Res Publica

The Giant Sucking Sound (of Jobs Leaving Due to Trade Policy)

by David Trumbull -- March 25, 2011

According to a recent Associated Industries of Massachusetts (“AIM”) blog posting by Kristen Rupert:

“A pending free-trade agreement between the United States and Korea would increase U.S. exports by $10-$11 billion annually to a nation that has become Massachusetts’ ninth largest trading partner, two trade experts told the AIM International Business Council recently.”

The article goes on to state that: “The bottom line: a $10 billion-$12 billion jump in gross domestic product and creation of at least 70,000 jobs.”

What the author fails to note is that this not a truly reciprocal 'zero-for-zero' tariff reduction deal. While the U.S., under the agreement, will open our market to duty-free access for goods from South Korea, the Koreans will be permitted to keep the 10% value added tax (VAT) that they impose on imports. Furthermore, they are free to increase the VAT in the future. Experience over the past 50 years has shown that it is not unusual for our trading partners, after reducing their tariffs in exchange for the U.S. reducing ours, to then increase the VAT to offset the tariff reductions, so that the end result is we lower our barriers and let in more of their products while their barriers stays at the same level and we never realize the promised increase in exports. That’s why we have a crippling, and growing, trade deficit.

The encouraging news is that conservative, libertarian, and Tea Party activists are waking up to the damage that two decades of failed trade policy has inflicted on this nation and they are putting pressure on our elected officials to do something about it. Last week the New Hampshire General Court voted 172 to 124 a measure “urging Congress to withdraw the United States from the North American Free Trade Agreement (NAFTA)”

Granite State Republicans voted more than two to one in favor of the anti-NAFTA statement. Of the 172 yeas, 167 were from Republicans, with merely five Democrats voting in favor of ending a job destroying trade agreement that has done so much to erode the middle class and harm blue collar and unionized workers in our country.

The vote is, of course, symbolic. The New Hampshire legislature cannot change U.S. trade policy. And even if a majority of state legislatures sent similar instructions Congress, and if Congress then voted to take the U.S. out of NAFTA, it still wouldn’t happen, for President Obama, fully committed to pursuing job-killing trade agreements, would veto it. Still, the vote shows that the public is aware that we have a trade policy that harms ordinary American and that, at least at the state level, politicians, especially Republican, understand it as well.

No, we probably shan’t repeal NAFTA anytime soon. But perhaps we can stop the even worse agreements that President Obama is pushing with Korea and Communists Vietnam. To stop those all we need is a majority in one house of Congress. Let’s see if our Republicans in Washington can prove themselves friends of working men and women the way the Republicans in Concord have.

[David Trumbull is the chairman of the Boston Ward Three Republican Committee. Boston's Ward Three includes the North End, West End, part of Beacon Hill, downtown, waterfront, Chinatown, and part of the South End.]