The Flinchum File

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Supporting The Republicans And A Democrat

Economists can often be as petty and spiteful as Republicans or Democrats.  But, sometimes, the over-whelming majority actually agree on something, and “free trade” is one of those somethings.  To really appreciate why this is true, you need to Google or Bing the law of  “comparative advantage.”  Walking through the math is beyond the scope of this blog, but it would help you understand why so many economists favor “free-trade.”

Currently, our Democratic President finds himself allied with the Congressional Republicans to give him “fast track authority” in negotiating a hugely-important trade deal with the 12-nations of the Trans-Pacific Partnership.  Our future growth lies with Asia, not Europe nor Africa.  We must formalize our trading relations with them to realize the real growth potential.

Historically, when the president negotiates a trade deal and presents it to Congress for approval, the politicians treated it as a Christmas tree to be decorated, creating a Frankenstein treaty that our trading partners could not accept.  (After all, why negotiate in good faith with the U.S. when you know Congress is going to change whatever you agreed to?)  Giving the president this fast-track authority means that Congress gets to vote on the proposed treaty as an all-or-nothing deal, without adding any extraneous ornaments.  This authority has been granted to other presidents and should be granted to this one.

To be balanced, Democratic politicians argue the objective is “fair trade.”  Treaties that merely give foreign nations the opportunity to steal our jobs may be free, but it is certainly not fair.  Complicating this political drama is a new study by a respected MIT economist named David Autor, which “proved” that the Democrats worst fears were confirmed – trade agreements do cost U.S. jobs.

Of course, the jobs lost were mostly factory jobs that would eventually be lost anyway, but there is more to considering a trade agreement than jobs that are going to be lost anyway.  There are many other things that need to be negotiated, such as intellectual property and tariffs and tax transparency and terrorism.  Don’t increased sales matter at all?  (Now, study the law of comparative advantage!)  Even the author of this study, David Autor, supports the new trade deal, as I do!

This “triangulation” between a lame-duck Democratic president, allied with Congressional Republicans, against Congressional Democrats is not new.  President Clinton used it successfully and repeatedly.  A lame-duck president does not need to appease his base – he just needs to do the right thing, and this is the right thing!