Trade Agreements can Help Bridge the Rich-Poor Divide

Director Global Works Foundation, a Think Tank on World Trade, Ed Gresser's newest paper, "Trade and Inequality: Cause? Cure? Diversion?". Is available at http://progressive-economy.org/2014/12/11/trade-and-inequality-cause-cure-diversion/, the paper is an in-depth at the place of trade in the inequality debate, and offers practical ideas on ways trade policy, including conclusion of the Trans-Pacific Partnership and Trans-Atlantic Trade and Investment Partnership agreements, can help respond.

The paper argues that:

"Trade is not the central issue in inequality, nor is trade policy the main element of a solution. Domestic policy must be the center of any effective response. But managed creatively, trade policy can help. Creative agreements, enforcement of rules for lower-income exporters and intellectual property holders, and willingness to reform the existing [U.S.] trade regime in the interest of lower-income families would all be useful and appropriate."

Reviewing data on inequality and consumer living standards, the paper finds that over the past two generations American society has grown more affluent, but also 'grown apart,' with wealthier families growing rich faster than the country as a whole. Analysts, however, disagree about the role of trade in these trends.

After exploring the academic debate, the paper's policy section applauds Federal Reserve Chairwoman Janet Yellen's recent focuses on primary and secondary education, small business formation, and encouragement for inheritance at low- and middle-income levels, and argues that trade policy has a useful role in complementing these domestic policy measures. It offers four ideas to help:

1. Open foreign markets through completing the Trans-Pacific Partnership and Trans-Atlantic Trade and Investment Partnership. Better export performance will raise national growth, which in the analysis of economist Thomas Piketty could in turn at least modestly slow inequality growth.

2. Reduce taxation of lower-income families through the tariff system, by eliminating especially regressive tariffs on cheap consumer goods, in particular low-cost clothing and shoes not made in the United States.

3. Support small-business exports, through trade agreements which help reduce paperwork burdens, encourage small de minimis shipments, and ease use of the Internet to find foreign customers. Gresser cites in particular the Obama administration's negotiation of a small-business policy chapter in the Trans-Pacific Partnership.

4. Support low-income intellectual property rights holders through stronger Customs targeting of counterfeit goods and international collaboration. As a concrete example, Gresser cites Native American artisanal crafts, a $1 billion business struggling with counterfeit imports likely holding above 50 percent of the American market.

The paper is available at http://progressive-economy.org/2014/12/11/trade-and-inequality-cause-cure-diversion/