US consumers would benefit greatly from some realistic ideas for stimulating growth. The usual suspects have been ultimately disreputable shovel-ready infrastructure projects and tax rate reductions. Infrastructure projects too often turn into out-of-control, over-budget repeats of The Big Dig, and tax cuts seldom can attract bipartisan support. For many years, a proposal called the Trans Pacific Partnership (TPP) has been under development. The target is removing impediments on US exports to our Pacific Rim partners. TPP also gained agreement on protections for intellectual property such as copyrighted materials and patents. On the Atlantic side, a similar trade proposal has been in development. The Trans-Atlantic Trade and Investment Partnership (TTIP) between the US and the EU is in the late stages of development.
TTIP would generate a net $99 billion in additional annual US household income and the TPP would generate another $77 billion net income, together creating a realistic $176 billion in annual stimulus without committing US consumers to pay more federal tax. The expansion of imports associated with the trade pacts is largely a consequence of consumers’ embrace of the lower prices of some overseas products. There are not many plausible stimulus proposals that deliver so much for so little public investment. Public opinion favors increased trade. Polling reveals that 58% think the good caused by exports more than offset the downside of expansion in imports. Only 24% think the imports cause more damage than the exports cause good.
Both agreements rely on the private sector to expand production and export of goods and services where they excel. That would create a net increase in employment and perhaps investment, but there will also be some worker displacement from firms that are less productive than their overseas competitors. The EU estimated 400,000 or more workers would need to find new jobs, likely within industries that boosted exports. This employment thrash has been the focus of labor unions’ opposition, and they cite the bitter experience of the North American Free Trade agreement as an example they want to avoid. Labor’s rejection demands that populist politicians follow the party line, and they do.
Although the GOP usually favors expansion of trade, this year the GOP want delays in consideration of TPP and TTIP until after the US lame duck session of Congress. Donald Trump insists on renegotiating trade deals from a position of strength.
Across the pond, the EU and UK were very eager to embrace TTIP. TTIP could help restore some of the much needed trade vigor that would be lost due to Brexit. Britain especially sees TTIP as a partial fix for the loss of borderless trade privileges with the EU. The EU faces opposition from EU pundits, especially on the basis of some leaks that reveal weakened environmental commitments.
Another contentious issue for leftists in the EU is the ”investor–state dispute settlement,” which they demagogue as letting companies sue governments for lost profits in secret international courts. The settlement process establishes remedies for damages caused by a nation’s unilateral breaches of the trade agreement. Without a process for remedies, the trade pact could quickly unravel under the weight of nations’ self-permitted deviations from the deal.
Walking away from reasonable trade deals such as TPP and TTIP seems like a cavalier disregard for the public’s welfare.