Some stories that you hear and read are not based in reality. On the streets of New York City, we call it the Three-card Monte. It looks like it’s a card game you can win, but you really can’t. Such has been the case for most U.S. international trade relations under this administration and this Congress.
Perhaps it all started on Sept. 11, 2009, when the White House announced the Obama Tire Doctrine. You might have missed this newsworthy event but, for those us of who make their living from trade, a punitive tax on imported tires was an explosive hit. The administration was concerned that China would flood the U.S. market with low-cost tires. It didn’t matter that tire importers needed these inexpensive tires as a merchandising tool, to help sell their higher-price tires, which were being made in the U.S. Funny, just this week this conversation came alive again with claims of increased shipments of low-cost Chinese tires. While this is true, the missing link is that U.S. auto sales have also increased dramatically during this same period and, unless something has changed, each car still gets at least four tires!
{mosads}While labor unions herald this 2009 act as bold and historic, actual tire companies found the decision to be “disappointing.” It was a great headline for a few days, but looking back on the three-year tax, the results were dismal. Yes, we did save 1,200 U.S. jobs in the tire industry, but a study by the Peterson Institute reported that Americans had to spend about $1.12 billion more on tires during the three years, and it actually amounted to a $936,000 cost for each job that was saved. The whole situation was ugly, expensive and nobody won. However, the stage for the Obama agenda was set. Trade deals were going to be tough, and no free passes would be given out.
If the tire disaster wasn’t enough to get everyone’s attention, then surely the next move would do it. Also in September 2009, using an obscure blog post, the White House announced that they would ban lobbyists from Industry Trade Advisory Committees (ITACs). Some might think this has no relevance to good governance, but the truth is that this effectively removed expertise from the committees. Essentially, we were now going to let the co-pilots fly the planes. Yanking lobbyists out of trade advisory committees was just bad policy. Some lobbyists did sue, and only recently this absurd policy has been reversed. It was pretty much akin to running a baseball game without an umpire. The inmates had now taken over the asylum.
Where did all this distrust for international trade come from?
As we look to his brief congressional record, then-Sen. Obama did vote against CAFTA (the Central American Free Trade Agreement).
As a candidate for president, in a debate against then-Sen. Hillary Clinton (D-N.Y.), he said that some trade deals for the U.S. can be beneficial, but NAFTA (the North American Free Trade Agreement) was bad.
As Sen. Obama became President Obama, he was in no rush to get the Korea, Colombia and Panama trade agreements signed, and preceded to make changes to all three. One could argue that was good or bad. However, during that period, the world of international trade was moving at a rapid pace, while America was taking a Rip Van Winkle nap.
In 2009, Obama would also launch his “Signature Trade Legislation” called the Trans-Pacific Partnership (TPP). It proposed to cover 40 percent of the world’s GDP and 40 percent of all U.S. exports. If passed, TPP would be a significant force in trade. However, it’s truly hard to speculate if TPP will actually pass during this administration. Hopefully, it isn’t the Three-card Monte of trade legislation — looks like you can win something, when you really can’t.
In addition to many contested components of the TPP negotiation, and in spite of the critics who complain that it’s a secretive process, there are also some serious incongruities with the whole concept of TPP. It actually is possible that TPP could hurt many of the existing U.S. trading partners, especially the NAFTA and CAFTA countries.
For Obama to pass TPP, he first needs a niche legislative item called TPA (trade promotion authority), so that he is able to fast-track the legislation through Congress. This presents a trust issue, as many in Congress are fearful of giving Obama more executive power. There is some rumor that TPA will pass in the lame-duck session and, hopefully, that will happen as the legislation is needed.
The administration may be a factor in the sluggish trade economy, but they are not solely to blame for the past six-year trade debacle; Congress hasn’t done much either.
In 2012, Congress neglected to renew the Miscellaneous Tariff Bill (MTB). Some members of Congress called MTBs earmarks. Clearly they missed the mark, and failed to understand that MTBs are a tax incentive for component parts for American manufacturing. These items are not available in the U.S., and there is no conflict and no earmark.
The result: The cost of American manufacturing goes up and competitiveness goes down.
In 2013, Congress neglected to renew the Generalized System of Preferences (GSP), a wonderful legislative concept that has been in existence since 1974 and allows the U.S. to provide jobs and stability to developing economies, in return for duty-free access for products used as raw component parts for American manufacturing.
The result: The cost of American manufacturing goes up and competitiveness goes down.
In 2014, Congress will likely fail to renew the Nicaraguan Tariff Preference Level (NIC-TPL), inflicting much pain to U.S. companies that have invested in Nicaragua because of that trade program. It’s upsetting when the government encourages us to make investments in a region where they have a vested interest, and then they pull the rug out from under our feet. This is a heartless maneuver that leaves domestic producers hung out to dry.
The result: American companies fear to make investments backed by U.S. trade deals.
In the fourth quarter of 2014 or in 2015, Congress must deal with the renewal of the African Growth and Opportunity Act (AGOA), which is a carefully crafted program to help the U.S. develop Africa as a market. The early years of AGOA were not active, but lately this has come into vogue. Congress has yet to renew the program while China is investing heavily in Africa. We could lose everything we have gained if the U.S. doesn’t renew AGOA soon.
The result: 15 wasted years for the U.S. as China gains ground on African trade.
So, what’s the moral of the story? Is international trade good or bad for the U.S., and has the Obama administration along with the 111th, 112th and 113th Congresses been helpful?
The simple answer is “yes” and “no.” Trade is good, and the administration and Congress haven’t been helpful.
The best measure of success in raw economic terms is the real gross domestic product (GDP) of the U.S., as measured by experts. In the last six years of this Congress and this administration, we have failed to meet the historical U.S. average of 3.27 percent real GDP growth.
Bottom line: No International trade equals no domestic growth.
It just seems like every international trade ship has raised the sail and headed out to sea, while the U.S. remains sitting at home, still firmly tied to the dock.
Is this where we really want to be?
Helfenbein is chairman of the board of the American Apparel and Footwear Association. He is a strong advocate for a robust U.S. trade agenda and lectures frequently on the subjects of supply chain and international trade.