The US must not flip-flop on free trade, its mainstay

The controversial Trans-Pacific Partnership trade deal between the United States and some powerful Asian countries is a good step forward, argues Sholto Byrnes

Democratic presidential candidate Hillary Rodham Clinton speaks at the U.S. Conference of Mayors 83rd Annual Meeting in San Francisco. Mathew Sumner / AP Photo

When US secretary of state John Kerry ran for the presidency in 2004, his Republican opponents made much of his shifting position on a military appropriations bill. “I actually did vote for the $87 billion before I voted against it,” he infamously said. His predecessor as secretary of state, and the presumptive Democratic candidate in the 2016 presidential elections, Hillary Clinton, has recently done her own flip-flop on the Trans Pacific Partnership (TPP), which is currently being debated in the US Congress.

She has previously described the proposed 12 Pacific Rim-nation pact as setting “the gold standard in trade agreements to open free, transparent, fair trade”. But now Mrs Clinton, noting the opposition from liberals whose support she needs, is distancing herself from the partnership, saying that were she still in the senate she would have voted to deny president Obama fast track authority to negotiate the agreement.

Former US labour secretary Robert Reich has declared TPP “nearly dead”, while former treasury secretary Lawrence Summers wrote last week: “The repudiation of the TPP would neuter the US presidency for the next 19 months. It would reinforce global concerns that the vicissitudes of domestic politics are increasingly rendering the United States a less reliable ally. It would signal a lack of US commitment to Asia at a time when China is flexing its muscles. And it would strengthen the hands of companies overseas at the expense of US firms.”

Failing to pass this agreement would be bad. As Mr Summers also rightly pointed out, that is not because the TPP represents a western opportunity to contain China. He correctly suggests that membership should be possible for Beijing at some point.

It would be bad because of what it would represent: the rejection of free trade in favour of a short-sighted protectionism that will do little to save American manufacturing in the long run.

The benefits of free trade – from encouraging innovation, competition and efficiency to stimulating growth, fostering the harmonisation of standards and opening up opportunities – should be obvious. Between the establishment of the North American Free Trade Agreement in 1994 and 2008, for instance, trade between the US, Canada and Mexico tripled to US $946.1 billion (Dh 3.47 trillion). It has been estimated that since the creation of the European Union’s single market in 1992, foreign direct investment has more than quadrupled.

Earlier this year, one banker suggested that if the Association of Southeast Asian Nations managed to increase internal trade in the way that Nafta and the EU have, the combined economies of the 10-nation group could gain an extra $2.5 trillion per year.

The alternatives are within living memory for those who grew up while Europe was still split by the "iron curtain" and communist regimes practised a severe form of protectionism that was supposed to support indigenous industries. So there were joke cars, such as the Trabant, which Time magazine reported "smoked like an Iraqi oil fire, when they ran at all, and often lacked even the most basic of amenities, like brake lights or turn signals". There was appalling food and the economies of countries behind the iron curtain were so impoverished that the system was bound to implode once the truth of how the rest of the world lived managed to filter through.

Of course, globalised free trade is not to be welcomed when it leads to the destruction of industries and the communities linked to them. However, if their decline is due to the loss of competitive advantage, free trade only speeds up a process that is already inevitable (unless lossmaking industries are to be propped up for ever by an overindulgent state). Far better for local products to be able to earn their place in more open and freer markets, as makers of artisanal food have done in Europe and America. They are able to charge premium prices because of their products’ authenticity and superior quality.

Moreover, nations that have significant trading relations with each other are less likely to go to war – it is not just the histories of shared work and friendship, but large proportions of countries’ GDPs are then at stake. So all of these factors come to bear on America’s prevarication about the TPP deal, and leads one to hope that the desire remains for the US to lead in one area where its special status is welcomed – free trade.

For free trade has another benefit and one that in a way makes it a superior to political treaties in forging bonds between countries. And that is that free trade is in practice one of the purest expressions of the democratic will. Consumers who choose to buy lamb from New Zealand, cheese from France, smartphones from Korea or shoes from Britain do so of their own free choice and preference. Their participation in trade with these countries is entirely up to them.

Top-down political unity, on the other hand, can be forced through against the wishes of the people. Many would argue that this is exactly where the EU has gone wrong. If its unelected leaders had been content for it to be merely a free trade area, for instance, there would be no talk of Brexit, Grexit or the possible catastrophic collapse of the eurozone.

To return to TPP, the former US presidential hopeful Jon Huntsman put it well when he said: “When America closes its doors, so does everybody else. We are the primary engine of growth in the world and we are the only beacon of free trade left.”

Mrs Clinton: help president Obama keep that beacon alight.

Sholto Byrnes is a senior fellow at the Institute of Strategic and International Studies, Malaysia