AGOA 2.0: 'On-Line Africa' and the Next U.S.-Africa Partnership
July 28, 2014
The U.S.-Africa Leaders Summit this August joins 50 national leaders in history’s largest American-African meeting. At the center of their agenda will be a call for “swift and seamless renewal” of the African Growth and Opportunity Act (AGOA) – the centerpiece of American economic relations with sub-Saharan Africa, created in 2000 and set to expire in September 2015. They will be right to call for its renewal – but as ProgressiveEconomy observes in AGOA 2.0: ‘On-Line Africa’ and the Next U.S.-African Partnership observes, the passage of time and the sudden flowering of ‘on-line Africa’ have given them new opportunities in digital trade and small-business exchange which did not exist at the turn of the century, and can help AGOA serve much broader publics in both continents.
Sub-Saharan Africa is now the world’s fastest-growing adopter of mobile Internet technology: where 4 million Africans had Internet access in 2000, 172 million have it today, and the count is growing by 20 million a year. This creates a chance for a much broader U.S.-African partnership where linkages among major companies are matched by a complex web of partnerships among specialized manufacturers, immigrant-owned restaurants and groceries, African-American community institutions, fair trade and artisanal companies, and many others.
The challenge will be to take the AGOA of 2000, and broaden it to include the digital, financial, and trade facilitation policies most important to these constituencies – by encouraging universal access to the Internet, supporting the development of data, telecom and financial regulatory policies that encourage digital trade; and broadening AGOA’s market access features to promote trade facilitation and serve smaller businesses more effectively. The Summit participants, then, should seek not only to renew the program but to modernize it with new features for a 21st-century “AGOA 2.0”:
1. Support universal and low-cost Internet access in Africa through Internet dialogues under the AGOA Ministerial series, technical assistance in regulatory policy;
2. Encourage free international flows of data through agreements and dialogues;
3. Support development of secure online payment systems;
4. Encourage the spread of high-speed Internet access, and the use of smart phones and other devices, including by encouraging African governments to eliminate tariffs in IT goods such as smart phones, computers, and telecommunications equipment;
5. Support trade facilitation implementation through capacity-building;
6. Waive U.S. fees and charges on small “de minimis” shipments of African goods.
The paper’s full text is available at:
Congress carried out an unplanned tariff-hike experiment last year by letting GSP expire. China looks like the beneficiary.
July 23, 2014
THE NUMBERS: Import shares for top 250 ‘GSP’ products, 2012 and 2014 -
* Projected based on five months’ data. The import share for 2013 was 23.7 percent China, 10.5 percent GSP developing countries.
|GSP Developing Countries||11.2%||10.2%|
WHAT THEY MEAN:
The Generalized System of Preferences, known for short as “GSP,” expired on July 30th, 2013 – a year ago next Wednesday. The largest and oldest American ‘trade preference’ program for developing countries, GSP dates to 1974 and waives U.S. tariffs on 3,291 types of goods (about a third of America’s 10,714 tariff “lines” ) from 122 developing countries and territories. A year of this unplanned experiment suggests results as follows: (a) smaller developing countries’ share of imports has fallen; (b) China’s share has grown, and (c) overall import trends are unchanged. Some background, then the results:
The GSP System: GSP’s 3,291 waivers cover microwave ovens, gold necklaces, silicone, auto parts, frozen fish, arc lights, automobile tires, slabs of building stone for construction sites, sheets of sterile jelly for scientific labs, plywood doors, auto parts, aluminum foil, guava juice, and in general a wide swathe of miscellaneous goods. Most get tariff rates of 1 percent to 8 percent. Very high-tariff products like T-shirts, butter, and running shoes are not included, nor are sophisticated heavy-industry products like cars; most natural resource goods and high-tech products are permanently duty-free anyway.
