Needless to say, I am quite disappointed that the main point on which Obama and Clinton seem to be competing is who can threaten the most drastic action on NAFTA. I expect that before we get to the March 4th primaries, we will have heard at least one promise to carpet bomb Mexico City. Pulling out of NAFTA will piss off our allies, severely disrupt several key industries (I'm looking at you, Michigan), and will not reverse the decline in manufacturing jobs. The Economist's blog, however, suggests that it might not be so bad:
The world is globalised, and an election in America does not make one's neighbours disappear, much as one might wish them to. Mr Drezner is correct to note that re-establishing respect for America's allies is a key plank of the Democratic electoral platform. It is awfully hard to square that with efforts to throw those allies' economic concerns out the window.
But perhaps we could avoid this discussion altogether. All the attention paid to a single tri-lateral trade agreement should remind us that trade agreements are a pretty subpar way to liberalise trade in the first place. That's the point made by Richard Baldwin at VoxEU today, who calls the tangle of overlapping and conflicting bi-lateral and regional trade agreements "the spaghetti bowl."
My former employer's opposition to bilateral trade deals was one of the few editorial lines of which I was not quite sure. In an ideal universe, obviously, all trade deals would go through the WTO. But if we cannot achieve a multilateral trade deal--as it seems we currently cannot--it's not clear to me that nothing is better than something.
Update Commenter Noah says:...what? In an ideal universe, we adopt unilateral free trade, full stop. And if we really need to work out a free-trade agreement with another nation explicitly, the text should fit on a postcard.Well, yes and no. I agree that unilaterally dropping our trade barriers would be good for America. But America is a big market, and there is a possibility that by using the lure of lower American trade barriers, it could get other countries to lower their trade barriers, thereby producing even more gains from trade than we'd get by just going to unilateral free trade. Of course, it's not clear that this is the case, and given the stalled progress at the WTO, perhaps it would be a good idea to just go full monty rather than waiting for talks to restart. There's also the possibility that America could become a light to all nations--that we could make free trade so obviously awesome that everyone else would follow suit. So I'm not sure whether unilaterally lowering would be a net benefit or not. All of this is politically moot, of course; at this point, we free traders are fighting just to hold onto the gains we've made. But it's interesting to debate the theory.
Who knew that H. Ross Perot could hear so far into the future? He expected a "great sucking sound" from the southern border as a result of NAFTA, not realizing that it would actually be coming from the Democratic primaries in 2008.
Have you seen this video of Bill Clinton endorsing Obama? See link.
http://www.youtube.com/watch?v=RGW38Zy4bJo
I expect that before we get to the March 4th primaries, we will have heard at least one promise to carpet bomb Mexico City.
The difference between Democrats and republicans is that with Democrats, we know that comments like this are in jest.
Ah... you are writing about trade. For just a second, I visions of you and Wonkette...
Meanwhile, we have reports of Goolsbee reassuring the Canadian ambassador that Obama's NAFTA talk is just hot air...
Call me old-fashioned, but I've never really understood how creating pages of legislation that restrict trade can be referred to as "free."
Free is free. If we want free trade, start by eliminating all tariffs, duties, and import/export restrictions. We won't alienate any of our allies, and we won't have to waste time and money renegotiating non-free trade agreements.
In an ideal universe, obviously, all trade deals would go through the WTO.
...what? In an ideal universe, we adopt unilateral free trade, full stop. And if we really need to work out a free-trade agreement with another nation explicitly, the text should fit on a postcard.
Early in 2007 Barney Frank proposed a kind of social contract in which Democrats would vote for free trade in return for Republican support of measures benefitting lower income workers. Bush's answer, sustained by his party, was to veto liberalization of SCHIP and other Democratic social welfare initiatives and to continue his support of tax cuts for the investor class.
It seems to me that Megan and her libertarian supporters in this thread are being ingenuous in wondering why Clinton and Obama seem so angry. Blue collar voters are mad as hell, and they aren't going to take it anymore. Until they change their minds, Democratic candidates for President will campaign as populists and Democratic Presidents, if there are any, will govern from the left. This is one of George Bush's many negative accomplishments
In an ideal universe, obviously, all trade deals would go through the WTO.
...what? In an ideal universe, we adopt unilateral free trade, full stop. And if we really need to work out a free-trade agreement with another nation explicitly, the text should fit on a postcard.
Posted by Noah Yetter | February 29, 2008 4:47 PM
Noah, richer that that, MM is widely considered as a 'libertarian'..is it any wonder that the currency value of such a society is heading South(?)
The difference between Democrats and republicans is that with Democrats, we know that comments like this are in jest.
