What does Trade Promotion Authority (TPA) have to do with the 8th of May?

Today, seventy years ago, the Second World War ended with Germany’s unconditional surrender. Since then, Germany’s relationship with the world has changed a lot and to mark this historic event numerous commemorative events were held. However one issue that receives little attention is the effects this event had on international trade. The reintegration of West Germany into the World Economy, as described by the economic historian Christoph Buchheim, contributed significantly to the current role of the Federal Republic of Germany in the world.

To understand the significance of West Germany’s reintegration, one has to look at the struggle to establish the post-war order by the victorious allies. In September 1944 President Roosevelt and Prime Minister Churchill met in Quebec to discuss this very order. The Morgenthau Plan arose as part of the agreements of the Quebec conference, and it was decided that Germany was to be demilitarized by isolating it and restrict its industrial facilities. Fortunately for the Germans, as well as other Europeans, the US Secretary of State, Cordell Hull, intellectually discredited the Morgenthau plan to such an extent that it was abandoned.

Instead the knowledge gained from Hull in the First World War, that trade between nations promotes peace whereas autarky is “related” to war, was used in his political career to lower trade barriers and deepen the global division of labour. Both the results of theoretical deliberation and empirical evidence are clear: countries that trade intensively with each other largely dispense with transnational conflicts or resolve such conflicts in a civilized way, as shown in numerous studies. The role, and arguably intent, of foreign trade is not limited to export turnovers, prosperity, employment and growth; it is also, if not primarily, to promote peace and international understanding. Foreign trade builds trust. To be successful in the global market, in the long run, one needs to build up reputation and be trustworthy. Then the nationality or skin colour of trading partners does not matter anymore.

Hull’s findings were put into practice in the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947, the European Economic Community (EEC) in 1958, as well as numerous international free trade agreements of varying depth and width. European integration even led to the longest period of peace in European history. As a consequence the European Union (EU) was awarded the Nobel Peace Prize in 2012, as was Cordell Hull in 1945 for his commitment to the United Nations (UN). The world is far from perfect, but just imagine how it would look without these agreements and integration efforts!

Now we have entered the eighth decade of the post-war period and it is necessary to defend the achievements of the last seventy years, and expand upon them.

Leading congressmen of both US parties (Democrats and Republicans) have introduced a bill in Congress that gives the US President the right to negotiate international trade agreements under specified conditions. Agreements negotiated this way must either be accepted or rejected within 90 days of reaching the Congress and cannot be changed or filibustered. This procedure is called Trade Promotion Authority (TPA) or “Fast Track”.

The initiators are not bringing the law by Congress quietly. It is being threatened by trade unions, many anti-free trade Democrats, and some Republicans in Congress who might vote, for domestic political reasons, to prevent a President Obama from acquiring TPA.

And even if the TPA would be decided in the United States, it won’t guarantee a conclusion of the Doha Round or the successful negotiation of free trade agreements such as the transatlantic trade and investment partnership (TTIP). Resistance is expected by many citizens, in addition to interest groups such as the trade unions and sectors that would be negatively affected by further market opening. Take the TTIP for example, to which the resistance in Germany is particularly high. The so-called civil society is trying to prevent it almost by force.

Perhaps we should, in all the justified criticism of the TTIP details and the fears of abuse of certain regulations by strong interest groups, expand our views of free trade and trade agreements. There is more at stake than just the question of how food is preserved, or the quality of advice from readers in bookstores, rather it comes to securing peace and prosperity in the Western world. We take both for granted and forget sometimes that you have to work hard to maintain a functioning trading order. The maintenance of vital trade relationships is by no means the only instrument for securing peace, but it is an important building block and arguably – when looking at the path we’ve walked to get to this point – even a mainstay.

The original article, Welchen Anteil hat der Handel am Frieden?, is available at Wirtschafts Woche in German.