As of 2012, GSP waivers were most important in trade with countries in the Middle East, the Balkans, and the Caucasus. GSP waived tariffs on 91 percent of imports from Armenia, 55 percent from Georgia, 50 percent from Lebanon, 26 percent from Albania, and 21 percent from Tunisia and the West Bank. (See below for a small single-product case-study of Tunisian olive oil.) The largest GSP exporters in dollar terms, though, were India, Thailand, Brazil, the Philippines, South Africa, Indonesia, and Turkey. Meanwhile, buyers of Chinese, Vietnamese, Taiwanese, European, and Japanese products pay full rate, while buyers of goods from the U.S.’ 20 FTA partners get zero tariffs.
The experiment: As a temporary waiver program rather than a permanent FTA-like abolition of tariffs, GSP needs to be renewed periodically by Congress. Without a renewal bill, GSP expires, waivers end, and tariffs go back into effect. Last year’s renewal didn’t happen, due not to opposition per se but a confusing argument over procedural ‘pay-fors.’ (For those interested, an explanation is below, after the olive-oil case.), Tariffs have therefore risen for beneficiary countries; remained in place on Chinese, European, Japanese, and Taiwanese goods; and stayed at zero for FTA partners. To find out what has happened since, ProgressiveEconomy over the past week examined data on imports of the top 250 GSP products, which make up about 75 percent of all GSP imports. The results:
1. Overall Import Levels Stable: Total imports of the 250 products rose from $192 billion in 2012 to $197 billion in 2013, and likely around $205 billion in 2014. This is growth of 8 percent, slightly higher than the 6 percent increase in U.S. imports of all goods (excluding petroleum). Expiration of GSP thus does not appear to have changed any balance between importing and local production.
2. Beneficiary Country Share Drops: In 2012, the 127 beneficiary countries accounted for 11.2 percent of imports of the 250 studied products – more or less the same as their 11.1 percent shares in 2010 and 2011. In 2013, with the program expiring at mid-year, the GSP beneficiaries’ share of imports fell to 10.5 percent; this year, the figure is likely to be 10.2 percent. Countries with especially noticeable drops include Indonesia, Tunisia, Georgia, Lebanon, Fiji, and Papua New Guinea.
3. Chinese Share Rises: About 22.1 percent of the 250 studied GSP products came from China in 2012. This is essentially the same as the 21.9 percent for 2011 and the 22.2 percent in 2010. China’s share rose to 23.7 percent in 2013 as GSP expired; the 2014 level appears likely to be around 24.5%.
4. FTA Partners Stable: The U.S.’ 20 FTA partners, finally, have stayed about the same: 38.3 percent in 2010, 38.2 percent in 2011 and 2012; 38.3% in 2013; the 2014 share likely to be 38.1 percent or 38.2 percent.
A. Conclusion: These results are partial, of course. Changes in trade flows generally or any particular product – see Tunisia’s olive oil trade below – may result from random variations or local events; and trends for the 25 percent of GSP imports not reviewed in our survey could diverge from those in the top goods. But so far, last year’s tariff-policy experiment appears to have produced a clear trend: with GSP gone, China has gained and smaller developing countries lost ground.
The U.S. Trade Representative’s guide to the GSP system: http://www.ustr.gov/trade-topics/trade-development/preference-programs/generalized-system-preference-gsp
Case study -
USAID’s July 2013 post happily claims a bit of credit for Tunisia’s successful olive-oil presentation at a New York gourmet food convention a year ago:
“Following the Tunisian revolution in January 2011, USAID began working with local partners on a broad range of economic development programs to address some of the underlying causes of the revolution: high unemployment, lack of opportunities, and barriers to economic growth. … Since December 2012, USAID has provided technical assistance to Tunisian companies producing and marketing olive oil. The olive oil industry is particularly significant to Tunisia’s economy—it’s the fifth most important source of foreign currency earnings (accounting for 45 percent of agricultural exports) and employs approximately 270,000 people.”
A bit premature, unfortunately. A few days after the convention, the end of GSP added a, 5 cent-per-kilo tariff to the price of Tunisia’s oil. Since then, Tunisia’s olive oil sales here have not taken off, but instead dropped from 18,400 kilos in the first five months of 2013 to 6,600 kilos so far in 2014. In this case, rival Spanish products have taken up the slack; in gold jewelry, Tunisia’s other top GSP export, China’s share has grown. Lebanon has had much the same experience in both products. Georgia’s drops are most noticeable in grape juices and food products; Indonesia’s, in aluminum and jewelry.
