On Trade, Congress Talks Out of Both Sides of Its Mouth | — Panjiva
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On Trade, Congress Talks Out of Both Sides of Its Mouth

  • By Josh Green
  • · October 12, 2011
  • ·

This week, the U.S. Senate advanced three bills promoting free trade and passed another bill that could trigger a trade war.  Gotta give the Senate points for audacity, if not for consistency.

To be fair, there is a common thread — jobs.  Theoretically, trade deals with South Korea, Colombia, and Panama should open up new markets and create jobs.  And a change in Chinese currency policy would, according to most experts, make American goods more competitive in the global marketplace and increase Chinese demand for American goods — thereby creating jobs.

The problem is that all of these efforts ignore the big picture on trade with respect to jobs.

Specifically, the biggest opportunity for job creation in the realm of trade is through expansion of U.S. exports of services.  (Kudos to C. Fred Bergsten, an assistant Treasury secretary from 1977 to 1981, for making this point in a recent NYT op-ed.)  The best way to promote growth in services exports?  By helping U.S. service providers gain access  to the world’s important market — China.

In this sense, free trade agreements with South Korea and those two behemoths of global trade — Colombia and Panama — are nice-to-haves.  And, in fact, badgering the Chinese on currency likely moves us further away from the goal of increased market access, by inviting a protectionist response on the part of the Chinese.

Which brings us to part 2 of the big picture on trade with respect to jobs.  Trade wars are a well-known way to kill jobs.  Read this frightening write-up of the Smoot-Hawley Tariff Act — or just watch this clip from Ferris Bueller’s Day Off:

It’s not clear what, if anything, Congress can do to help U.S. service providers gain access to the Chinese market.  But, in the meantime, Congress should at least honor the Hippocratic maxim and abstain from doing harm.  Sadly, this week’s activity suggests that this may be too much to ask of the current Congress.

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