Wall Street Journal: Free Trade Can Fight Inflation

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Washington, August 1, 2022 | comments
To fight inflation, President Biden should repeal or reduce Trump-era tariffs. Economists across the political spectrum agree that trade lowers prices and expands choice for consumers, and trade deals open markets for American businesses. Smart trading pacts forge deeper ties with allies, and they serve as a counterweight to Beijing’s aggressive efforts to buy global influence.

That’s why the Trump tariffs should go. And instead of being defensive about the decision, the Biden administration—and both parties in Congress—should pivot toward an unapologetically pro-trade agenda.

Despite the known benefits, both parties have grown more hostile to trade in recent years. For too many U.S. politicians, trade has become anathema. And as a result, the U.S. has missed opportunities to move forward through economic statecraft. In some cases, we’ve instead taken steps backward.

The Trump administration’s decision to pull out of the 12-country Trans-Pacific Partnership was a gift from Washington to Beijing in the contest for influence in the Indo-Pacific region. It was met with disappointing silence from both parties in Congress.

Section 232 tariffs on aluminum and steel imports, imposed on friend and foe alike, raise production costs and consumer prices. Even worse, Section 301 tariffs levied on an array of Chinese products have done little to change China’s abusive trade practices. These tariffs contribute to inflation and impede our commitment to clean-energy independence. They also place American companies at a competitive disadvantage, because China (predictably) slapped retaliatory tariffs on our exports. National Security Council spokesman John Kirby recently acknowledged that tariffs have “increased costs of American families and small businesses” without “addressing some of China’s harmful trade practices.”

The failure of U.S. policy makers to reauthorize the Generalized System of Preferences program is another error. The GSP waives tariffs on certain goods from about 120 lower-income countries. It encourages U.S. firms to get products from a diverse set of emerging partners, promotes international development through trade (not only aid), and lowers prices for U.S. consumers. It’s a tool of soft power that we have removed from our toolbox.

Congress must step up. Tariffs are taxes, and the Constitution confers the taxing power on Congress. We must not yield this prerogative to the executive, regardless of who occupies the White House.

This administration has pledged that its foreign policy, including trade, will benefit the middle class. That’s a laudable goal, but actions need to match the rhetoric. Congress should insist that U.S. trade policy actually address the most vexing challenge that working families face: the decline of their purchasing power.

Trade liberalization policies, such as removing 301 and 232 tariffs, could save the average American household almost $800 annually—far more than the president’s proposed gas-tax holiday. It’s no cure-all, but for struggling American families and businesses, every dollar in price relief counts.

Congress should also extend and modernize GSP.

In addition, Congress should update the Trade Adjustment Assistance law, which supports American workers hurt by foreign trade. Workers should be compensated if they are harmed by restrictive measures such as tariffs, not only by liberalization policies such as trade agreements. This would be a more balanced approach, rooted in the recognition that protectionism comes at a cost.

Finally, the president and Congress must understand that expanding trade relations, including by reconsideration of our withdrawal from the Trans-Pacific Partnership, is crucial to outcompeting China. American policy makers can’t claim to be tough on China if they aren’t willing to promote a muscular trade policy.

Opponents will contend that trade liberalization drives a race to the regulatory bottom. But we know how to prevent that. The trading system should be rules-based. Trade deals should impel U.S. companies to innovate, not force them to compete against foreign firms unrestrained by labor, environmental and intellectual-property standards. U.S. officials have these templates at hand, but they can’t enact them if elected leaders don’t start negotiations.

Detractors sometimes blame trade liberalization for hollowing out communities. The evidence is clear, however. Trade creates jobs and lowers costs. Automation has been far more disruptive to local economies than trade has. Where dislocation does occur, adjustment assistance should help smooth it out.

American families and businesses are grappling with high prices. Lowering tariffs can provide immediate relief. The president and Congress should act now.

Mr. Auchincloss and Ms. Murphy, both Democrats, represent, respectively, Massachusetts’ Fourth and Florida’s Seventh congressional districts.

This op-ed first appeared in the Wall Street Journal
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