Obama and Trade

Obama’s speech last night included a line attacking NAFTA, which he’s catching flack for from Blake Hounshell, Mike Boyer, and Greg Mankiw. Regular readers know I’m a firm believer in free trade, and so it shouldn’t be too surprising that I disagree with Obama on this. But these critiques, in particular Boyer’s claim that Obama’s “anti-globalization”, miss the point. Reading The Audacity of Hope, it’s pretty evident that Obama takes the Scandinavian-style, social democratic approach to trade, combining a belief in the mutual benefits of open markets with a conviction that the gains from trade must be redistributed equitably through a social safety net. Take this excerpt, from pages 175-176:

We can try to slow globalization, but we can’t stop it. The U.S. economy is now so integrated with the rest of the world, and digital commerce so widespread, that it’s hard to even imagine, much less enforce, an effective regime of protectionism. A tariff on imported steel may give temporary relief to U.S. steel producers, but it will make every U.S. manufacturer that uses steel in its products less competitive on the world market. It’s tough to “buy American” when a video game sold by a U.S. company has been developed by Japanese software engineers and packaged in Mexico. U.S. Border Patrol agents can’t interdict the services of a call center in India, or stop an electrical engineer in Prague from sending his work via email to a company in Dubuque. When it comes to trade, there are few borders left.
This doesn’t mean, however, that we should just throw up our hands and tell workers to fend for themselves. I would make this point to President Bush toward the end of the CAFTA debate, when I and a group of other senators were invited to the White House for discussions. I told the President that I believed in the benefits of trade, and that I had no doubt the White House could squeeze out the votes for this particular agreement. But I said that resistance to CAFTA had less to do with the specifics of the agreement and more to dod with the growing insecurities of the American worker. Unless we found strategies to allay those fears, and sent a a strong signal to American workers that the federal government was on their side, protectionist sentiment would only grow.
The President listened politely and said that he’s be interested in hearing my ideas. In the meantime, he said, he hoped he could count on my vote.
He couldn’t. I ended up voting against CAFTA, which passed the Senate by a vote of 55 to 45. My vote gave me no satisfaction, but I felt it was the only way to register a protest against what I considered to be the White House’s inattention to the losers from free trade. Like Bob Rubin, I am optimistic about the long-term prospects for the U.S. economy and the ability of U.S. workers to compete in a free trade environment – but only if we distribute the costs and benefits of globalization more fairly across the population.

I know this won’t appeal fully to economic conservatives like Mankiw and Boyer, the former of whom has made it clear that he believes the losers from trade don’t deserve any assistance. But I for me, a strong welfare state and an open trading regime are of a piece with one another, two means to the common goal of prosperity and economic security. From that vantage point, Obama’s approach to trade is the most humane and coherent yet presented by a major politician.

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