This commentary originally appeared in the Washington Examiner on July 8, 2015.
Though conservatives have reason to distrust President Obama's actions after years of failed policies, they should be cautiously optimistic about last week's bipartisan congressional approval — dominated by Republicans — of Trade Promotion Authority, otherwise called fast track authority.
"Fast Track" authority gives presidents for the next six years an opportunity to negotiate trade agreements that Congress will then vote up or down after at least 60 days of public review. This makes it different from Obamacare, in which then-House Majority Leader Nancy Pelosi before passage said, "We have to pass the bill so that you can find out what is in it."
This type of authority has been given to every president since FDR to lower trade barriers with multiple countries, including NAFTA, but expired in 2007.
Sure, Congress could work these deals out on their own, but this tends to lead to a negotiating process that's full of uncertainty and conflicts of interest for businesses and other countries, practically eliminating any chance of an agreement; hence the reason for "Fast Track" authority.
Understandably, critics opposed granting this authority because of concerns over President Obama's motives and the hope for a free market president in 2017. But this line of reasoning puts too many eggs in one basket and potentially handicaps prosperous trade agreements.
While free trade has been one of the greatest developments for generating prosperity worldwide, governments have for too long blocked international trade to benefit special interests at the expense of everyone else through tariffs, quotas and other protectionist measures.
Though research shows that countries should be cautious when joining free trade agreements due to potential exposure to economic volatility among member countries, lower trade costs is beneficial, on net, for all involved.
For example, international trade for the last decade and since World War II has boosted average U.S. household incomes today by about $13,000 per year according to an HSBC study and a Peterson Institute for International Economics' report, respectively. Reduced international trade during this period would have been devastating for Americans — just like it was during the Great Depression.
Given international restrictions on global trade, the U.S. should do everything it can to break down the barriers to trade through free trade agreements. Though another approach is to remove all trade barriers unilaterally and to reap the benefits of opening up trade and paying less for imports, this is a long term goal that will likely not be accomplished anytime soon.
Passage of "Fast Track" authority now provides for the possibility of a potentially valuable Trans-Pacific Partnership. If President Obama's team negotiates a bad deal by picking too many winners and losers, Congress should simply vote it down.
The 12 TPP countries include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam. These countries have roughly 800 million people, produce about 40 percent of global economic output and account for almost 33 percent of global trade.
This agreement could help increase U.S. access to around 480 million people who already constitute half of all domestic exports. This would not only boost exports because of lower trade costs, but it will also benefit Americans with the opportunity to purchase cheaper, higher quality products than those domestically produced.
This is an important point: It's not just exports that make us more prosperous; increased access to low cost goods will allow Americans to save or spend more on other desires.
After years of failed mercantilist and Keynesian policies that have resulted in economic growth rates substantially below long-term rates, increased trade among Pacific Rim countries would finally let markets boost our economy.
Free trade also benefits states such as Texas. For example, research finds that Texas is more resilient to oil price shocks and U.S. economic volatility after NAFTA from further economic diversification because of increased trade activity with Mexico and Canada — it has now been the U.S.' leading exporter for 13 consecutive years. Texas and other states could substantially benefit by increasing their exports.
Of course, the devil may be in the details when the Obama administration presents TPP to Congress. Potentially harmful components of TPP could include deals for labor unions, changes to immigration law and increased environmental restrictions.
No trade agreement is perfect. Congress will determine how flawed TPP is and whether or not it is superior to the status quo. And in the case of the Pacific Rim market, the stakes are surpassingly high.
Liberty and prosperity shouldn't take a backseat to protectionist fears. If the administration can deliver a true free trade agreement, we shouldn't let special interests get in the way of its tremendous benefits to the American economy.
More trade will benefit the American economy so that we can be freed from failed past policies and start a new day of letting markets work, which is a time-proven conduit to greater prosperity for all.
Vance Ginn, Ph.D., is an economist in the Center for Fiscal Policy at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. He may be reached at [email protected].