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The Ghost Of NAFTA Haunts Obama On Trade Deals

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AP Photo / Jacquelyn Martin

Obama says new trade deals will avoid the shortcomings of NAFTA, the 1994 North America Free Trade Agreement with Mexico and Canada, which many Americans blame for big job losses, especially in manufacturing.

Pro-trade groups say globalism, technology and other factors caused many of the losses. Still, they are scrambling to show that post-NAFTA deals have been better for U.S. workers, and they say more agreements are needed.

Near the heart of every trade argument lurks NAFTA, a breakthrough deal passed mainly by Republicans in Congress and signed by a Democratic president, Bill Clinton. Liberals, labor unions and others denounce NAFTA almost daily. They say it's the blueprint for new proposals being pushed by Obama and — once again — a mostly Republican constituency in Congress.

Not true, say Obama and others.

"Past trade deals haven't always lived up to the hype," Obama acknowledged in last month's State of the Union speech. "I'm asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren't just free but are also fair."

In a White House meeting this week with black lawmakers, Obama said trade deals of the 1990s were flawed, and "any new trade agreement will not make the same mistake," said Rep. Hank Johnson, D-Ga.

A pro-trade, pro-Democratic think tank, Third Way, issued a study on Thursday showing that post-NAFTA trade deals, on balance, have benefited the United States. The group examined the nations' post-NAFTA trade deals, which involve 17 nations. Using federal government data, it studied only goods, not services, which are a U.S. strength.

The study found that in 13 of the 17 countries, the U.S. balance of trade improved after free-trade agreements took effect. Even when the other four nations are counted, the study said, the average annual U.S. trade balance improved by $30 billion among the 17 nations.

The study averaged the annual U.S. trade deficit or surplus with each nation for the decade before its trade deal took effect. It then made the same calculations for each year after the deal was in place. It converted all findings to 2014 dollars, to account for inflation.

The brightest spot was Singapore, where the average U.S. trade balance rose by nearly $12 billion a year since their trade deal began in 2004. The worst was South Korea. The average U.S. trade deficit expanded by $4.8 billion after the Korea Free Trade Agreement began in March 2012.

"Many policymakers and interest groups reflexively oppose new trade deals because of the hangover from NAFTA," the Third Way study said. "But post-NAFTA, trade deals were negotiated with higher standards."

The study's co-author, Jim Kessler, said the higher standards mostly involved environmental and labor safeguards, which were omitted from NAFTA's main document. He acknowledged that many labor and environmental groups criticize Obama's trade plans.

"But at some point you have to make a deal," Kessler said, and U.S. failure to enact new trade pacts will cede control to countries such as China.

Obama and Republican congressional leaders are pushing two proposals at once. The Trans-Pacific Partnership, or TPP, is a pending trade agreement with Japan, Australia and nine other Pacific Rim nations. China is not included.

Lawmakers say TPP won't pass unless Congress first gives Obama trade promotion authority, known as TPA or "fast track" power. A TPA bill sets guidelines but lets the White House send Congress a trade proposal to adopt or reject, but not amend. Every president since Franklin Roosevelt has had some form of enhanced trade-dealing powers, but Obama still lacks it.

Lori Wallach of Public Citizen's Global Trade Watch strongly opposes TPA and TPP. She said studies such as Third Way's make a big deal out of modest trade improvements with countries like Panama, and gloss over huge trade deficits with major trading partners such as South Korea, Mexico and Canada.

Census data show the 2014 U.S. trade deficit with those three countries was $25 billion, $54 billion and $34 billion, respectively.

Wallach said there's no reason to think the TPP language will differ much from NAFTA or the Korea agreement. "It's a straight line from NAFTA to Korea to TPP," she said.

While China is excluded from the TPP, it's central to many trade debates. The Obama administration says China is unfairly subsidizing seven industries and wants the World Trade Organization to take action.

In a sign of Obama's challenge in Congress, Johnson said he listened carefully to the president's arguments when the Congressional Black Caucus visited the White House. But his Georgia constituents are deeply unhappy with major trade pacts such as NAFTA, Johnson said.

"I'm not with the president on trade," he said.

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