USAID boosts Tunisian olive oil: http://www.usaid.gov/results-data/success-stories/tunisian-olive-oil-finds-new-gourmet-market
And producer Sarra Huile has background on the industry: http://www.sarrahuiles.com.tn/index.php?option=com_content&view=article&id=63&Itemid=79&lang=en
Why did GSP expire? Or, offsets explained -
The GSP waivers ended last year not because a Congressional majority decided to end them, nor because a passionate minority blocked renewal. Rather the reason was an unrelated argument over ‘pay-fors.’
According to the Congressional Budget Office, renewing GSP means waiving $742 million a year (as of 2013) in estimated tariff payments on the olive oil jugs, microwaves, necklaces, arc lamps, etc. Congressional fiscal-probity rules adopted in 2009 require a step like this to be chaperoned by an ‘offset,’ which means raising an equivalent amount of taxes and fees elsewhere, cutting an equivalent amount of spending, or some combination of the two. Sen. Thomas Coburn, a retiring Republican from Oklahoma, felt that the ‘offset’ in last year’s renewal bill used wasn’t a virtuous one, and so blocked the otherwise accepted ‘unanimous consent’ agreement needed to bring up GSP renewal for Senate approval last July. No solution has been found since.
Sen. Coburn explains, in September 2013: http://www.politico.com/story/2013/09/budget-trade-tom-coburn-reduced-tariffs-bill-96863.html
In principle, perhaps Congress should live strictly and virtuously. But in practice, fiscal chastity rules appear to apply more rigorously to small things than to big ones. Seven months before the blocked renewal of GSP, the “Taxpayer Relief Act of 2013” approved $329 billion in extension of tax cuts and emergency spending programs. $329 billion per year; $3.5 trillion over ten year). In proportion, the TRA added 440 times more to future debt than GSP renewal would have. Nonetheless the TRA bill did not get an ‘offset,’ even an unseemly fig-leaf-like one, nor did anyone block it in protest. Using a bitter metaphor, if the two bills were animals, the analogy might be a landlord barring a new tenant in one apartment from bringing a guinea pig, while casually approving a full-grown grizzly bear for the family next door. CBO has the figures:
TRA – $328,366 million for one year, no ‘offset’: http://www.cbo.gov/publication/43829
GSP – $742 million for one year, ‘offset’ strictly required: http://cbo.gov/publication/42638
Traffic accidents kill 1.24 million people a year worldwide; wars and murders, 0.44 million.
July 16, 2014
THE NUMBERS: Annual deaths* from –
* 2010 estimates for world, 2012 for the United States
WHAT THEY MEAN:
Google tests a driverless car with no steering wheel; Honda introduces an auto-pilot-backed Accord to Australia; “Cruise” offers a $10,000 upgrade-to-autopilot feature for Bay Area Audis; Ford has its own plans. Auto-industry writer Dale Buss scoffs, writing in Forbes magazine that with auto fatalities trending down, at least on safety grounds there’s no need for anything radically new:
“It’s bogus to assert that driverless cars are required to address the issue of traffic accidents and fatalities. The number of U.S. auto-crash fatalities was declining steadily for years until very recently, when distracted driving, thanks largely to texting, reared its ugly head. But surely there are less drastic solutions to that development than removing every American driver from behind the wheel.”
True enough, auto fatalities have been heading down in the United States. Better manufacturing, safety regulations, and changing social attitudes on alcohol and seat-belts have cut the National Highway Traffic Safety Administration’s traffic death count rapidly and deeply, from the mid-1970s peak of 55,000 to 45,000 deaths in 2006, 32,885 in 2011 – the lowest number of traffic deaths since 1949 – and 33,561 in 2012.
