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Levin Details Important Challenges Ahead for International Trade

Photo of Sandy Levin

Today, House Ways and Means Committee Ranking Member Sandy Levin (D-MI) gave an impressive speech highlighting the past, present and future challenges in the international trade arena at the Peterson Institute. Focusing specifically on issues relating to the American automotive industry in the Transpacific Partnership (TPP), he also touched on the Transatlantic Trade and Investment Partnership (T-TIP) as well as the Trade Promotion Authority (TPA). However, his best points were those that emphasized the need for “free and fair trade,” not just “fair trade.”

In sharp contrast to much of the neoclassical literature on free trade, Representative Levin noted that markets are not, in fact, always self-correcting and that distortions from foreign mercantilist trade policies need to be addressed in free trade agreements going forward. As innovation economists, ITIF also holds this belief; global free trade is beneficial, but only when countries eschew mercantilist policies (e.g., tariffs, unfair taxes, currency manipulation, discriminatory standards, IP theft, etc.) that manipulate the system. Not only do mercantilist policies restrain productivity and innovation, but they also potentially lead to lower levels of global growth as private companies make investments in countries and in types of production that they would not otherwise make, absent these mercantilist policies.

As negotiations progress on the T-TIP and the TPP, the United States has the opportunity to push back against mercantilist policies. Levin noted that by expanding the reach of free trade agreements, with regard to such things as environment, labor, currency and IP standards, there is the potential to truly overhaul the idea of “free trade.” Enforceable regulations in these agreements will create the best opportunities for U.S. exports, and include developing nations in a global economy aligned towards a system of free and fair trade. Citing the recent workers’ rights disaster in Bangladesh, he pointed out that the Obama administration’s removal of the Generalized System of Preferences (GSP) trade benefits for the nation forces the Bengali government to consider fair standards as a component of their trade system.

Market distortions do not always work themselves out, and it is time for the United States to get serious about facing off against mercantilism abroad. Free trade is desirable, but it is time for fair “two-way trade to replace one-way trade” not only in the United States, but around the world as well. ITIF applauds the bipartisan efforts on Ways and Means of both Representatives Levin and Camp (R-MI) in thinking seriously about how to craft a new U.S. trade agenda and strategy for the 21st century.

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