I have written before about the problem of the disconnect, the mistake of treating issues that are closely interlinked as if they were separate. President Obama’s approach to the issue of excessive inequality, unfortunately, is an example of this.

He has been specific and thoughtful in proposals to diminish inequality. His budget includes a number of important ways to alter the situation in which virtually all of the increased wealth that our country is producing goes to a handful of people. He has been supportive of this in other ways as well. One example is the excellent appointments he has made to the National Labor Relations Board who are seeking to restore the right of working men and women to join unions.

But his approach to international trade not only ignores this issue, it also will exacerbate inequality. This is one of two issues – along with the minimum wage – where conventional economic opinion has shifted in a more liberal direction over the past decade.

Thirty years ago, there was a consensus of economic opinion, with a few dissenters on the liberal side, that minimum-wage increases might hurt working people and that international trade was an unrestricted good for the economy. Given the favorable experience we had with the increase in the minimum wage when President Clinton forced the Republican Congress to adopt it in 1996, after which employment reached record highs and no negative effect was established, opinion on the minimum wage has turned around. It is now recognized as an important part of an overall program to diminish excessive inequality.

Similarly, it is now generally accepted that increased trade has two effects in advanced economies. It increases overall wealth. But it also exacerbates the excessively unequal distribution of that wealth because people employed in basic manufacturing see their relative position undermined while those engaged in high-end, high-skilled activity benefit at a rate that is greater than the nation as a whole.

This does not mean that we should be cutting off international trade, or even that we should stop trying to advance it. It does mean that efforts to do that should deal with the dual impact it will have-increasing overall wealth while exacerbating highly unequal distribution of that wealth – and be accompanied by measures that deal with the latter.

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President Obama’s approach does have one significant improvement over that originally taken by Clinton – and of course by magnitudes over that advocated by all recent Republican presidents. In the North American Free Trade agreement, there were no strong protections requiring our Mexican partners to observe reasonable environmental and labor protections. When we sign trade treaties with countries who ignore either the rights of workers or the needs of the environment, American companies that seek to recognize these two values are put at a competitive disadvantage. The proposed Trans-Pacific Partnership does have some binding requirements in this area. But the economic history of recent decades establishes that this will not do nearly enough to resolve the dilemma I have discussed.

Moreover, there is one particular area where, even in its own internal terms, Obama’s draft is troubling: the provision that would enhance the right of foreign businesses to sue in America against regulations they oppose. There is significant unhappiness in many foreign financial institutions with some of the strict regulations we have adopted in the area of financial reform, and we have already seen conservative courts seizing on opportunities to weaken some of these rules. Enhancing their ability to do this is a great mistake, and no such provision should be included in the treaty.

But the central point remains that even if the treaty itself is free of faults, it would be a mistake from the standpoint of diminishing inequality to have Congress vote to advance the process by itself. The issue is that the business community takes the position that the federal government’s policies should enhance their ability to make profits while doing nothing to see that those profits are shared more widely among the population at large. They want Obama and Congress to adopt the legislation that is needed to have such a treaty go forward, while continuing to resist fair taxation; oppose reasonable efforts for working people to join unions; continue to press for a rollback of important financial regulation, including consumer protection; fight increases in the minimum wage; and fight other legislative and administrative efforts that provide economic support for working people who have been the victims of the economic trends of the last 30 years.

Obama should join those Democrats in Congress who seek to link these two issues legally as they are in fact linked economically. His position ought to be, as it is of a broad range of Democrats in Congress, that we will go ahead with a properly drafted trade treaty only as part of a package of measures in which the rights of working people are also enhanced.

We hear talk frequently of “grand bargains” in which major factions in this country come together on a policy that advances several interests, not just the one that is most dominant at the time. It is time for such a deal with regard to inequality. A treaty that enhances trade while enforcing legitimate labor and environmental standards on our trading partners – and does not give them the right to sue to invalidate American regulations beyond what domestic companies have – should be part of this, but so should an agreement by the business community to stop the union-busting campaign that has been going on; to agree to tax carried interest in the hedge fund arena; to agree to tougher measures that stop overseas tax evasion; to raise the minimum wage to a decent level; to support measures that extend higher education opportunities to the children of working families; and to embrace the other parts of the president’s budget agenda that will make this a fairer country.

Giving the business community what it most wants in the form of increased international trade while allowing them to maintain what has been an all-too-effective opposition to efforts to alleviate the economic stagnation that has effected the great mass of workers would be a very bad deal.

Barney Frank is a retired congressman and the author of landmark legislation. He divides his time between Maine and Massachusetts.

Twitter: BarneyFrank


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