That Old Time Religion

That Old Time Religion

Yesterday afternoon, I attended one of those Washington meetings at which the Chatham House rules were in effect. Doubtless all of my readers know that Chatham House is a London foreign affairs think tank whose rules mandate that no participant in a meeting be quoted by name outside the meeting. This is supposed to encourage free and open discussion, but in my experience it can also lead to great works of fiction. Thus, you will have to take it on faith that I am not making this up and that the discussion I am about to report actually took place.

Several senators and members of the House of Representatives, Fortune 100 CEOs, eminent writers, and high Obama administration officials were present when the discussion turned to the question of negotiating international free trade agreements. Or, to be more precise, the focus was on the absence of conclusion of such agreements. One very well known senator led the discussion by saying it was well nigh unforgiveable that the United States had negotiated no new free trade agreements in the past five years. He said this was evidence of a woeful lack of leadership in the White House and in the Congress. In particular, he excoriated the Obama administration for having not yet concluded the proposed Trans-Pacific Partnership (TPP) free trade agreement now under negotiation.

A high-ranking member of the administration replied that the trade representative is working as hard as he can on bringing the deal to fruition. A former high-ranking member of the administration seconded that and added that it is absolutely essential to get this deal done. He went on to say, however, that opposition and lack of interest in Congress could doom it. That unleashed a round of comments about how the people in this country and even in Congress don’t understand that these trade deals are good for them. There was much lamentation about the ignorance of Congress and the need to better educate it.

Why? I wondered. The most optimistic projections of the impact of the TPP on the U.S. economy shows a gain of only one half of one percent of GDP by the year 2025. That is a rounding error. Given the assumptions that go into these kinds of projections, the potential for a big negative impact is quite high. Indeed, if precedent is any guide, the TPP will likely increase  the U.S. trade deficit, reduce U.S. economic growth, and cause further unemployment. Trade deals in the past have always been presented as things that "level the global playing field", reduce the U.S. trade deficit, increase U.S. exports, create jobs, and raise incomes. Yet, with a few exceptions the opposite has been the case in the recent past. For example, the Korea-U.S. free trade agreement that went into effect a year or so ago has been followed by a sharp increase in the U.S. trade deficit with Korea. The reports yesterday of median U.S. household income remaining about where it was in the 1970s, suggests that trade deals have not had a major positive impact on the U.S. economy, or, at least not enough of one to offset other negative trends.

So why had this group become so animated about the need to do a deal that at best will have only a tiny positive impact and that at worst could have a significant negative impact on the U.S. economy?

Religion. That’s the only answer. This elite group has a god called trade or perhaps globalization. The details of these trade agreements don’t really matter because regardless of what they are the results of the deal will be presented as a big success and as having greatly increased the welfare of the public.

That’s what used to be called That Old Time Religion.