The Hankyoreh, July 25, 2017
As president, Donald Trump has continued to use the same protectionist rhetoric he used during the campaign, even though he has not done much to date to follow through with protectionist policies. Nonetheless, his comments have prompted outrage among most of the media, which is committed to supporting the trade policies of recent administrations.
In this respect it is striking how the media slavishly follow the major features of recent trade agreements as the definition of “free trade,” as though the deals were crafted with the goal of advancing some universal principle. This is in spite of the fact that the deals were quite openly crafted in response to the demands of powerful industry groups who cared about advancing their profits, not abstract principles.
This matters not only in the debate over whatever trade agenda Donald Trump may ultimately produce, but for the future course of trade policy more generally. The Trump presidency could provide an opportunity for a welcome re‐examination of the direction and goals of trade policy.
Unfortunately, the media seem determined to make the two poles in the debate Trump’s theatrics of highlighting outsourcing “bad guys” and more of the same in trade deals like NAFTA and the Trans‐Pacific Partnership. The idea that trade policy could take a fundamentally different course is not on the media’s agenda.
The media feel little need to pretend impartiality in pushing the current trade agenda. It is absolutely standard for major media outlets like the New York Times and National Public Radio to tell their audience that any use of tariffs by the United States will lead to massive retaliation and the unwinding of the world trade system.
They would like their audience to believe that Mexico or the European Union would jack up the price of major imports like corn or wheat to their consumers by 20 or 30 percent if the United States were to impose a tariff on steel or some other imported item. This is of course possible, but usually politicians are not anxious to whack their voters with a big increase in prices on essential items.
The idea that currency provisions should be included in trade deals is routinely treated with derision, even though the adjustment of currency values is the textbook mechanism for correcting trade imbalances. This is especially striking in the context of the United States where it is generally recognized that “secular stagnation” is a serious problem.
Secular stagnation is a more complex way of saying inadequate demand in the economy. If the U.S. trade deficit was smaller by an amount equal to two percentage points of GDP ($390 billion annually, in the 2017 economy), the United States would have much less concern with secular stagnation. This is pretty much definitional, but the reporters who write on this stuff are so committed to the trade agenda that they never make this obvious point.
Perhaps the most egregious instance of misrepresenting reality to push the trade agenda comes with patent and copyright protections. These government‐granted monopolies are completely antithetical to free trade. They amount to the government giving one party exclusive rights to sell a product. They can raise the price of a protected item by a factor of 100 or even 1000, the equivalent of tariffs of 10,000 or 100,000 percent. Nonetheless, the provisions in trade deals that make these protections longer and stronger are invariable termed “free trade,” turning logic on its head.
The impact of these protections is most important in the case of prescription drugs. This is both because of the huge sums involved, roughly 2.3 percent of GDP in the case of the United States, and also because access to medicines is a question of people’s health and life.
Prescription drug prices have become a huge issue in the United States. Even middle class people with good insurance often face a crushing burden in paying for drugs if someone in the family suffers from a serious illness like cancer.
There have been a variety of remedies proposed to reduce drug prices, including replacing patent monopolies with a more modern financing mechanism. One proposal is to allow for the importation of drugs from other wealthy countries, all of which have lower prices due to government price controls.
The pharmaceutical industry and its allies have mounted an intense push against this path. They argue that the U.S. Food and Drug Administration (FDA) could not ensure the safety of drugs coming from countries like Germany and Canada. This argument is taken very seriously in policy circles.
The incredible part of this story is that many of the pharmaceutical industry’s allies also argue for trade deals that make it easier for the United States to import food from developing countries. This means they want us to believe that on one hand, we lack the ability to monitor the safety of drugs produced at a relatively small number of factories whose quality has already been certified by regulatory agencies in other wealthy countries. On the other hand, we have the ability to ensure that shrimp, meat, and fish from Vietnam and Bangladesh are completely safe.
Adding to this absurdity, it is literally the same agency, the Food and Drug Administration, which is responsible for ensuring the quality of both imported food and imported drugs. Somehow they can be super‐competent when it comes to ensuring food from a wide range of sources in poor countries is of good quality, but they become worthless clowns when it comes to largely overseeing the quality certifications of their counterparts in other wealthy countries.
The basic point is that we have a large segment of the policy community, including many economists, who are prepared to say anything to keep the existing course of trade policy in place. They absolutely do not want an honest debate on trade policy.