So, significantly lower numbers. But “lower” shouldn’t be confused with “low.” An annual U.S. rate of 33,000 deaths (which includes 2,700 teenagers) is six times the annual number of deaths to HIV/AIDS, double the annual deaths to murder, and comparable to the casualty rates for the Korean War or World War I. Put another way, using state traffic figures, nine Texans die daily in car crashes, three each week Maine, one daily in Kansas, two per day in Illinois, and so on.
And worldwide, the U.S. is actually relatively safe. The World Health Organization’s Global Status Report on Road Safety 2013 estimates 1.24 million traffic deaths a year – nearly triple the UN’s estimate of annual murders, and twenty times the estimated annual total of deaths in wars. The toll is highest in middle-income countries, as a riskily picturesque mix of vehicles – cars, scooters, small motorcycles, trishaws, sometimes farm animals and carts – combines with the absence of helmet laws, and weaker police and emergency medical services. The worldwide traffic fatality rate is about 17 per 100,000 people – 50 percent above the 11.4 percent in the U.S., and likely higher if a world figure for deaths per vehicle-mile were available.
Why do all these crashes happen? NHTSA believes “human error is the critical reason for 93 percent of crashes.” A Missouri review of the state’s 716 fatal crashes in 2011 found equipment or road failures responsible for 11, while the other 705 involved human error – typically some combination of speeding, drinking, bad lane changes, and so on.
Now, back to the driverless car. Options range from Google’s experiment with the fully ‘autonomous’ vehicle to more evolutionary changes, in which an ‘autopilot’ guides most driving decisions, and the ‘Internet of things’ enables cars to sense approaching objects, scooters, people and stop by themselves. In principle, removing the driver can eliminate accidents resulting from drunkenness, drug use, texting, falling asleep, jumping red lights, looking left while a headphone-wearing pedestrian walks into your way from the right, and other human errors
No doubt, the concept raises engineering challenges, software questions, and marketing questions. Certainly after 120 years of eyes on the road and hands on the wheel, it is ‘radical.’ But assuming the rate of human error in fatal crashes is essentially the same as that in crashes overall, in principle driverless cars could cut deaths by 90 percent in the U.S.. Reductions worldwide would likely be smaller in percentage terms, since so many developing-world traffic deaths are in scooter, motorbike, or trishaw accidents. But even a reduction by half would save many more lives than the abolition of murder and war. In which case, a radical idea – even a “drastic” idea – might be a very good one.
Things to come -
Dale Buss in Forbes says don’t worry about driverless cars: http://www.forbes.com/sites/dalebuss/2014/06/30/google-jangles-auto-execs-but-will-driverless-cars-really-ever-happen/
Honda’s auto-piloted Accord makes its Australian debut: http://www.motoring.com.au/news/2013/medium-passenger/honda/accord/self-driving-honda-here-next-week-36348
Via Slate, Cruise’s Bay Area retrofitted autopilot for Audis: http://www.slate.com/blogs/future_tense/2014/06/24/cruise_s_10_000_self_driving_kit_will_come_to_market_before_anything_driverless.html
Google’s self-driver car video: http://www.google.com/about/careers/lifeatgoogle/self-driving-car-test-steve-mahan.html
And Ford’s Blueprint for Mobility: http://corporate.ford.com/microsites/sustainability-report-2011-12/financial-mobility-blueprint
The World Health Organization’s Global Status Report on Road Safety 2013 tabulates 1.24 million deaths worldwide: http://www.who.int/violence_injury_prevention/road_safety_status/2013/en/
WHO finds American roads a bit more dangerous than those in other rich countries, with a rate of 11.4 traffic deaths per 100,000 people – a level comparable to upper-middle income countries like Poland and Chile. (This could overstate U.S. risk, as the Report covers only deaths per capita, rather than per vehicle-mile.) The world’s lowest traffic-fatality rate are in a few small island countries – the Maldives and Micronesia in particular – where few people own cars. Setting them aside as special cases, the lowest rate is Iceland’s 2.8 per 100,000; others include the U.K.’s 3.7 per 100,000, Germany’s 4.7, and Japan’s 5.2.
