Leading From the Front on Free Trade

BY ROBERT B. ZOELLICK
America’s commitment to free trade will be tested in 2014. After years of indifference to trade policy, the Obama administration now has an agenda. Congress must decide whether the U.S. will lead in opening markets and creating fair rules for free enterprise in a new international economy. Where will Republicans stand?
The starting point will be Congress’s consideration of Trade Promotion Authority, which enables the president to negotiate agreements subject to an up-or-down vote by Congress. Through TPA, Congress sets goals, procedures for working with the executive branch, and controls the details of the enabling legislation. The Obama administration has been slow to press for negotiating authority.

Fortunately, Sens. Max Baucus and Orrin Hatch, the Democratic chairman and ranking Republican on trade in the Senate, respectively, and Rep. Dave Camp, Republican chairman in the House, introduced their bipartisan Trade Promotion Authority bill last Thursday. Chairman Baucus would like to move the bill through the Senate Finance Committee this month before his confirmation as ambassador to China. Successful action would offer a substantive thank you to Congress’s Democratic leader on trade.
The Obama administration hopes to close a Trans-Pacific Partnership (TPP) deal this year. Of the 11 other countries in this trade pact, six already have U.S. free-trade agreements, which were negotiated and passed by Republicans. TPP would add important economies—especially Japan and Vietnam—while modernizing rules and better integrating all 12 economies. In addition to the growth benefits, TPP recommits America’s strategic economic interests in the Asia-Pacific, complementing the U.S. security presence.
The U.S. is also combining geoeconomics with geopolitics by negotiating a Trans-Atlantic Trade and Investment Partnership (TTIP) with the European Union. Together, TPP and TTIP could forge modern trade and investment rules with major economies of western and eastern Eurasia. To offer opportunities for global trade liberalization, the U.S. is also negotiating in the World Trade Organization freer trade for services businesses and a Digital Economy compact that would update the successful Information Technology Agreement of the 1990s. These openings would be especially valuable for middle-income economies that want to boost productivity and reach high incomes through more competitive service and information industries.
The economic record of America’s free-trade agreements argues for expansion. America’s free-trade partners account for about 45% of all U.S. exports, even though their economies amount to only 10% of global GDP. On average, in the first five years of a new free-trade agreement, U.S. exports grew three to four times as rapidly as U.S. exports to others. The U.S. has a trade surplus with its 20 free-trade partners—in manufacturing, agriculture, and services—instead of the large deficit it runs with the world.
These trade agreements serve principally to bring down the barriers of other countries, because U.S. restrictions are already relatively low. U.S. free-trade agreements are also comprehensive—covering not only manufacturing and almost all agriculture, but also services, government procurement and transparency, investment and intellectual property, as well as dispute resolution. These trade agreements encourage others to move toward greater compatibility with the U.S. economy and legal framework.
Republicans have provided most of the votes in Congress for free-trade accords in the past. Here is why: The deals cut taxes on trade. They expand individual freedom, consumer choice and opportunities for innovation. They reduce governmental barriers. They boost the private sector. They enhance the rule of law and foster civil society.
An active trade agenda also signals America’s interest in the rest of the world at a time others are worried about U.S. withdrawal. Free trade boosts development and economic reformers around the world, while supporting U.S. growth. For much of the world, America’s commitment to stability seems more credible if built upon an economic foundation. Economic diplomacy can be the basis for hard, soft and smart power.
Nevertheless, some Republicans are hesitant to grant negotiating authority to the president because they fear he will use it to impose stricter labor and environmental standards he couldn’t otherwise get through Congress. But such fears can be addressed by circumscribing those provisions to the core labor and environmental standards that both parties agreed to in recent free trade agreements. Moreover, such concerns should not prevent Republicans from showing they can govern, lead internationally and extend America’s economic power globally through a vibrant private sector. Republicans should also insist, as they did with President Clinton, that a reasonable number of Democrats in Congress back their president.
We still have to see whether the Obama team can translate talk into action. It is not clear that this administration knows how to close deals—and take on its protectionist and isolationist constituencies in labor and manufacturing. Republicans should use TPA—and the process it creates—to set objectives that boost economic growth, pointing out that workers in U.S. export industries earn on average 18% more than other Americans because their labor is more productive.
Republicans should also set the intellectual agenda for worker adjustment and jobs policies that help Americans adapt to change, whether triggered by trade or technology. The federal government spends about $18 billion a year on nearly 50 separate employment training programs, run by nine different agencies, with few ever evaluated for results. When the administration sends up trade agreements it should also propose options to transform this often inefficient spending.
President Obama has tiptoed on trade, but he is moving in the right direction. He may hesitate when he recognizes that results require actions. Republicans should be pushing the president to deliver—and to make 2014 the year the U.S. reclaimed global leadership on trade.
Mr. Zoellick has served as president of the World Bank Group, U.S. trade representative and deputy secretary of state.