Free trade wins a silent victory

Two presidents in a row have demonstrated the dichotomy between the economics versus the politics of free trade. Bush and Obama took opposite approaches in demonstrating it, but the message is the same.

Even though economists are virtually unanimous that free trade yields extra jobs, not fewer, they have a reputation for being less than expert in politics. That's where the politicians take over; most of them (I think) do understand that free trade is better overall, but they also understand that supporting it might not be the best strategy for securing votes in the next election.

Bush talked up free trade and got elected to his first term. But he wandered away from that commitment when he signed steel import tariffs into law. Why? Because lots of union votes were at stake, and he needed them for the next election. 

Obama talked down NAFTA during the campaign, and promised to reopen the treaty.  Why? Because lots of union votes were at stake, and he needed them for the next election. He got elected... but last week he wandered away from that commitment with the announcement that he would not reopen it to press for new environmental and labor regulations.

Here are two links:

1: the campaign promise; and
2: last week's decision to kill the promise. 

I had been hoping all along that Obama's campaign talk was just obligatory pandering to swing-state voters' emotions (...as his economics advisor, Austan Goolsbee, had assured the alarmed Canadians behind the scenes back then). Bingo, I got my wish. Chalk it up as a victory for free trade and more jobs (...although possibly not union jobs). 

Next wish
I also wish politicians would just tell the truth in the first place, even if it takes a little more explaining. But we all know that will never happen, so I'll settle for one out of two.

Comments

[beancounter]

There's another way to look at this that Arlen Specter's defection reminded me of. A politician's job is to leave his personal opinion (also known as beliefs, feelings yes even morals) at the door and to represent his constituents in the way which would best represent their will. No doubt the past sentence outrages certain people, usually the same who believe it's immoral to leave religion out of policy and that anyone who doesn't let their personal beliefs in a saviour saturate their job is immoral.

So the idea is Obama *doesn't* know that free trade is better for the economy, and/or he believes it's a belief. But when he made the promise it was the *Democratic* primary fighting Ms. Queen Shillary herself, and now he's the President of the United States whose job is not just to allow the majority to rule rampant but to figure a solution that involves the other 40% of the electorate. In other words he is a good politician, like Arlen Specter, both doing their jobs representing their constituents rather than their own personal beliefs.

The above line of thinking is why I forgive politicians who "play the game." We ask politicians to represent the will of their constituents, but when the will of the constituents and/or the constituents themselves change and the consummate politician changes policy, many in the peanut gallery lambast him for doing his job or declare him Satan incarnate lacking moral compass/foundation/principle. That doesn't make sense at all.

[Optimist123]

"A politician's job is to leave his personal opinion (also known as beliefs, feelings yes even morals) at the door and to represent his constituents in the way which would best represent their will."

That's opinion-poll leadership -- a misnomer, because it's not leadership.

From Kissinger's memoirs:
"The modern politician is less interested in being a hero than a superstar. Heroes walk alone; stars derive their status from approbation. Heroes are defined by inner values, stars by consensus. When a candidate's views are forged in focus groups and ratified by television anchorpersons, insecurity and superficiality become congenital." http://tinyurl.com/c8bhya

I prefer a hero to a superstar. But we haven't had one of those for a quarter century.

[Michael]

Hi Steve,

I've been lurking here for a while now and I just wanted to say you write a great blog. Thanks for sharing!

[beancounter]

Well I think we would agree that the primary attribute of heroes is courage, which is great when we're in a life or death struggle with communism. But I'd rather a wise leader now than a hero leader (you may beg to differ and say wisdom is an inner virtue; I believe wisdom is understanding human nature and mostly this is gained through experience, interaction rather than inner morals).

"For lifting an autumn down is not considered great strength, seeing the sun and the moon is not considered a sign of sharp vision, hearing thunder is not considered a sign of sensitive hearing" -Sun Tzu

Wise leaders show up every 100 years, the point being they don't follow opinion polls but lead them so when the masses come with new demands the framework is set up to fulfill their demands in such a way that is not destructive to the state (the critical error of people who say we don't need healthcare reform -- the boomers will demand it and there better be a system in place already when they do or they'll be a haphazard rush by opportunists uncaring of details and short-sighted and expensive). Perhaps I chose the wrong word with "feeling" because you could easily classify wisdom as "feeling" though I prefer to see it as foresight.

