Four Reasons Why the New GOP Majority Needs to Support a Bold Trade Agenda

As new GOP members of Congress settle into their offices and assemble their staffs, they are already feeling pressure to take a stance on international trade. The House Republican leadership, particularly on the Ways and Means Committee, has made clear that it supports an ambitious agenda of trade liberalization. The White House has called for the U.S.-Korea Free Trade Agreement to be passed by mid-summer. At the same time, FTA opponents have begun to target conservatives with warnings that linking the Korea agreement to a variety of imagined evils.

For many new conservative arrivals in Washington, the trade issue is a difficult one. It was only rarely the subject of campaigning last fall and members of Congress who won on domestic issues may never have dealt with the arcane issues of World Trade Organization dispute settlement or non-tariff barriers. These members will likely be aware of conservatives' long-standing principled attachment to free trade. They will also note growing public wariness about the effects of trade and 'outsourcing' on jobs.

In fact, the trade issue presents an opportunity for the GOP to show political courage and articulate a vision for American economic leadership in the 21st century. It need not be a partisan vision, but there is a leadership vacuum on trade now that is begging to be filled.

To carry this mantle, it is important to see not only how a vigorous trade policy benefits the country as a whole, but how it is integral to preparing individual American workers for the challenges they face in the economy of the future.

On Thursday, I will examine trade and worker insecurity here at ConservativeHome. Today, I focus on four reasons why an open trade policy is good for the United States.

  1. This is America's economic future. When we produce goods and services, they are sold either at home (domestic consumption) or abroad (exports). If we are to grow the economy while paring back excessive consumption, we need to expand exports. As the Obama administration has discovered, this global rebalancing is not easy, but it is necessary and the country will need to have access to an open, rules-based trading system if it is to succeed economically. Right now, U.S. trade deficits are the necessary counterpart to U.S. borrowing from the rest of the world. In years to come, when the world begins to demand repayment, it will be cashing in its dollar bills and government bonds to get American goods and services.

  2. We live in an integrated global economy. The days are long gone when one country made wine, another made cheese, and they sent them back and forth on tall sailing ships. Now, leading manufacturers use components and tools from all around the world. It is not possible to have world-class businesses if they are shut off from competition and cannot benefit from the best supplies the world has to offer. Some of those top-notch supplies are certainly made in the United States, but others will only be available from abroad. For too long, an antiquated view of modern commerce has bred a mercantilist approach, under which exports are glorified and imports are shunned. The country benefits from both.

  3. Free trade follows directly from the principles of limited government, free enterprise, and entrepreneurialism. Just as open domestic markets reward effort and ingenuity, so do open global markets. American manufacturers, farmers, and service providers have done exceedingly well in these competitions. Despite its substantial borrowing-induced trade imbalance, the United States remains one of the top exporting nations in the world. Just as there are clear parallels between the virtues of open markets at home and abroad, there are equivalent perils to government intervention. The alternative to open markets is a policy that erects barriers to competition. In practice, the erection of these barriers offers opportunities for influence very reminiscent of earmarks. The difference is that the transfers go directly from the pockets of jilted consumers to favored industries, without passing through federal coffers.

  4. The distinction between global economic leadership and foreign policy leadership is small and shrinking rapidly. The quest for economic prosperity is so central to the mission of governments around the world that it has become increasingly difficult to have warm diplomatic ties but frosty economic ones. This is a major reason the Obama administration ultimately backed the Trans-Pacific Partnership talks begun by President Bush in late 2009 and then moved to pass the KORUS FTA in late 2010. The same arguments apply with Colombia and Panama and at a global level as well. It was no accident that G-20 gatherings to address the recent financial crisis repeatedly featured vows to bolster the global trading system. Unfortunately, those vows have not been fulfilled. That, in no small part, is because of a void in global trade leadership left as the United States has tried to adopt a diminished role. This is a prime area in which the world looks to the United States for leadership and judges the country on the basis of its ability to fill that role. In 2008, a popular theme in the U.S. presidential campaign was the restoration of America's popular standing in the world. The United States will not enjoy that esteem until it once again takes up a leadership role in trade.

The danger of portraying trade this way is that it can come off as bitter medicine-you swallow it with a grimace, only because you're told it's good for you. In reality, many of the downsides attributed to open trade are inescapable features of any modern economy. Thus, crafting a sensible approach to meet this challenges in the trade context is an essential part of crafting a broader, workable vision for American economic success.

Philip I. Levy is a resident scholar at AEI.

Photo Credit: iStockphoto/dan_prat

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About the Author

 

Philip I.
Levy
  • Philip I. Levy's work in AEI's Program in International Economics ranges from free trade agreements and trade with China to antidumping policy. Prior to joining AEI, he worked on international economics issues as a member of the secretary of state's Policy Planning Staff. Mr. Levy also served as an economist for trade on the President's Council of Economic Advisers and taught economics at Yale University. He writes for AEI's International Economic Outlook series.

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  • Email: philip.levy@aei.org

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