There is now a push for a trade agreement between the U.S. and Europe. Both the NY Times and the International Herald Tribune are reporting on this.
A free-trade agreement between the United States and Europe, elusive for more than a decade but with a potentially huge economic effect, is gaining momentum and may finally be attainable, business and political leaders say.
They engage in fact-free, Pollyanna thinking. “Trade agreement” is equated with a (1) rise in living standards or (2) economic growth. But there is no mathematical correlation, in the U.S., between trade agreements and bettered living standards or growth. They merely assume the connection, which does not exist. Because we give up more domestic market share than we gain abroad, thus reducing demand for U.S. goods rather than increasing demand.
So basically, the U.S. is again faced with the prospect of cheerleading a trade agreement without a national strategy. How can you negotiate without a strategy? What should the strategy be?
First we need a national goal of a manageable balance of trade, which means persistent trade deficits must be eradicated. This really is the core of it. Our trade policy results in persistent trade deficits. That is the core failure. It puts the lie to the promotional rhetoric of “increased exports” or “increased two-way trade.” Trade deficits suck vast amounts of aggregate demand from our economy, and then we debate fiscal stimuli to replace/ increase aggregate demand for those goods and services.
Second, we need a strategy to produce more in the U.S. … capturing a larger share of major supply chains. China does this. Japan does too. The U.S. did this in the past. But now we have no strategy. That is why we did not move from low tech to high tech and services successfully, as the free traders predicted. Other countries with a strategy are capturing/have captured robotics, electronics, computers, alternative energy, and a host of other high tech industries. So we are a net importer of advanced tech. And we lost all that intellectual property to build upon for future product generations.
Third through thirteenth… well… you can read our 21st Century Trade Agreement Principles to find out. Over 150 organizations and companies have agreed upon those thirteen principles for a successful national trade strategy that actually benefits us.