"Everyone knows how I feel about this."
That was Senate Majority Leader Harry Reid back in January. "This" was President Barack Obama's request for a free hand to negotiate trade agreements without having to worry about Congress rewriting them later. Everyone knew Mr. Reid opposed granting the White House "trade promotion authority," especially in an election year. Mr. Reid and a good number of the Democratic caucus are skeptical of free-trade agreements.
Enter Ivy League economist Matthew Slaughter. Prof. Slaughter, a trade and globalization expert at Dartmouth College in New Hampshire, published research Thursday that says Washington could create 10 million trade-related jobs over the next decade. All politicians have to do is try.
The prediction, which comes in a paper commissioned by HSBC, could create a stir in the U.S. capital. Prof. Slaughter, who served on former president George W. Bush's Council of Economic Advisers, is a respected figure in Washington. His analysis won't be easily dismissed. Advocates of freer trade will have a powerful new weapon. Skeptics will be hard pressed to explain how, exactly, trade is a job killer when fresh evidence says otherwise.
Prof. Slaughter reckons a third of the roughly 10 million jobs created in the U.S. between February, 2010, and last month came in industries tied to international trade of goods and services. He considers that an impressive share of the overall total given politicians did nothing in that period to boost trade.
Exports now represent 13.5 per cent of U.S. gross domestic product, the biggest percentage on record. That's small compared with other big economies, reflecting the ability of American companies to profit by selling at home. But domestic demand isn't what it was. The Great Recession taught the companies that survived that they would have to look farther afield to grow. America is an exporter now, not just an importer.
The post-recession expansion of U.S. exports happened with little help from Washington, even though Mr. Obama had set a rhetorical goal of doubling exports. The U.S. approved free-trade agreements with South Korea, Colombia and Panama in 2011, but those deals are probably too new – and too small in scope – to have provided a big push in trade. Efforts to expand the scope of the World Trade Organization collapsed and some Republican lawmakers are threatening to destroy the federal export finance agency. The federal U.S. corporate-income tax rate is the highest among the world's richest economies. Mr. Obama and lawmakers talked about lowering business taxes, but failed to do so.
"What is remarkable is how many tradeable-industry jobs were created in recent years despite almost no new government policies to support the creation of trade-connected jobs: no new trade and investment agreements negotiated; no expansion of skilled immigration; no business-tax reform," Prof. Slaughter wrote. "This recent past speaks to the job-creation potential of an aggressive pro-trade policy agenda like that previously outlined."
Prof. Slaughter's 10-million-jobs estimate is based on the assumption that Washington's paralysis is restraining the U.S.'s potential. If trade-related industries created one third of the jobs in recent years without any help from government, then think what they could do with a push from policy? Prof. Slaughter says it's reasonable to think trade-related jobs would make up at least 40 per cent of all new jobs, and perhaps half of them. That's about 10 million positions over a decade if the U.S. economy continues creating jobs at its current rate.
The policy agenda that Prof. Slaughter puts forward seems impossibly ambitious for a collection of politicians that in 2014 gave up trying to do much of anything. Prof. Slaughter advocates the completion of trade agreements with Pacific nations and the European Union; an overhaul of the immigration and tax systems; a stronger safety net for workers displaced by a shift to a more trade-oriented economy; and a new mandate for the Export-Import Bank, the federal agency tasked with providing credit to businesses involved in international trade.
Washington confronted all of these issues this year and soon gave up trying for middle ground. Prof. Slaughter accepts that the goal of 100,000 trade-related jobs a month is "aggressive," but insists that it is "attainable." Perhaps the prospect of being able to take credit for the creation of millions of jobs will inspire American politicians to end the deadlock. They can't possibly go another year without doing anything, can they?