stuff ... 'let the adults in the room' handle first things first, already ...
Will massive Trans Pacific trade deal hurt American workers? Labor Secretary Thomas Perez pushes back
by Greg Sargent, Plum Line, washingtonpost.com -- April 20
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PLUM LINE: Paul Krugman argues that trade is already fairly free among participating nations and that there’s currently very little protectionism.
PEREZ [Labor Secretary Thomas Perez]: Tell that to a farmer who’s trying to ship pork to Malaysia or other farm items to other countries, where you have 30, 40 percent tariffs. I wouldn’t call the playing field level. There are lots of Japanese autos in the U.S. and there are virtually no American cars in Japan. There are also many non-tariff barriers. I want the F-150 not only made here, but made for shipment abroad.
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PLUM LINE: Currency manipulation. If you’re not going to secure currency manipulation reform as part of this, where else can you do it? This would be the place to do it, no?
PEREZ: Jack Lew has been negotiating with a number of members on both sides of the aisle to come up with a meaningful currency bill that would address the concerns.
PLUM LINE: To be clear, if nothing happens on that front, you’d still find a TPP without any currency manipulation provision acceptable?
PEREZ: I would respectfully dispute the premise. People are working 24-7 on this issue. But we want to make sure at that the remedy does not create a new serious illness. That illness is to prevent our government from taking very important steps to respond to macro-economic forces. We need to preserve all of our tools to deal with the natural ups and downs of the economy. At the same time we want the right tools to deal with currency manipulation.
Ahh sure, nothing like getting all those "macro-economic forces" finely tweaked -- and then leaving the BIGGEST "
Marco-forces player" of the region, out of those equations in the first place, as if they don't even exist.
That is one HUGE Vacuum, that any well-meaning economic Trade agreement, sooner or later will have to acknowledge. Just maybe China might have a problem with "being told the rules," after the fact.
Does a TPP agreement -- without China -- really acknowledge their "macro-force" that is projected to be among the most dominant economic forces of the next century. That even the orbits of our 'most favor' Pacific-Rim trading partners, just might get pulled into at some point?
There are many sound economic reasons, for TPP critics to be skeptical of such grand-engineering arrangements. Are Vietnam, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, going to band together and buy up our Trillion dollar Debts? Are they going to just pretend like China doesn't exist too?
Are our new TPP-BFFs going to keep stocked all our Mega-stores' low-priced shelves -- that seems to be the theory anyways. But maybe China may have a thing or two to say about that, in long and short runs -- before we/they are done with the global "playing-field rule-making."