By Terry Miller
President Trump has promised to refashion trade policy and the world trading environment in ways that will improve the lives of all Americans.
Economists since the time of Adam Smith have understood the value of economic specialization and trade in generating widespread prosperity. Around the world, countries that trade the least have the lowest standards of living. By contrast, those that have embraced trade have advanced rapidly from agrarian subsistence to industrial abundance.
The importance of trade to national well-being is certainly well understood in the context of foreign and defense policy, too. Sanctions restricting investments and trade are a weapon of choice against recalcitrant regimes such as North Korea. Surely we shouldn't turn such a weapon on ourselves.
Trade policy should turn on a fundamental question regarding economic freedom: Do Americans get to decide for themselves what products to buy and sell, or should government act as an intermediary, directing purchases to favored suppliers, no matter the cost? For those who believe in limited government, the answer is obvious: Individuals should be free to choose.
Unfortunately, our trading environment today is far from free. Government intrudes in a variety of ways: tariffs, quotas, regulatory standards, and more. Free-trade agreements may reduce some of these constraints, but they often leave others in place, or even make them worse.
Trump clearly has heard the cries of Americans fed up with the whole process.
Many in Washington have denounced the president's decision to abandon the Trans-Pacific Partnership negotiated by his predecessor. The agreement would undoubtedly have created legitimate new commercial opportunities for some American producers and importers, and it's a shame to lose them.
But the deal also included sweetheart provisions that would have hindered competition. That's a problem. A better, more transparent negotiating process would have reduced the opportunity for such special dealing.
Others quite understandably worry that the United States will lose influence in the Pacific region if we don't participate in the agreement. But in the final analysis, U.S. influence comes from the ideals we profess, the strength of our economy, and our military. Treaties or trade agreements may reflect that influence but they do not create it. The benefits we derive from our existing trade and strategic relationships are not going to vanish because the TPP did not become U.S. law.
NAFTA is a more substantial agreement and a more significant concern. An established arrangement, its provisions are now embedded in the fabric of everyday investment, production, and consumption decisions in the United States, Canada, and Mexico.
Casual overthrow of NAFTA rules and regulations could have devastating costs for millions of Americans. That's not to say that NAFTA shouldn't be renegotiated. Improvement is possible in many areas. Energy, for example, was deemed too difficult an issue to handle in the 1990s. It might now be ripe for inclusion in an updated NAFTA.
It will be vital, however, to handle NAFTA renegotiation with care and concern for the interests of all Americans. Like any economic intervention, NAFTA is prone to regulatory capture, that is, the exercise of undue influence by those who can afford the best lobbyists or who are able to dominate the political discourse.
The Trump administration will have to stand strong against corporate calls for special privileges that appear in the guise of protectionism. A good test is whether the protection requested is aimed at a foreign market-corrupting practice or whether it instead is a competition-suppressing response to the decisions of fellow Americans seeking the best products at the best prices. Unfortunately, American consumers, who speak loudly in the marketplace, have very little representation among the Washington power elite.
The Trump administration has indicated that, prior to reopening negotiations, it will fully research the economic implications of withdrawing from NAFTA, with special attention devoted to its potential effects on manufacturing and service-sector workers, the middle class, and foreign direct investment. That's a great place to start.
With such information in hand, the administration can seek to amend the agreement where needed, and avoid unnecessary disruptions. One need only recall the catastrophic disruptions resulting from Obamacare to understand the scope of economic and personal damage created when government acts without full consideration of all the facts.
The Trump administration's determination to reexamine our trade pacts presents a rare opportunity to expand Americans' freedom to trade. The current system, though better than it once was, is rife with cronyism and special deals for the well-connected. The rest of us pay the price for that. It's time we got a better deal.