John Hood John Locke Foundation
March 26, 2014
Congress should give President Barack Obama more power — when it comes to the issue of free trade, that is.
Conservatives and constitutionalists are rightly concerned about recent arrogations or abuse of power by the executive branch. They should demand greater oversight by Congress and the courts when it comes to the capricious implementation of the Affordable Care Act and the misuse of IRS resources to punish political adversaries.
But our constitutional system does make the president the primary representative of the American public on matters of foreign and trade policy. That’s why every chief executive since 1974, Democrats and Republicans alike, have received trade promotion authority (TPA) from Congress to fashion free-trade agreements.
Under TPA, the legislative branch retains the ultimate policymaking power by ratifying the resulting agreements on an up-or-down vote. Lawmakers also exert their authority at the beginning of the process by giving presidents not only TPA but also goals and guidelines for any potential trade agreements. What TPA really does is allow the executive branch to work out the details with other countries without having to shuttle back and forth to Capitol Hill during negotiations.
Unfortunately, trade promotion authority expired in 2007. Congress has yet to reauthorize it. That’s been bad news for exporters and consumers in states such as North Carolina that thrive on a robust global trade in goods, services, and ideas.
According to federal data crunched by the Business Roundtable, some 1.2 million jobs in North Carolina relate to international trade in some way. That’s more than one out of every five workers in the state. They include employees of manufacturers that produce and export medicines, industrial chemicals and machinery, tractors, fibers and yarns, auto parts, and consumer products. They include employees of agribusinesses that produce, process, and export swine, poultry, peanuts, tobacco, strawberries, and other produce. They include workers in research labs, law firms, and financial institutions. They work in factories, warehouses, office towers, and small startups housed in abandoned storefronts and retrofitted garages.
Most of these North Carolina exporters are owned and managed by Americans. But there are also hundreds of foreign companies with significant investments here in plants, equipment, and personnel. Nearly 200,000 state residents work for foreign-owned companies. To the extent that wider trade agreements foster more direct foreign investment in the Tar Heel State, that number will grow.
North Carolina’s biggest export markets are Canada ($8.1 billion in goods and services sold in 2012), China ($3.4 billion), Japan ($2.8 billion), Mexico ($2.8 billion), Britain ($2.1 billion), and Germany ($1.6 billion). But there are also hundreds of millions of potential customers in Southern Asia, sub-Saharan Africa, and Latin America that would buy our exports if trade barriers came down.
Of course, trade is a two-way street. North Carolina consumers also benefit tremendously when they are allowed to buy goods and services from abroad. Some enjoy the wider variety of products. Others are pleased to stretch their dollars further. Either way, real living standards rise. The average North Carolina family of four saves about $10,000 a year because of past trade liberalizations.
Does free trade sometimes result in business contractions and job losses? Yes, in specific industries or circumstances. But the economic gains still outweigh the losses. That doesn’t mean the resulting dislocations aren’t painful, and deserving of response by the public and private sectors. It is not in the public interest, however, to attempt to wall off any company or sector from international competition. It hurts consumers in the short run and fails to save outmoded firms in the long run. It only delays the inevitable adjustments.
North Carolinians are capable and willing to embrace the realities of the 21st century — including the demands of an increasingly global market. President Obama says he wants Congress to reauthorize trade promotion authority. Most Republicans and Democrats say they agree. The sooner they act, the sooner we will see new trade agreements to create new jobs for the many North Carolinians who remain out of work.
Time to make the deal.
Hood is president of the John Locke Foundation. For more information, visit www.johnlocke.org.