Sudanese aspirin factories notwithstanding, I presume.
Free is free. If we want free trade, start by eliminating all tariffs, duties, and import/export restrictions. We won't alienate any of our allies, and we won't have to waste time and money renegotiating non-free trade agreements.
If pro is the opposite of con, what is the opposite of progress? Hint: The answer is the same reason nothing so sensible will ever become law.
Democratic Presidents, if there are any, will govern from the left
May we have this credo printed across the top of the NYT front page, please? Preserving the words if there are any for full effect.
Wouldn't the same conclusion also hold for eliminating all barriers to movements of capital and labor? Arguing that absent unique resources in the exporting country, movements of goods simply constitute a substitute for (amount to the same thing as?) movements of labor and capital? So that the [theoretically] real optimum policy would be free trade, free capital movement, free immigration, free knowledge flows?
Megan, you big tease!
In an ideal universe, we adopt unilateral free trade, full stop. And if we really need to work out a free-trade agreement with another nation explicitly, the text should fit on a postcard.
Hmm. I wonder if you can fit something covering patents and copyrights in a reasonable manner on a postcard. Certainly, "treat the patents of foreigners as you do domestic ones" is short and beneficial, but I'm not certain that it covers the entire situation. OTOH, I'm not sure that there's much one can really do to force an answer to the free rider problem with, e.g., pharmaceuticals.
Wouldn't the same conclusion also hold for eliminating all barriers to movements of capital and labor? ... So that the [theoretically] real optimum policy would be free trade, free capital movement, free immigration, free knowledge flows?
Yep! Freedom leads to prosperity! Also, it's the right thing to do. Win-win.
Let me see, what has free trade gotten us so far. Extremely rich executives, poor quality products, really bad tech support, people holding our medical records hostage, poison medications and toys, loss of jobs, lower standard of living and a crippled economy. Yea lets have more of this?
Kevin P.-
Not only is the title a tease, so is this bit from the first comment:
"great sucking sound"
I was disappointed by this post.
You must think that the sanctions regime is great for Cuba, that Burma benefits similarly, and that similar sanctions would reward Iran.
But America is a big market, and there is a possibility that by using the lure of lower American trade barriers, it could get other countries to lower their trade barriers, thereby producing even more gains from trade than we'd get by just going to unilateral free trade.
And you can see how hard Clinton or Obama would work to achieve this.
I have some personal experience with the results of the 'free' trade provided for by NAFTA. Post-NAFTA, when traveling to Canada to work, if I was going to work at a customer site that we had previously sold software too (which was all the time), I was supposed to present the original bill of sale at the border. Huh?! The requirement was ridiculous, but had been placed into the agreement at the behest of somebody. Anyway, we all learned to say that we were going to visit the branch office, since that got around the requirement. The point is that agreements like NAFTA are always presented as 'free' in order to smooth their passage, but they are in reality a package of rules designed for the benefit of the large companies that sponsor their passage. WTO has the same purpose on the international level.
So, post-NAFTA, it was harder for me to work in Canada than pre-NAFTA and harder than to work in Europe. Go figure.
What is disappointing to me is not that Obama and Clinton have chosen to speak against NAFTA. It's how many economists and pundits paid no attention to the enormous unpopularity of trade until the politicians started talking about it at election time. Obama and Clinton are trying to win the election by speaking to the concerns of the voters, which is what a politician is supposed to do. I'm in favor of free trade, but I'm in favor of democracy, too, and I'm surprised and relieved that the two candidates have been so restrained so far, considering the depth of anti-free trade anger that we apparently have in the Midwest.
Obama and Clinton are trying to win the election by speaking to the concerns of the voters, which is what a politician is supposed to do.
One can talk to people's concerns without pandering to them. "We both know these jobs aren't coming back, but trade is good for our economy as a whole and we'll help you transition" instead of "Trade bad, vote me."
"we free traders are fighting just to hold onto the gains we've made. But it's interesting to debate the theory"
This is ridiculous. If you had any real interest in free trade, you would be pushing harder for universal health care and a strong safety net.
Here's a great example of what "free trade" gets us: A European Union subsidized industry competes against a major component of American defense infrastructure: The EADS' air tanker contract win on Friday ensures that our USAF will soon be flying French Airbus. That’s a $35-100 Billion deal and a loss of ~9000 American jobs. (Don't try to say the EADS front, Northrup Grumman will get equal American jobs to Boeing). What are we thinking? Why not Aeroflot? Or better yet - the Chinese -- we might have gotten Boeing planes made with cheap Chinese labor and helped reduce their unemployment!