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When free trade isn't free

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Washington, D.C., November 4, 2016 | comments
This op-ed was posted in the Washington Examiner.

On both the right and the left, Americans are ticked off that Washington has been captured by an elitist establishment that appears unconcerned by the struggles of the disappearing middle class.

Take this week's news that Obamacare premiums are set to go up over 20 percent across the country. Yet leadership in Washington is determined to take up the highly controversial Trans-Pacific Partnership in the December lame-duck.

Will TPP benefit middle-class Americans? Why are we pushing this trade agenda over and above the top concerns of the American people during an unaccountable lame-duck session? If this deal truly benefits the American people, why not pursue it in the broad daylight of regular order?

I came into office after President Obama's unconstitutional amnesty helped undercut the wages of American workers, and I vividly remember leadership in Washington saying they would fight tooth and nail to overturn this policy.

The American people were furious — and remain so, because they cannot point to much of any fight on their behalf. That is the issue.

I hear from small business folks, the people behind 70 percent of our jobs, every day. Their number one concern is not a massive trade deal — it's Obamacare, which is literally putting them out of business. This huge market distortion takes up 1/6 of our economy and America wants to know: What is Washington going to do to fight for them?

I have a PhD in economics and I support the theoretical merits of free trade. Free and fair trade occurs when both trading partners gain from trade due to specialization and a broadened, deeper market. Historically, when we had freer markets, trade enriched the world.

However, today, truly free markets are hard to find — in any sector.

Instead, American workers have been dealt a body blow by political elites who agree to deals that keep their wages low, and threaten their very livelihoods. And then the elites, who benefit at the expense of hard-working Americans, have the audacity to call this lopsided setup "free trade."

TPP proponents argue that consumers benefit from trade deals, due to lower prices for goods. That's all very well — but goods are hard to buy if you do not have a job or if you now have a low-paying, part-time service job. And recent labor force data show very weak labor markets and a marked shift to lower skill, lower paying jobs.

An important asterisk to the term "free trade" is attached in trade theory. While the nation as a whole gains, there will be winners and losers, so the gains are to be used to help the dislocations of the losing sectors.

Sadly, that asterisk is usually ignored in practice. When it is applied, instead of using the gains to make our economy more competitive globally (by enhancing technological growth or human capital,) we end up enhancing the welfare state, thereby weakening work incentives and making us even less competitive.

Both Donald Trump and Bernie Sanders used their platforms to spread the message that current U.S. policy does not benefit all Americans. Competitive large firms, wealthy cronies with lawyers and lobbyists with seats at the table during negotiations in Washington, D.C., will undoubtedly benefit from a deal like TPP. They all get their special line somewhere in the 5,500 pages of the deal.

To get my vote, though, I need to see evidence that these massive trade deals benefit middle class Americans — those men and women in my district who work hard all day, every day, holding up their part of the bargain.

I have asked the highest leaders in government for an answer to the question of whether TPP will help struggling Americans; and so far all I hear is crickets.

Trade deals did not cause all of the problems faced by working class Americans, but they have become the lightning rod issue by which Americans are expressing legitimate concern about their futures. The ever-shrinking middle class has not seen wage rate increases in 30 years. We have anemic 1 percent economic growth thanks to a regulatory overhang of $2.6 trillion, according to the Wall Street Journal. Firms aren't able to make long-term capital investment bets, so they cannot grow, and therefore we do not produce more jobs.

Finally, unlike most deals that are negotiated in public, there is no bill on TPP for us to review right now. I'm also concerned by chapters that constrict industries, and sections with potential to alter federal law that raise major sovereignty issues.

Despite its potentially massive impact, the American people aren't being asked for their input on this deal. We aren't getting an opportunity to examine it under the cold light of day.

This won't be the last week with horrific Obamacare news. Government interference in healthcare has been a disaster, and businesses are suffering under a constant alphabet soup of regulations, from EPA and FDA rules and the overtime rule and the fiduciary rule and the franchisee rule. All of this constricts our economy and hurts hard-working Americans, who are being sold a false bill of goods under the title "free market." They're fed up; and they are right to be furious with the priorities of Washington's elites.
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