Congress passed three long-awaited free trade agreements (FTA’s) with South Korea, Colombia, and Panama on Wednesday, ending a political standoff that has stretched across two presidencies.
Tough economic times often tend to bring with them a rise of protectionist sentiment, and it seemed the US was no exception. But while Congressional obsession over whether or not China is a “currency manipulator” and the protectionist rhetoric of the Occupy Wall Street protesters continues, the passage of these trade agreements is a welcome deviation from an increasingly antitrade trend.
The overwhelming consensus among economists is that freer trade can benefit all parties involved. (Among many such economists, Jagdish Bhagwati – Episode 21 of the podcast – offers a particularly eloquent case in In Defense of Globalization). However, the crucial detail is whether necessary adjustments are made to compensate the losers from trade deals, of which there are always bound to be some.
For example, the current free trade agreement with South Korea will no doubt expand many markets and benefit the general American consumer, making many Korean exports – like automobiles and computer chips – cheaper for US consumers. But workers in competing US industries (in this case, most notably in automotives) may suffer due to increased competition, as hitherto protective barriers are undone.
This, of course, is why FTA’s often involve so much political wrangling in the first place. In fact, the term “Free Trade Agreement” in these contexts is a little misleading, because the deals are anything but a wholesale elimination of barriers to trade between countries. The free trade deals just passed include a plethora of special provisions for automakers and other (often politically sensitive) industries, which dampen the impact of increased competition due to more open trade.
Still, it’s nice to see that bipartisanship in American politics hasn’t gone completely extinct in these tough times.