TheTrans Pacific Partnership Could Actually Be Good

Opposition to the Trans Pacific Partnership (TPP) negotiations has been sounded out in negatives, but it doesn't have to be. It is based primarily on distrust of the Obama Administration's willingness to protect American workers. There is a long- existing idea designed to protect workers and allow an American presence in the Asian basin to remain relevant. It might even repair some of the damage done by the North American Free Trade Agreement (NAFTA).

The conflict between Liberal opposition and a President dead set on burnishing his legacy with an important trade agreement is becoming personal. Witness the exchange that took place several weeks ago between the President and Senator Elizabeth Warren where he accused her of naiveté and she responded by defiantly challenging him to take off the shroud of secrecy in the ongoing negotiations.

In a seemingly unrelated context the U.S. Department of Commerce announced that the importation of consumer goods in the month of March, 2015 amounted to $54.2 billion and was the highest on record. The trade deficit of all goods and services for the month was $51.4 billion, the highest since 2008. On the surface this is somewhat unrelated, but it is not. The fact that the balance of trade in the U.S. has been negative over a protracted period of time means quite simply that the equity and wealth of the country is being spent and, more to the point, gives clear indication that the exportation of jobs from the US is increasingly making the US reliant on other countries for goods and services rather than manufacturing or producing them here.

The clear culprit in this scenario has been NAFTA (North American Free Trade Agreement), and opponents are rightly concerned that TPP will add more of the same. NAFTA came into being in 1994, and there have been significant trade deficits ever since. Likewise, opponents are rightly fearful that both the President and the 605 corporate advisers involved in the TPP negotiations, as they benefit from increased international trade, will sell out American workers.

However, there is an over-arching, geopolitical concern that motivates the President that should evoke sympathy, even though it conflicts with the feared impact of job losses. Obama's "pivot to the East" announced in 2012 was a response to the growing importance of China in the region and the perceived threat of its commercial, political and military dominance. It was, and is, clear there was a need for the US as the global super power; to protect sea lanes, defend allies from potential aggression, position the US for the rapid emergence of 40% of the world's population, and re-establish the American presence as a relevant and reliable ally. Heavily mixed into these concerns, needless to say, are the commercial opportunities of increased trade.

You can argue as much as you like about the need or importance of the US role as the super power, and there are several historical precedents for how this all eventuates. One thing is clear about President Obama in this context, however, is that he has no intention of appearing feckless in defending the role the US has played since the end of WWII. You may not like his choices, but his intent seems unquestionable.

Fortunately, Liberals can safely modify the TPP on meritorious grounds. Despite all of Obama's recent populist rhetoric he has demonstrated on more than one occasion his willingness to throw middle class Americans under the bus. No one is more aware of this than Elizabeth Warren who witnessed firsthand Obama's resistance to the Consumer Financial Protection Bureau, his devotion to the financial industry, his willingness to "hollow out" Social Security benefits, and his devotion to the Clinton era sponsors of "centrist" (read that as traditional Republican) budget and fiscal matters.

Threading the needle on these issues is made possible from one of the most "respectable" citizens, namely Warren Buffet. In 2003 Buffet wrote an article entitled America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem-And We Need To Do It Now. The article appeared in Forbes Magazine and has been largely forgotten. What he proposed was effectively a "cap and trade" plan for the import/export business.

Under the "Buffet Plan" exporters would get a certificate for the value of their exports. The certificates would allow anyone holding them to import that dollar amount of goods or services. Alternatively, the exporters could sell the certificates and use the revenues to modernize factories, pay specialists and the other things needed to revive in-country industries, or use the cash and sell for less (that would counter currency manipulation and subsidies that other countries provide their exporters). The idea was improved upon in 2008 and 2009 by the Levy Institute and the Economic Policy Institute, respectively, by suggesting that the government auction off import certificates rather than focus on exports, and use the revenues to retrain workers, build infrastructure, support research and/or assist new business. There have been further studies assessing the prospect of mixing the approach and providing certificates for both import and exports.

Liberal strategists need to address the geopolitical concerns revolving around the issue of trade, and the Buffet Plan provides a way to do so. They can insist that the TPP be paired with a cap and trade plan that would funnel resources to places that would better enable a competitive response. Needless to say, Republicans will scream that the proposal inhibits free trade and represents a tax on the "job creators," but the job creators will be largely foreign corporations. Likewise, there will be opposition from current trading partners like China since the status quo has benefited its export trade and purchasing certificates adds cost to transactions. However, this "cost" is a partial means of addressing the currency manipulation that keeps much of China's exports cheap. Similarly, Wall Street will not be pleased since the status quo has been very lucrative, but the certificates will provide another trading vehicle for them to make lots of money.

There is a little flag waving that is in order. A constructive solution for TPP may well appeal to all voters no matter what their political stripe. As it stands NAFTA, and prospectively an ill constructed TPP, has or will screw American workers, all of them, no matter what their political inclination. A cap and trade approach that provides resources to regain jobs would sidestep that without doing damage to the geopolitical issues currently in play.