The highest rate in the world is the Dominican Republic’s 42 deaths per 100,000 people. This attributable in particular to very high and unsafe use of motorcycles: 57% of DR traffic deaths are drivers of, or passengers on, motorcycles or scooters; 25% are pedestrians, and 14% are automobile drivers. Other high rates include 38 deaths per 100,000 in Thailand (74 percent are tuk-tuk or motorcycle drivers or passengers); 37 per 100,000 in Venezuela and Iran, and 34 per 100,000 in Nigeria.
The National Highway Traffic Safety Administration on American traffic fatalities, up to 2012: http://www.nhtsa.gov/NCSA
And the CDC on the awful toll of teenage driving accidents:
The U.N.’s Office of Drugs and Crime estimates murders for 2012 at 437,000: http://www.unodc.org/gsh/
And Oslo’s Peace Research Institute finds battle deaths now averaging 55,000 per year: ”http://www.prio.org/Data/Armed-Conflict/Battle-Deaths/The-Battle-Deaths-Dataset-version-30/
And two stories from abroad -
AP looks at motorcycles and tragedy in the Dominican republic: http://bigstory.ap.org/article/dominican-traffic-death-rate-among-worlds-highest
And the Hanoi-based Asia Injury Foundation looks at traffic deaths – about 12,000 Vietnamese, mostly frequently young scooter-owners driving without helmets, die each year in traffic accidents – in the developing world, helmet law policies, and other options: http://asiainjury.org/the-challenge/
"Globalization" is not new.
July 2, 2014
THE NUMBERS: Merchandise trade as share of U.S. GDP -
WHAT THEY MEAN:
Before we turn to the Founders on this Fourth of July weekend, a bit of context -
Nobody really knows how large America’s early-republic economy was, but the website www.measuringworth.com, a quantitative economic-history research project based at the University of Illinois, guesses a $189 million GDP in 1790. We do know about merchandise trade flows: in the same year, Alexander Hamilton’s newly hired Customs agents counted $23 million in imports and $20 million in exports. Thus if the GDP estimate is right, goods trade would have been equivalent to 23 percent of the economy.
Twenty-two decades later, the statistics are about 100,000 times larger and measured in trillions rather than millions. But – accepting the sad lack of figures on 18th-century services trade and information flows – the 21st-century figures are eerily similar to those of the Founding era. The Bureau of Economic Analysis’ estimate for 2014 GDP will be about $17.3 trillion, and the Customs Bureau’s figures for merchandise trade will be about $2.35 trillion for merchandise imports and $1.65 trillion for merchandise exports. Thus the goods-trade share of GDP is a nearly identical 23.1 percent.
Similar facts can produce similar thoughts and arguments. Those looking to enlist the Founders for today’s global-economy debates still should be careful – as the first American policymakers, the Founders were learning on the job and often changed their minds. This caution noted, here are Alexander Hamilton, Thomas Jefferson, and Thomas Paine:
(1) Innovation and lower-wage import competition –Hamilton’s 1791 Report on Manufactures, the first U.S. government paper on “competitiveness,” argues that high-wage America can use technological innovation to compete with lower-wage rivals (in Britain and Europe) in manufacturing:
“While in the article of wages the comparison certainly turns against the United States … the degree of disparity is diminished in proportion to the use which can be made of machinery. To illustrate this last idea: let it be supposed that the difference in price in two countries of a given quantity of manual labor requisite to the fabrication of a given article is as ten, and that some mechanic power is introduced into both countries which, performing half the necessary labor, leaves only half to be done by hand, it is evident that the difference in the cost of the fabrication of the article in question, as far as it is connected with the price of labor, will be reduced from ten to five.”
