STUCK IN REVERSE
Hillary’s Fatal Trade Flip-Flop
The Democratic frontrunner’s reversal on a trade deal she’s long championed is reflective of politics at its worst.
Hillary Clinton’s decision to oppose President Obama’s top trade priority is beyond disappointing. It devalues two of her real assets – foreign policy expertise and political loyalty – while aligning her with the most economically retrograde voices on the “populist” left.
Political reporters naturally played up Clinton’s “break” with Obama, who has just wrapped up the Trans-Pacific Partnership (TPP) after five years of arduous negotiations with 11 other Pacific Rim countries. Her untimely defection to the anti-trade camp will compound the president’s already difficult task of rallying Democratic support in Congress for TPP.
More troubling, though, is Clinton’s break with herself. As Obama’s first Secretary of State, she was a key architect of the administration’s strategy of “rebalancing” America toward the Asia Pacific. Integral to that strategy is TPP, which would create an economic counterweight to China – a vast free trade zone encompassing 40 percent of global GDP that includes advanced economies like Japan and Australia, and emerging markets like Malaysia and Vietnam.
At issue is whether the burgeoning Pacific economy will play by China’s mercantilist rules, or merge into the liberal, rules-based trading system championed by the United States and Europe. The stakes for U.S. workers and companies are enormous. In 2011, Clinton called TPP a model for future trade agreements, and indeed other Asian economies, such as South Korea, Taiwan, the Philippines and Thailand, have expressed interest in joining.
So TPP isn’t just another trade deal; it’s an impressive feat of U.S. economic diplomacy and leadership. Its rejection by Congress would deal a heavy blow to America’s influence in the region.
It would also damage America’s growth prospects. The U.S. economy is stuck in low gear, averaging a paltry two percent growth per year since 2000. Over the last decade, productivity growth also has slowed, which economists say goes a long way toward explaining why wage gains for most U.S. workers have been so meager. Our economy needs a lift – and TPP’s market-opening provisions will stimulate foreign demand for U.S. products.
It’s estimated that Asian countries will add about two billion new middle class consumers to the global economy over the next 15 years. U.S. trade with Asia will continue to grow; since our economy is relatively open, the only question is whether it will grow on terms that are fair and reciprocal. That’s what TPP aims to ensure, by requiring Asian countries to ease trade restrictions, such as high duties for food imports, weak protection for innovative technologies, and onerous licensing requirements for service providers.
TPP isn’t perfect – we’ll know more about its flaws when the details of the final agreement are released. But we already know enough to conclude that, on balance, the agreement will be good for our economy and help spread liberal values across the Pacific.
In fact, progressives should be particularly pleased that TPP incorporates high labor and environment standards in its basic text, and these standards are fully enforceable under the agreement’s rules. The pact also breaks new ground on digital trade, which has the potential to extend the benefits of trade from large companies to small firms and individual entrepreneurs by dramatically cutting the costs of engaging in global commerce.
Rather than welcome new opportunities to expand and democratize trade, however, today’s neo-populists blame trade for the loss of America’s old manufacturing empire and rising inequality. And they see trade agreements as a conspiracy by corporations and shadowy “global elites” to enrich themselves at the expense of working Americans.
With its dominant motifs of economic grievance and victimhood, the anti-trade narrative packs an emotional wallop. But it doesn’t offer progressives a positive political program. Instead, it vilifies U.S. businesses that must succeed if their workers are to prosper. It can’t speak to the aspirations of upwardly mobile Americans for new jobs and opportunities in a knowledge-based economy. It has plenty of ideas for how government can indemnify the victims of economic change through redistributive measures, but few about how to revive the U.S. economy’s dynamism and make it work for all Americans.
Now it’s true that most Democrats on Capitol Hill probably won’t vote for TPP. Some of the opposition is principled, but much of it reflects an effective campaign of misinformation and intimidation by labor and its allies, who have threatened to withhold funding from Democrats who dare to support Obama. And while the party’s Washington establishment has turned against trade, that’s not true of rank-and-file Democratic voters around the country, a majority of whom say trade is good for the country.
So why has Hillary Clinton reversed herself on trade and thrown in with populists who, deep down, aren’t that fond of her?
The answer is probably not to ward off a phantom menace from Sanders, who has no chance of winning the Democratic nomination. A more plausible explanation: By appeasing organized labor and other anti-trade activists, Clinton hopes to dampen the clamor for Vice President Joe Biden to jump into the race. After all, Biden would be obliged to defend his administration’s policy on TPP, and would be the last person to stab his pal Barack Obama in the back.
In any event, Clinton’s TPP shift is the latest in a string of recent concessions to pressure groups in her party. First she announced her opposition to the “Cadillac tax,” which is a key source of funding for Obamacare. Labor, however, hates the provision, which targets the federal tax subsidy for costly health plans. Then she broke a long silence by coming out against the Keystone XL pipeline, a top priority of green activists.
Clinton is hardly the first candidate to get whipsawed between the maximalist demands of the “base” and the need to appeal to moderate and swing voters later in the general election. But at a time when voters are looking for authenticity, too much tactical repositioning can be fatal.