Refining Trade Deals

Posted July 10, 2009, at 7:31 p.m.

Global trade will become more of an economic force in this century than ever before. But the United States, the dominant player in global trade, must improve the way it formalizes trade with other countries. Depending on the details of agreements, trade can create prosperity or poverty in developing nations, and it can limit or expand manufacturing here.

Rep. Mike Michaud introduced a bill beginning to gain support in Congress that would revise the terms by which the U.S. trades with developing nations. Rep. Michaud has been an outspoken opponent of the North American Free Trade Agreement, arguing it has hurt more than helped American and Maine businesses. But his TRADE bill — the Trade Reform, Accountability, Development and Employment Act — is a third way. Rather than oppose or support global trade, the bill creates a better framework for renegotiating existing agreements and sets standards for new ones.

The TRADE bill, which has 108 co-sponsors, would require the Government Accountability Office to review existing agreements such as NAFTA and CAFTA and the trade-promoting World Trade Organization, of which the U.S. is a member. The review would assess economic outcomes in the U.S. and abroad, as well as consider human rights, security, and environmental and social effects. The review would have to be completed before any new trade agreements are signed. Currently, trade deals with Panama, Colombia and South Korea are pending, so those would be on hold if the Michaud bill passes.

Under the bill, new trade deals could not ban “buy American” provisions or anti-sweat shop policies, but would ban tax breaks for businesses that outsource U.S. jobs.

Rep. Michaud’s bill also would end the fast-track system where Congress can only approve or reject, not revise, trade agreements. Rather than have the White House negotiate deals and allow only yes or no votes in Congress, the bill creates a new mechanism to include Congress in the process by which trade agreements are drafted.

In 2004, President Bush’s treasury secretary, John Snow, said the outsourcing of American jobs was good for the domestic economy. Democrats seized on the statement, and Mr. Snow had to do some backpedaling, but what he said was essentially true. Through trade, the economies of developing nations can rise to the point where their businesses and residents are then buying American products.

At the same time, the argument made in the early 1990s was that through global trade, the U.S. economy would emerge as specialized in producing higher-value goods. That has been the result, but most agree the loss of manufacturing along the way has not been good for the U.S. A recent example comes in the importation of wind turbine parts for Maine projects, some of which are manufactured in Vietnam.

Too often, trade agreements have allowed U.S. or multinational firms to relocate manufacturing to developing nations where they can dump waste in the river, pay employees poorly, make them work in terrible conditions and squelch any efforts to organize unions. This must end, for moral and economic reasons. The TRADE bill achieves these goals.

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