(2) Trade agreements: As Governor of Virginia in the 1770s, Thomas Jefferson favored unilateral free trade. (VA being an exporter of wood, tobacco, and fish, and a buyer of imported clothes and farm implements). As President after 1800, he was an enthusiastic user of trade sanctions to promote foreign policy goals. In between, as Secretary of State, Jefferson argued for negotiations to reduce trade barriers but opposed unilateral concessions. His 1793 Report on Foreign Commerce – the first U.S. government catalogue of foreign trade barriers and negotiating challenges – reviews tariffs, state trading monopolies, and logistics barriers in seven European countries and their Western hemisphere colonies, with policy ideas based on a blend of theoretical support for open markets with reciprocity:
“Instead of embarrassing commerce under piles of regulating laws, duties, and prohibitions, could it be relieved from all its shackles in all parts of the world, could every country be employed in producing that which nature has best fitted it to produce, and each be free to exchange with others mutual surplusses for mutual wants, the greatest mass possible would then be produced of those things which contribute to human life and human happiness; the numbers of mankind would be increased, and their condition bettered. Would even a single nation begin with the United States this system of free commerce, it would be advisable to begin it with that nation; since it is one by one only that it can be extended to all. “Where the circumstances of either party render it expedient to levy a revenue, by way of impost, on commerce, its freedom might be modified, in that particular, by mutual and equivalent measures, preserving it entire in all others. … But should any nation, contrary to our wishes, suppose it may better find its advantage by continuing its system of prohibitions, duties and regulations, it behooves us to protect our citizens, their commerce and navigation, by counter prohibitions, duties and regulations, also. Free commerce and navigation are not to be given in exchange for restrictions and vexations; nor are they likely to produce a relaxation of them.”
(3) And economic integration as a support for peace: Like Franklin Roosevelt and Bill Clinton later on, intellectual Thomas Paine argues in The Rights of Man (1790) that international economic integration is a deterrent to war. Paine overdoes it a bit:
“In all my publications … I have been an advocate for commerce, because I am a friend to its effects. It is a pacific system, operating to cordialise mankind, by rendering nations, as well as individuals, useful to each other. If commerce were permitted to act to the universal extent it is capable, it would extirpate the system of war, and produce a revolution in the uncivilised state of governments. … Commerce is no other than the traffic of two individuals, multiplied on a scale of numbers; and by the same rule that nature intended for the intercourse of two, she intended that of all. For this purpose she has distributed the materials of manufactures and commerce, in various and distant parts of a nation and of the world; and as they cannot be procured by war so cheaply or so commodiously as by commerce, she has rendered the latter the means of extirpating the former.”
P.E. staff wishes supporters, readers and friends a Happy Fourth of July.
For weekend reading, the 18th-century globalization documents and their 21st-century descendants -
Trade policy then and now –
Jefferson’s Report on Foreign Commerce covers trade barriers and shipping bans in the U.K., France, Spain, Portugal, Denmark, Sweden, and the Netherlands, along with their colonial possessions in Latin America, Canada, and the Caribbean. Sample:
“Our bread stuff is at most times under prohibitory duties in England, and considerably dutied on re-exportation from Spain to her colonies. Our tobaccoes are heavily dutied in England, Sweden and France, and prohibited in Spain and Portugal. Our rice is heavily dutied in England and Sweden, and prohibited in Portugal. Our fish and salted provisions are prohibited in England, and under prohibitory duties in France. Our whale oils are prohibited in England and Portugal. And our vessels are denied naturalization in England, and of late in France. .. Spain and Portugal refuse, to all those parts of America which they govern, all direct intercourse with any people but themselves. … We can carry no article, not of our own production, to the British ports in Europe, nor even our own produce to her American possessions.”
… and the Report’s lineal descendant, the USTR’s 2014 National Trade Estimate: http://www.ustr.gov/about-us/press-office/reports-and-publications/2014-NTE-Report
Competitiveness, wage differentials, and technology -
Hamilton’s Report on Manufactures calls for imports of labor-saving machines, passage of a patent law to stimulate American inventors, incentives for high-skilled immigration, cash prizes for innovative American factories, and an infant-industry protection scheme using temporary tariffs on bell-metal, glue, whiskey, whale-oil, pewter cups and bowls, furniture, chocolate, rifles, and books:
… and the Commerce Department’s 2012 survey of American competitiveness: http://www.commerce.gov/americacompetes
The global economy and peace –
Paine’s The Rights of Man (1790): http://www.ushistory.org/paine/rights/c2-05.htm
… and former National Security Advisor Thomas Donilon (2012) looks at the Trans-Pacific Partnership as an element of American Asian policy: http://asiasociety.org/new-york/complete-transcript-thomas-donilon-asia-society-new-york
U.S. trade policy turned 80 last Thursday.
