One problem in this whole debate over the Trans-Pacific Partnership is that we lose the forest for the trees. We end up arguing about trade deals—and worse, a deal almost no one has read (because it’s negotiated in secret)—as opposed to the broader underlying issues of the economic impact of trade from the perspective of what matters most: growth, jobs, wages, incomes, and inequality.

I draw that distinction because what follows is not about politics. Many players in this debate form their views based on perceived labor or corporate interests, or the fact that their constituents are convinced, often legitimately, that prior trade deals have hurt them. That’s not what I’m thinking about here. What follows is instead is my brief take on the economic questions invoked by the debate. For a deeper dive into much of what’s here, see Chapter 5 in the Reconnection Agenda(I’m not saying it’s any good, but I will say that I spent a lot of time trying to make some of the less intuitive parts of this as clear as possible.)

There’s trade and then there’s trade deficits: Economists and the punditry typically pull for more trade because its benefits are well known: greater supplies of goods (and thus lower prices), the opportunities for trading partners to produce and sell more of the goods and services in which they specialize, greater interdependence between countries, the opportunity for developing countries to spur their development.

Of course there are costs to those displaced by trade, but in the textbook model, the benefits are more widely felt than the costs.

That’s not, however, the full story in the US by a longshot. The key distinction is, as the figure above shows, that we’ve run large—in terms of their impact on the generally benign scenario just described—trade deficits since the mid-1970s.

So why is that a problem?

Trade and full employment: First, since the trade deficit is a drag on GDP growth, it means that unless we make up that drag through some other component of growth, demand will be too weak to get to full employment. Note that as the figure shows, even while the trade deficit as a share of GDP has improved in recent years, it has still averaged -4 percent since 2000. That’s a steep barrier to full employment.

Notably, both Ben Bernanke and Larry Summers have made this point, adding these negative trade balances as a factor in their “secular stagnation” (persistently weak demand) discussions.

And yet, while the trade deficit/GDP was -4 percent in 2000, so was the unemployment rate 4 percent that year, because the other components of GDP—consumption, investment, government spending—more than made up the difference. The problem is, these global imbalances have contributed to the bubbles that have doomed the last few business cycles. In other words, the question is not whether we can get to full employment with large trade deficits—we know that we can. But can we do so without damaging bubbles? Perhaps so, but that’s not occurred in recent decades.

Second, as Josh Bivens points out, it’s not the case, as is often said, that the winners from trade are many and the losers are few. He estimates that that our persistent trade deficits have cost the 70 percent of the workforce that’s non-college educated about $1,800 per year in lost earnings. To be clear, that’s not just the impact of the directly displaced. It’s also the impact on those with whom they compete, post-displacement, in lower-wage service sectors.

The point is that large, persistent trade deficits make it harder to get to full employment without lastingly damaging bubbles. Moreover, even at full employment, these deficits affect the composition of jobs in ways that hurt the majority of the workforce.

There’s trade and then there’s trade deals: What does all of this have to do with the TPP, NAFTA, etc.? As you’ve hopefully gleaned from the above, the main question is whether and how such deals affect trade flows. The answer, as far as I can tell, is not in the ways you’d think from listening to the rhetoric.

Boosters of US trade deals say we’re running trade surpluses with the countries with whom we’ve got trade deals; Public Citizen says that’s wrong (one good point they make is that you have to exclude “re-exports”—foreign-made goods that pass through US ports on their way to other countries—from the tally of US exports). It’s certainly true that our trade deficits with Mexico and South Korea increased post those bi-lateral trade deals, but there are so many different factors that determine these net balances that it’s beyond my understanding to make the call either way.

So, with the critical exception of the currency point below, I wouldn’t base support or opposition for a trade deal on the belief that it’s going to raise or lower the trade deficit. I’d recognize that these agreements include both “free-trade” measures, like tariff reductions, and “protectionist” measures, like patent extensions. Though I’ll have to see it to believe it, I trust our trade reps and the President when they say labor protections are stronger in the TPP than in the NAFTA. But the deal also includes dispute settlement mechanisms that can supersede sovereign courts.

You will find none of that stuff in the textbooks on the benefits of trade and globalization. So do not conflate trade deals with the simple “trade good…more trade better” argument that dominates.

Currency matters: Finally, I’ve written extensively about the importance of currency rules in or around these trade deals. “In” is better, as it’s more effective to have a neutral tribunal making the call and imposing corrective measures than an individual country acting unilaterally. But if, as the administration plausibly maintains, they can’t get a currency deal in the bill, then there’s got to be something outside the bill.

Remember, the key factor in all of this is the trade deficit, and the punchline of the currency/exchange rate piece of it is that a country that lowers its tariffs in a trade deal can almost instantaneously reverse that impact by devaluing their currency by the same amount.

Interestingly, the Senate has two options in play to fight back: the Bennet amendment and the Schumer amendment. The Schumer bill’s been around for a while but I’m still learning about the Bennet one, and I’ll post on them once I’ve done more homework. My initial take is that Bennet is better in terms of diagnosing currency-induced export subsidies, but has weak teeth relative to Schumer’s approach of countervailing duties on subsidized exports.

End of the day, as I say in Chapter 5, I’m all for more trade and globalization, and not just for us but for developing economies as well. And it wouldn’t matter if I wasn’t. That toothpaste ain’t goin’ back in the tube. But a useful debate must be informed by the real benefits and costs I’ve tried to summarize above.

There are those who disagree, strongly, with many of these assertions. The President’s economic council, for example, has quite different views on trade deficits (see box 7-3 here)—and while I disagree, I’ve got great respect for those guys/gals. The admin and the US trade rep also believe currency management is no longer much of a threat and not something we could block without implicating our Fed, views I also think are wrong.

But those are good debates to have, and I welcome them.

Reprinted with permission from Jared Bernstein