There's also the tragic heroes (McCain) who I feel immense compassion and pity for but prefer almost any other type (superstar, statesman, legalist, professional).

[Harun]

Sure, Bush signed steel import tarrifs into law when world steel prices were extremely low. They promptly started rising along with everything else but at the time countries that subsidize their own steel were very low priced. Just some context there, as I agree he should not have signed that law. The tariffs were ultimately removed after about 18 months.

Now, you are impressed that Obama didn't ban NAFTA even though we're only 100 days in, despite his canceling of a pilot trucking plan that allowed Mexican trucks into the US and vice versa. Let's see if that's back in place in 18 months. (and you know, the Teamsters have a union as well.)

He has also allowed the UAW to take over control of GM & Chrysler, while Ford has to compete with them and negotiate with them. International Free Trade is great, but we also need free trade within our own country.

And again, the man has 3+ years left - Bush imposed his tarrifs in 2002. You might want to wait and see what else Obama does.

A great link to some Obama comments on trade:

http://www.ontheissues.org/2008/Barack_Obama_Free_Trade.htm

[Bob]

I'm wondering how much Mexico's internal war with the drug cartels affects any NAFTA renegotiations or lack thereof. Mexicos' new president is fighting the good fight, needs help to do so and we sure don't want any more murderers, kidnappers and other criminals infiltrating our southern borders. It's a disaster down there.

I'll bet Calderon let Obama know that tougher NAFTA deals wouldn't help Mexico recover from near failed state status.

As far as campaign promises go I guess you pick your poison. Nuclear energy was on the table during the campaign....nowhere to be found today.

Taking a pencil and going line by line to cut out stuff in the budget (as mentioned during the nomination speech in Denver) has yielded a whopping $100m. That's a rounding error.

I'm not disappointed though. I never believed any of the campaign BS to begin with.

[beancounter]

Chrysler and GM have dug their own grave years before the Obama administration with too lucrative collective bargaining agreements with the full force of law. Why not "allow" (what a choice of word when the union holds all the chips) the union to stop being a backseat driver in returns for billions of concessions? Because the government gave a private company a loan? Whether or not the loan should have been given is another issue, but certainly the government would bungle management even more than a union. Maybe when the union runs the show they'll wake up but more likely go bankrupt. Good.

Since when does free trade give citizens from other countries the right to work in the USA? Strip away the bull and you have Mexican truckers wanting to work in the United States. NAFTA might allow workers from other countries here on work permits, but that's besides the point. I hate definition drift, and free trade is no tariffs at its heart with other issues corollary. Protecting domestic jobs from foreign workers and no tariffs do not have to be mutually exclusive. Free trade means no duty at borders and everything else is a sideshow (and some people don't like the everything else.)

Obama's comments on free trade are quite enlightening. According to your link he says it's impossible to turn back the clock on globalization. But just for some context I looked at McCain's comments and realized that Obama is realpolitik and McCain ideology. McCain actually said that counter protectionism is a "murder suicide pact." Meanwhile Obama is talking about fair trade. If another country gives you the finger and puts tariffs on your goods, what kind of incentive do they have to remove such tariffs other than you placing tariffs on their goods? Obama's view is far from naive -- it is nuianced and understands international power politics trumps ideology. Meanwhile McCain style would let China put tariffs on anything and everything while responding with harsh words and WTO wrangling.

Nobody is impressed by Obama. They're just relieved more indication he's more pragmatist than idealogue. Of course some realized this with his appointment of Robert Gates or even during the campaign when he refused to criticize Russia for Georgia (their own backyard) but some are apparently still worried he's a closet socialist. Perhaps it's the Hugo Chavez hug.

[Harun]

Trade Wars Brewing In Economic Malaise
Outrage in Canada as U.S. Firms Sever Ties To Obey Stimulus Ruleshttp://www.washingtonpost.com/wp-dyn/content/article/2009/05/14/AR2009051404241.html

One more data point.