June 18, 2014
THE NUMBERS: U.S. trade agreements, 1934-2014 –
|1934-1944||28 Reciprocal Trade Agreements|
|1947-2013||13 ‘Multilateral’ agreements|
|1985-2011||17 ‘Free Trade Agreements’|
WHAT THEY MEAN:
Observing the 80th anniversary of Franklin Roosevelt’s Reciprocal Trade Agreements Act last Thursday, the U.S. Trade Representative Office looks back:
”The Reciprocal Trade Agreements Act was signed into law on June 12, 1934 as part of the Roosevelt Administration’s efforts to pull America out of the Great Depression. The RTAA served as an integral step in America’s transition from economic crisis to global leadership. FDR believed that a complete and permanent recovery depended on strengthened international trade to increase domestic growth and demand. To secure our country’s space in the global economy, the American President and Congress needed to work together to negotiate trade agreements to cut tariffs on goods and increase U.S. exports. Increased international trade boosted the growth-promotion aspects of the New Deal’s domestic programs, and the successful enactment of the RTAA resulted in the conclusion of 19 new trade agreements between 1934 and 1939, strong growth in U.S. exports, and the recovery of the American economy.”
The “RTAA” was the first in the series of 18 bills – known sequentially as RTAA authority, “fast track” from the 1970s to the 1990s, and most recently “Trade Promotion Authority” or TPA – through which Congress has set objectives for international trade negotiations, and created procedures for judging and implementing the results. As such, it was the launch of modern American trade policy, dropping the earlier mix of Congressional tariff bills and executive-branch commercial Treaties.
Two comments from Roosevelt explain the program in terms relevant to policymaking ever since. The first comes from the March, 1934, message to Congress making the first formal request for negotiating authority. It argues on grounds of international competition and economic growth at home:
“[O]ther governments are to an ever-increasing extent winning their share of international trade by negotiating reciprocal trade agreements. If American agriculture and industrial interests are to retain their deserved place in this trade, the American government must be in a position to bargain for that place.”
The second is from Roosevelt’s request for a third renewal of the authority in April 1945. After summarizing the results of the first RTAA bill, this looks ahead to a new approach – the 23-country agreement of 1947, which created the international trading system now known as the WTO – as a matter of international peace and security:
“The purpose of the whole effort is to eliminate economic warfare, to make practical international cooperation effective on as many fronts as possible, and so to lay the economic basis for the secure and peaceful world we all desire. … The point in history at which we stand is full of promise and of danger. The world will either move toward unity and widely shared prosperity or it will move apart into necessarily competing economic blocs. We have a chance, we citizens of the United States, to use our influence in favor of a more united and cooperating world. Whether we do so will determine, as far as it is in our power, the kind of lives our grandchildren can live.’”
Eight decades later, the Obama administration’s pending request for a new Trade Promotion Authority bill would guide five negotiations: the 12-country Trans-Pacific Partnership, the Trans-Atlantic Trade and Investment Partnership; the Geneva-based Trade in Services Agreement; and the WTO’s ongoing negotiations to eliminate tariffs on environmental technologies and information technology goods. Thus trade negotiations join Social Security, farm supports, minimum wages, and child labor laws among the 21st century’s principal living New Deal legacies.
