Donald J. Trump called our trade deals a disaster for Americans when he was on the campaign trail.
He promised to scrap the TransPacific Partnership (TPP) and get out of NAFTA and the South Korea trade pacts.
His frontal assault on so-called free trade, a shibboleth of the bipartisan establishment, reduced the Democrats’ Great Blue Wall to rubble and vaulted him to victory.
Then President Trump set out to fulfill his promises.
On Day 1, he withdrew from the TPP, Obama’s master plan for the free movement of people, goods and money in a Pacific Union akin to the European Union.
Trump then served notice on South Korea, Canada and Mexico that their trade agreements with the U.S. are dead letters unless rewritten on terms more favorable to the U.S.
One of the administration’s key demands is that NAFTA should be reviewed, renegotiated and updated every five years going forward.
That’s just plain common sense. While the operating system for the $200 phone in your pocket has an upgrade every few months, the operating system for more than a trillion dollars in trade hasn’t been upgraded in decades.
When NAFTA was written, an onboard computer meant you had one in the trunk. Cars were made in Michigan and you couldn’t drink the water in Mexico. Now, cars are made in Mexico (with parts from China, Thailand and elsewhere), and you can’t drink the water in Flint.
But NAFTA isn’t the only trade agreement that needs updating.
In 1974 – 20 years before NAFTA – Congress adopted a trade-for-aid scheme created by the United Nations, known as the General System of Preferences.
GSP is America’s oldest and largest trade preference program, eliminating import tariffs on thousands of products from 129 countries, from Armenia to Yemen. The goal was to lift underdeveloped countries out of poverty by letting them import and sell goods in the U.S. duty-free.
India is the greatest beneficiary of GSP and the best example of why the program needs updating.
When Congress launched GSP over 40 years ago, the first Apple computer was yet to be sold for two years. Commercial Internet service was still a decade or so in the future.
The Internet made it possible to instantaneously and cheaply ship information across the globe. And that made possible India’s outsourced call center, legal processing and software engineering industries.
Just as China used its cheap manpower to replace American manufacturing workers, India exploited its cheap brainpower to replace American service and IT workers.
The strategy paid off handsomely for the South Asian nation.
A study by two of India’s own economists finds that half of India’s 1.2 billion people – 600 million people – are now in the middle class.
That should be reason enough to cut India from the GSP welfare roll. But there are other reasons as well.
According to the U.S. Trade Representative, “In addition to promoting economic opportunity in developing countries, the GSP program also supports progress by beneficiary countries in affording worker rights to their people, in enforcing intellectual property rights and in supporting the rule of law.”
GSP is up for renewal at the end of the year. It’s long overdue for Congress to update it – and to remove India from the program altogether.