Free Trade as a Stimulus Strategy

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Most people agree that, when it comes to economic recovery, more economic activity is better than less. When companies buy and sell more goods and services, we get more jobs and growth.

Yet, for some reason, this obvious fact eludes those who want to constrain America's access to overseas markets. At a time when government is spending hundreds of billions of dollars it doesn't have on doubtful stimulus initiatives, you've got to wonder why some politicians continue to argue against free trade agreements. After all, these pacts have a proven track record. Trade has created millions of jobs and is responsible for almost a third of the nation's gross domestic product (GDP).

Three free trade agreements (FTA) are currently in play in Washington. Two of them - pacts with Colombia and South Korea - are in trouble due to union opposition. Despite claiming to be in favor of free trade, the Obama administration has not been willing to buck big labor and push for these deals. The third pending agreement, with Panama, has brighter prospects. President Obama seems willing to push Congress on this one because it has the least opposition from Democrats and unions, and also because it is an economic no-brainer.

The U.S. has a huge trade surplus with Panama, which bought almost $5 billion worth of U.S. goods in 2008. For every dollar of Panamanian imports coming to the U.S., American businesses sell $10 worth of goods and services there. Until this year's crisis, Panama's booming banking, insurance and tourism sectors were fueling economic growth of about 6 percent per year. Efforts to improve financial transparency led the Organization for Economic Cooperation and Development to remove Panama from its blacklist of tax havens and money launderers, making it even more attractive for foreign investment.

But last week, after the White House indicated it could soon send the Panama FTA to Congress for a straight up or down vote, anti-trade House Democrats began mobilizing against it. Panama, they insist, remains a haven for tax evaders. Moreover, they oppose its labor laws, which prevent unions from striking at companies less than 2 years old. These opponents want to use the trade agreement to force a friend to change its laws.

Doubtless to their surprise, 20 members of the New Democrat Coalition in the House disagreed. Led by California's Ellen O. Tauscher, they sent a letter supporting the FTA to Mr. Obama, calling it economically beneficial for the United States and American businesses. …