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Bill Clinton tiptoes through free trade agreement issues

The former president discussed the pros and cons of the Trans-Pacific Partnership, which many have compared to his own blockbuster free trade agreement NAFTA.

   Former President Bill Clinton made a strong case last week for free trade agreements such as the Trans-Pacific Partnership, which is currently being negotiated by the White House and 11 other countries in Asia and the Americas.
   In an interview with Jon Stewart on the Daily Show Wednesday, Clinton said he supports the TPP, but that better domestic policies and enforcement mechanisms in the pacts are needed to balance out any social inequalities that derive from more open trade.
   Clinton was careful to walk a fine line, knowing the North American Free Trade Agreement (NAFTA) he pushed through 21 years ago has been blamed by liberal Democrats for the outsourcing of manufacturing jobs. The ex-president’s wife, Hillary Clinton, has tried to remain noncommittal about the TPP as she campaigns for president herself, even though she championed it as the “gold standard” for free, transparent and fair trade deals just a few years ago as Secretary of State.
   “The analysis of all of our trade agreements with countries that have lower per capital incomes than we have shows that on balance we tend to have balanced trade, much more than let’s say with China, which we have no trade agreement with and a humongous deficit,” Clinton said on the Comedy Central program. “We had a huge trade deficit with China even before they joined the WTO, and at least when they joined the WTO they had to agree to rules and if we vigorously enforced the trade deals we had a forum to resolve it.”
   Critics of NAFTA and the TPP also point to China’s accession to the WTO in 2001, as well as free trade agreements with Colombia, Central American nations and South Korea, as examples of trade deals that helped other nations and multinational corporations at the expense of middle-class workers in the United States.
   “In general our trade deficits have been bigger with countries with which we don’t have trade agreements. But it’s also true that, there have been a lot of independent studies, that show we have a net loss of manufacturing jobs at the low end” of the value chain, the former President said. He argued the nation has not done a good job with Trade Adjustment Assistance, a program designed to help people who lose jobs to overseas factories transition to other sectors of the economy.
   President Obama is facing an uphill battle to conclude the TPP. Congress this month rejected a Trade Promotion Authority bill that would fast-track any ratification of a final deal by only allowing an up-or-down vote by Congress. This ability to craft deals without after-the-fact revisions from the legislature is seen as key to strengthening Obama’s hand in negotiations with other nations.
   The Senate passed TPA and Trade Adjustment Assistance, which provides money for retraining workers displaced by trade as well as healthcare benefits, but House Democrats voted en masse against TAA – even though it is a program they generally support – in order to kill TPA because the Senate vote linked the two as a package deal.
   Last week, Republican leaders tried a new parliamentary tactic to resurrect TPA by decoupling it from TAA. The House passed a new TPA bill and sent it back to the Senate, where Majority Leader Mitch McConnell, R-Ky., has promised to bring up TAA for a separate vote.
   Democrats will have to carry the bulk of the vote for TAA because many Republicans believe job reallocation is better done by the free market than a government program. The plan is for TPA to pass with the support of most Republicans and a handful of Democrats, primarily from states with large export economies.
   Clinton said trade deals would be an easier sell if the economy was working better and the middle class participated in the overall prosperity. He added that a common trade enforcement mechanism known as investor-state dispute settlement, which allows companies that have invested in a foreign country to fight regulations they don’t like and pick the arbitrators, should be more open and transparent. The instrument is widely criticized by progressives as allowing foreign corporations the power to undo a country’s national policy.
   “There’s no question that politically, in geo-politics it would be a big deal for America to make an agreement with these countries and not just let China write all the rules for Asia for the next 20 or 30 years. But you can’t do it if the American people – who only last year recovered the per capita income they had the last year I left office – [don’t benefit]. For 14 years, the real inflation-adjusted median income was lower than it was the day I left. So we got to first make sure that our people are going to be alright and that we have a sensible economic policy at home,” Clinton said.
   If Congress fails to pass TPA, the United States will be seen as an unreliable commercial and strategic partner in Asia, Jeffrey Schott, a senior fellow for trade and economic policy at the Peterson Institute for International Economics, said last Monday on National Public Radio’s “Diane Rehm Show.” Asian countries like Japan want the U.S. engaged in TPP and beyond, primarily to keep China and North Korea in check because they already have good access to the U.S. market.
   Schott, a former Treasury Department official, said that politicians tend to oversell the ability of trade agreements to increase employment.
   Trade agreements shift work to higher value, sophisticated manufacturing that requires more technology and skilled workers, who tend to earn more, and also benefit service industries and agriculture, where the United States has distinct advantages, he argued.
   But politicians have also “grossly underestimated the gains” from NAFTA because many of the benefits take a decade or two to become fully realized. “Almost every trade agreement has over performed what the original estimates have been.
   “The domestic policies to redistribute the gains among different constituencies in the economy are where we have fallen flat,” said Schott. “We haven’t taken the steps to improve our competitiveness to deal with the plight of dislocated workers” and crumbling infrastructure.