♠ Posted by Emmanuel in Trade at 12/05/2008 08:44:00 AMAs I've suggested in the post immediately below, there is a battle for the heart and soul of Democratic trade policy in the incoming Obama administration. There are those who are really gung-ho on passing all sorts of protectionist measures who Obama has counted on for electoral support. OTOH, Obama's economic advisors are decidedly "non-progressive" in the left-leaning sense: largely conventional economists who buy into paeans about the virtues of free trade. My favorite case in point for the latter in Austan Goolsbee. Of course, he's the same bloke who reportedly told some Canadians that Obama's statements about renegotiating NAFTA are campaign hyperbole to win the votes of the organized labor/tradophobic set.
My intuition is that the ongoing economic crisis will prove decisive in seeing which of these two forces gain the upper hand in the Obama administration: a quick and relatively painless economic recovery would favor the Goolsbee-Summers-Geithner elements who are more moderate in their approach to trade. If a prolonged and painful recession ensues, however, expect the trade-bashers to gain the upper hand.
A new Newsweek article on why Obama may not be so bad for trade which I recommend you read features a tidbit about Goolsbee being interviewed by the CFR on the matter. Below are the relevant excerpts for you in which Goolsbee constructs what I can only call "the moderate economist's Obama":
Now on trade, the Bush administration—now followed by the McCain campaign—has been pushing a false choice in which they say either you're going to back everything that they call a free trade agreement, no matter how many loopholes are in it, no matter whether it addresses the basic concerns of people who have been left out in the opening of markets and globalization, or else you're a Smoot-Hawley protectionist [the Smoot-Hawley Tariff Act of 1930 raised U.S. tariffs to record levels]. It's completely inaccurate.
Obama's position has been extremely consistent over the many years that I've known him. If you go back and look at his book, or if you look at what he's saying now, it's the same, and that is, trade is not bad. Trade is good. And the opening up of markets and access to the fast-growing markets of the world is one of the key ways that many of our industries have grown.
At the same time, if we are not mindful of the great many people who have been left out of the bounty of opening of markets, all the political will and favor of globalization is going to dry up. You're not helping globalization if you subscribe to the Bush view that we ought to try to jam through trade agreements by a 50-49 margin by pulling out the stops and giving pork to whoever needs it in order to get them to vote for it. That strategy is dried up.
So Obama's approach has been, we ought to put labor and environmental standards—enforceable, the basic standards from the ILO [International Labor Organization] and regarding the environment, into the core of our agreements, and that we should work as much as possible to remove the loopholes and special interests, because if you look at these free trade agreements, they're a thousand pages long and 980 pages of that are giveaways to individual companies and monopolies, and very little of it looks like the economist's case for free trade.
And more broadly, to promote globalization we have to build a new consensus, and that consensus has to be built around making sure that America is ready to compete, that we can't build a moat around the country, and so we shouldn't try to. But we should invest in the capabilities of our own industries and we should be mindful of the concerns of the people who have been left out—that we can look after the health of workers, and still be pro-market. It's in the interest of developing countries too. I don't think there's any contradiction in that.