The U.S. Trade Representative Office looks back: http://www.ustr.gov/about-us/press-office/blog/2014/June/Eighty-years-of-the-Reciprocal-Trade-Agreements-Act
Then & now –
Roosevelt seeks trade negotiating authority, March 1934: http://www.presidency.ucsb.edu/ws/index.php?pid=14817
… and talks over trade and international security, at the Inter-American Conference for the Maintenance of Peace, 1936: http://www.presidency.ucsb.edu/ws/?pid=15238
And Amb. Michael Froman (June 2014) on the next agenda: http://www.ustr.gov/about-us/press-office/speeches/transcripts/2014/June/Remarks-USTR-Froman-at-Council-Foreign-Relations-Strategic-Logic-of-Trade
The RTAA legacy -
In the eight decades since passage of the Reciprocal Trade Agreements Act, policy and its results can be summarized as follows:
Agreements: Negotiators for Roosevelt and his 12 successors concluded 28 ‘reciprocal’ trade agreements between 1934 and 1944; 13 multilateral and ‘plurilateral’ agreements from the creation of the General Agreement on Trade and Tariffs in 1947 to the WTO’s Trade Facilitation agreement last December (and the WTO itself has grown from its 23-member beginnings to include 160 countries and territories); and 14 Free Trade Agreements with 20 countries. Also, though not through negotiations, 5 ‘preference’ programs waiving tariffs for lower-income countries.
Policy: The American tariff rate has declined from about 42 percent in the early 1930s to 1.7 percent in 2013, and the world rate to 3 percent. The ‘American Selling Price’ system for chemicals and Multifiber Arrangement for clothes are gone; the anti-dumping and countervailing duty laws have been revised in 1969, 1979, and 1994; farm subsidies have been limited, intellectual property law oversight broadened from the World Intellectual Property Organization to the WTO, and early steps
Trade: The ‘export share’ of the U.S. economy has risen from 3.8 percent in 1934 to 13.5 percent in 2013. This is the highest rate ever measured (though statistics for GDP only begin in 1929, and it’s likely the highest export shares ever for the U.S. were between 1783 and the beginnings of the Napoleonic wars in the late 1790s.) The rate for the world is harder to figure out, but the export-to-GDP ratio is up to 31% in 2013, from 21% in 1980 and perhaps 8%-10% in 1934. Meanwhile, manufacturing trade, which was about equal to agricultural and natural resource trade in the 1930s, is now larger than both combined. Services trade, propelled by the Internet, may come level with manufacturing in the next two decades.
And P.E. Director Ed Gresser looks at ‘21st-century Trade Policy’: http://progressive-economy.org/2014/01/31/21st-century-trade-policy-the-internet-and-the-next-generations-global-economy/
And what came before that?
From 1781 to 1933, Americans managed trade policy by combining State Department-negotiated Treaties of Amity, Commerce, and Navigation with Congressional bills setting tariff rates. The 89 Treaties, from the U.S.-Netherlands Treaty of Amity and Commerce in 1782 to the U.S.-Turkey Treaty of Commerce and Navigation in 1929, were meant to guarantee equal treatment for American goods and ships in foreign ports (and to provide lodging and relief for shipwrecked sailors), but also to allow tariff rates and harbor fees to fluctuate up and down.
Meanwhile, Congress passed 23 tariff bills, usually named for their authors, from Hamilton I in 1789 to ‘Smoot-Hawley’ in 1930. Typically Whig and early Republican parties wanted high tariffs to offset the supposed low-wage advantage held by competitors in Britain, Europe, and Japan and China; early Democrats favored low tariffs and farm exporters. As the tariff system was the main source of federal tax money until 1913, tariff debates were also arguments about the scale of federal government and the appropriate forms of taxation.
Douglas Irwin’s Peddling Protectionism (2011) looks at the Smoot-Hawley Act and the reason this system fell apart: http://www.amazon.com/Peddling-Protectionism-Smoot-Hawley-Great-Depression/dp/069115032X
And Gresser’s 2011 paper The Rebirth of Pro-Shopper Populism looks at the surprising relevance of pre-RTAA liberal critiques of the tariff system to America’s contemporary $32 billion tariff system – most of the money coming from taxation of cheap shoes and clothes – and its effects on the living standards of lower-income American shoppers today: http://progressive-economy.org/2011/06/14/the-rebirth-of-pro-shopper-populism-affordable-shoes-outdoor-apparel-and-the-case-for-tariff-reform/
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