We all know that familiar phrase: If we don’t learn the lessons of history we’re doomed to repeat them. Well, today’s lesson is trade. The issue is the Trans Pacific Partnership Trade Agreement. The history to learn from is the Smoot-Hartley tariff bill that was enacted in 1930.
There were many mistakes made as the 1920s came to a close and Herbert Hoover’s presidency came to a beginning that greatly exacerbated the economic downturn that became the Great Depression. One was a populist appeal to protect our domestic economy by impeding imports.
The Tariff Act of 1930 increased 890 tariffs, even over and above increases made just eight years earlier by the Tariff Act of 1922. The bill ended up doing nothing to protect our economy while it completely soured trade relations with much of the rest of the world. The resulting impediments to international trade helped make the Great Depression a world-wide happening.
The bill was actually widely opposed. More than 1,000 economists petitioned President Hoover not to sign it. Many bankers sided with them as did scores of editorialists. It only squeezed through the U.S. Senate by 44-42. But in the end, populist support driven by a combination of individual economic self-interests and emotional reaction to unavoidable economic forces pushed protectionism to victory and our economy to defeat.
Today, we are faced with a mirror image of Smoot-Hawley. We have the opportunity to adopt the Trans Pacific Partnership (TPP), a trade agreement with eleven other countries that will strengthen our competitiveness in global markets.
The partner countries of the TPP – many in the Asia Pacific region – encompass two-thirds of the world’s economy. It is a market of nearly 500 million consumers with a combined GDP of nearly $12 trillion. According to the Economist Magazine, the TPP proposes to reduce 18,000 tariffs on American goods to this huge market to zero. Even agricultural barriers, usually among the most heavily defended, will start to come down. And significantly, the TPP promises to give greater access to these markets for more service providers, a particular strength of our economy.
The TPP provides particular opportunity to California and the Sacramento region. According to the California Chamber of Commerce, California is the largest exporting state to the Asia Pacific region, to the tune of $67 billion in 2015. And that translates into high-paying jobs for over one million Californians. Imagine what this can become with much freer access to a $21 trillion market!
And the opportunity to feed into the potential of the Sacramento region is tremendous. According to the Northern California World Trade Center’s Capital Region Export Plan, “the Capital Region has a wide array of unique regional trade assets, including a deep water channel seaport in West Sacramento and proximity to other ports in Stockton and Oakland; the Sacramento International Airport; access to major markets through its interstate and highway network and rail systems; foreign trade zones; and is recognized as one of the nation’s most culturally diverse regions.”
Much of the opposition comes from labor and environmental interests. But the reality is that the TPP includes the strongest labor provisions of any trade agreement in history. According to the Economist Magazine, “several of the TPP’s chapters are devoted to protections for workers and environmental safeguards. There are clauses that attempt to slow deforestation and over fishing. All parties will also be compelled to follow the International Labour Organization’s basic principles on workers’ rights. They will be required to set a minimum wage and regulate working hours. . . Such commitments will be enforceable under the treaty’s dispute-settlement mechanism.” The TPP expands the fight for decent work around the world and creates a more fair and level playing field for American workers.
The issue is playing out in this year’s political campaigns. It is a different kind of debate that doesn’t fall down along partisan lines. I find myself with expected friends but also opponents among fellow Republicans, and rare allies who are Democrats including, yes, at least in this case, Barack Obama.
California has long been a leader on the world stage and we cannot ignore the growing influence of the Asia Pacific region. We must be forward-thinking and seize opportunities – like TPP – to shape trade policy. Rather than fearing competition and trying hide from it by suppressing global trade we should be seeking ways to capitalize on global trade to grow our economy and benefit American workers and consumers. Let us not fall victim to the same sort of myopic and visceral forces that prevailed in the mistake that was Smoot-Hawley. Let us learn the lesson of history.