Free Trade

It appears most clear from everything I’ve read that efforts by countries to restrict foreign imports during times of economic upheaval is an unwise thing to do.  Restricting trade and protecting domestic industries is an understandable instinct when times get bad, but it is apparently precisely the wrong course of action when combating a global recession.  It makes things worse, far worse.  Yet, we all know that labor organizations the world over, responsive to their domestic clientele, like nothing more than a good trade barrier to protect their particular industry from foreign competition.  The most popular trade restriction these days comes in the guise of conditions which must be negotiated into trade agreements to improve labor and environmental conditions in foreign countries.  While for labor it serves a very distinct purpose–a means of restraining free trade–for most everyone else, from the comfort of our American homes, it sounds like a very nice thing to insist upon (a close relative of ‘political correctness’).   While negotiation of some provisions of this sort would seem to be prudent, it is apparent that the “prudent” end of the spectrum rarely satisfy organized labor, as “prudent” would rarely really significantly alter trade.

So, today comes word that the Obama administration, showing due fealty to a key constituency of the Democratic Party, announces that it is “aggressively reworking U.S. trade policy to more strongly emphasize domestic and social issues, from the displacement of American workers to climate change.”  This is according to a story in this morning’s Washington Post (U.S. to Toughen Its Stance on Trade: New Policy Reflects Growing Dissatisfaction With Global Markets).  The story is a good one and confirms that countries the world over are “embracing new trade barriers aimed at  imported goods and other measures meant to restrict the flow of capital outisde their borders.”  Concerning the push in the U.S. for new labor and environmental standards in foreign trade deals, here is an excerpt from the story:

During the campaign, Obama said he generally supports free-trade policies but also signaled a tougher approach that is only now beginning to be outlined. Both in Kirk’s testimony yesterday and in a policy statement issued by new Obama appointees at the Office of the U.S. Trade Representative, the administration vowed to make tougher labor and environmental standards prerequisites for trade deals. Rather than stressing the signing of new agreements, the administration indicated that it will instead prioritize stricter enforcement of existing ones before the World Trade Organization — the Geneva-based body that arbitrates global trade. 

I am, of course, suspicous, given the relationship of organized labor and the Democratic Party, that anything approaching reasonable or the “right thing to do” will be the end result of this new policy.  This is more politics than sound policy.

Also in today’s Washington Post is an Op-ed arguing the importance of global trade to world economic recovery and offering a “three-pronged agenda [that] can promote growth, and support foreign policy and global stability.”  The author is Charlene Barshefsky who was the U.S. trade representative from 1997-2001 (making her a Clinton appointee).  The Op-ed is entitled Trading Up to Global Recovery.  While the author advocates free trade she also advocates for “disciplines on labor and the environment.”  

It appears clear to me that as concerns these “disciplines” to be imposed on other governments, the devil will be in the details:  Too lax and organized labor won’t be happy and too strict and the agreements will be have no chance of being agreed to by foreign nations.  Good luck on finding reasonable middle ground and a trade policy that helps more than hurts.  Good luck indeed.   

The news this morning doesn’t look as good as it did yesterday on the stimulus front:  It’s unclear whether Labor, and thus its supporters in the Senate, will approve of the watered down “Buy America” provision; apologists for the House bill are coming out of the woodwork to defend the original bill, apparently including the President; and the reformist momentum that seemed to be present on Tuesday has apparently stalled.  What does it mean?  It increases the chances that a highly flawed bill could be the one that’s voted upon by the Senate as early as today.  There’s still hope, however.

As concerns the “Buy America” provision you can read of yesterday’s developments in these two stories in the New York Times and Washington Post, respectively:  Senate Agrees to Dilute ‘Buy America’ Provisions and Stimulus Bill Gets Housing Tax Perk.  As I noted yesterday “Buy America” a terrible idea.  While I’d prefer no such provision, the added language, should help.  According to the above-referenced Times story, the words added to the provision are the following:  “applied in a manner consistent with United States obligations under international agreements.”  My concern here is that this will just open the door to questionable domestic interpretation of what is legal under international agreement and in turn to claims by other countries over that interpretation.  This is all to appease Labor.  Distasteful policy making.

As to the backlash against efforts to reform the House bill, there are two pieces worth noting.  The first is the President’s Op-ed in this morning’s Washington Post.  It’s entitled The Action Americans Need.  It’s disappointing.  It doesn’t say much and seems designed to comfort the interest groups on the left who don’t want to reform the House bill.  The President continues to work with Senate moderates, however, to find compromise.  This is good.  Today’s other apologist, who I sometimes suspect has an office in the Democratic National Committee Headquarters so partisan is he, is E. J. Dionne who spouts a lot of nonsense in his column in today’s Washington Post.  The piece is entitled Time to Play Hardball.  No, Mr. Dionne, it’s not.  Hardball won’t get additional Republican votes, which is what this bill needs.  It is also worth reminding ourselves that no compromise bill is going to get overwhelming Republican support.  It won’t because the majority of Republicans are too partisan or too ideologically conservative to be able to move to the center for the greater good.  But they don’t matter.  Those who matter are the relative centrists.  Get few or none of them and the bill has failed, even it it passes.  Get most, if not all, of them and it means the country has probably produced a better bill than the one that passed the House last week.  

Finally, as concerns the reformist efforts getting stalled, I note a fine editorial in the Washington Post this morning.  The Post editorial staff gets it.  The piece is entitled The Senate Balks: Why President Obama should heed calls for a more focused stimulus package.  Because I agree with it in toto, here’s the editorial in its entirety:    

Today in The Post, President Obama challenges critics of the $900 billion stimulus plan that was taking shape on Capitol Hill yesterday, accusing them of peddling “the same failed theories that helped lead us into this crisis” and warning that, without immediate action, “Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.” A thinly veiled reference to Senate Republicans, this is a departure from his previous emphasis on bipartisanship. Still, as a matter of policy, Mr. Obama is justified in signaling that the plan should not be tilted in favor of tax cuts — and that the GOP should not waste valuable time trying to achieve this.

However, ideology is not the only reason that senators — from both parties — are balking at the president’s plan. As it emerged from the House, it suffered from a confusion of objectives. Mr. Obama praised the package yesterday as “not merely a prescription for short-term spending” but a “strategy for long-term economic growth in areas like renewable energy and health care and education.” This is precisely the problem. As credible experts, including some Democrats, have pointed out, much of this “long-term” spending either won’t stimulate the economy now, is of questionable merit, or both. Even potentially meritorious items, such as $2.1 billion for Head Start, or billions more to computerize medical records, do not belong in legislation whose reason for being is to give U.S. economic growth a “jolt,” as Mr. Obama himself has put it. All other policy priorities should pass through the normal budget process, which involves hearings, debate and — crucially — competition with other programs.

Sen. Susan Collins of Maine is one of the moderate Republicans whose support the president must win if he is to garner the 60 Senate votes needed to pass a stimulus package. She and Democrat Ben Nelson of Nebraska are working on a plan that would carry a lower nominal price tag than the current bill — perhaps $200 billion lower — but which would focus on aid to states, “shovel-ready” infrastructure projects, food stamp increases and other items calculated to boost business and consumer spending quickly. On the revenue side, she would keep Mr. Obama’s priorities, including a $500-per-worker tax rebate.

To his credit, Mr. Obama continues to seek bipartisan input, and he met individually with Ms. Collins for a half hour yesterday afternoon. We hope he gives her ideas serious consideration.

Let’s hope the efforts of the Senate moderates continue today and a number of the bill’s unstimulative excesses are cut from it.  Then let’s hope it passes the Senate with a healthy majority.  This would be good news for the country.