Wednesday, November 12, 2003

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The battle over trade policy: it keeps going and going and going.....

In the wake of the WTO's ruling against the U.S. on steel tariffs, there are signs that the Bush administration might try to formally accede to the WTO while maintaining high levels of import protection. According to the Financial Times:

The US is considering a radical change to its laws on unfair trade that would severely penalise importers even if Washington bows to the World Trade Organisation's demands that it remove tariffs on foreign steel.

The complex methodological change would sharply raise the duties on steel imports that are also subject to separate anti-dumping tariffs.

The Commerce department, under pressure from the steel industry as well as lumber producers - who would also benefit significantly - gave notice in September that it is considering the change.

Alas, this is entirely consistent with my prediction of "hypocritical liberalization." This move would nevertheless increase the likelihood of triggering a trade war with the European Union. [C'mon, isn't that an exaggeration? The New York Times thinks everything Bush does will trigger a transatlantic row! OK, here's some more tangible evidence.]

In other depressing trade news, interest group pressure is mounting to renege on the planned end of Multi-Fibre Agreement on January 1, 2005. The Cato Institute's Dan Ikenson has more:

[T]he U.S. textile lobby has launched a rearguard campaign to preserve and expand import barriers. Recently, a coalition of textile producers filed petitions seeking new restrictions on certain Chinese exports. Talk of filing new trade remedy cases has become more pronounced. And the specter of job losses in the U.S. textile industry is once again being used to vilify trade.

The reality, however, is that American textile workers have had decades to adjust their expectations and seek new skills. Textile communities, and their leaders, have had ample opportunity to prepare for transition to employment in new industries.

Meanwhile, the enormous costs of textile protectionism have been borne disproportionately by America's lower-income families, who spend a higher proportion of their earnings on clothing. Textile protectionism has also deprived poor countries of export opportunities-precisely the kind of opportunities the Bush administration identifies as vital for promoting economic stability and security. Considering its burgeoning propensity to use trade policy to advance foreign policy and national security objectives, the administration should clearly articulate its support for freer trade in textiles and apparel by denying the industry's rearguard efforts.

Will the administration do so? For my money -- and the New York Times -- it's a coin flip.

The depressing fact -- that's still better than any of the Democratic candidates for president.

UPDATE: Drezner gets results from Andrew Sullivan! He posts:

Not even the White House can defend this attack on free trade in anything but the crudest political terms. The EU and the WTO are absolutely right to demand a reversal. If Bush sticks to his protectionist guns, he really should be pummeled by real economic conservatives.

Indeed.

ANOTHER UPDATE: For a nice background primer on the steel case, you could do far worse than the Institute for International Economics site. Here's a link to the latest backgrounder.

posted by Dan on 11.12.03 at 12:47 AM




Comments:

I'm not sure it's fair to say that President Bush is more supportive of free trade than any of the Democratic candidates. The Brooks article you point to as evidence of this really only considers Gephardt -- but what about the others?

Checking http://www.issues2002.org, it looks like Kerry, Clark, Dean and Lieberman all advocate free trade, to varying degrees. Lieberman, in particular, seems like he might be a strong and consistent proponent in the way that Bush has not been.

The other three all repeatedly assert that they support NAFTA but want "Fair Trade," meaning they want the inclusion of environmental and labor standards. None of them detail what standards they want, so it's hard to tell what exactly they'd do.

But I think it's unfair and misleading to lump all the candidates in with Gep. We don't know for sure whether any of them would be strong free traders, but we also don't know that they wouldn't.

We do know that Bush advocates free trade while adopting policies that are anything but (steel tariffs, cotton subsidies, etc, etc). Let's let the Democrats add some detail to their plans before assuming that Bush trumps them on trade, because his record in that regard is not particularly shiny.

posted by: Pedro on 11.12.03 at 12:47 AM [permalink]



I wouldn't worry about it. Clinton was all about the strategic traders until he actually got elected.

posted by: Jason McCullough on 11.12.03 at 12:47 AM [permalink]



Prediction: The Dems will be free traders on textiles when, and only when, they completely give up on the South. Until that day, they will try to buy Southern votes with tariffs.

Ditto for the Rust belt and steel.

Keep in mind that one of the two controlling constituencies for the Dems (unions) are rabidly anti-free trade, and you will have a more realistic assessment of how likely the Dems are to actually move the ball forward on this issue.

posted by: R C Dean on 11.12.03 at 12:47 AM [permalink]



Much like making the Iraqi reconstruction a loan, these tarriffs are a bad idea who's time has come. The very last thing we need right now is a trade war with Europe. What has kept the peace since the Cold War sure hasnt been the UN. Its been the fact that trade ties are too critical to be risked. Lets not rock the boat.

posted by: Mark Buehner on 11.12.03 at 12:47 AM [permalink]



We do know that Bush advocates free trade while adopting policies that are anything but (steel tariffs, cotton subsidies, etc, etc). Let's let the Democrats add some detail to their plans before assuming that Bush trumps them on trade, because his record in that regard is not particularly shiny.

Did Lieberman, Edwards, or Kerry vote against the farm bill? If not then they are each as culpable as Bush for it (especially since their party controlled the Senate when it was written and passed).

With regards to Dean, he is a big supporter of protectionist programs such as the NE Dairy Compact (I've seen him referred to as one of its "architects" on a couple of occasions) which is arguably worse than most other agricultural subsidies since it also is a form of protectionism which pits one region of the country against the rest in addition to the normal problems with government subsidy programs. I have not heard him condemn steel tariffs either (as Lieberman has rightfully done) and IIRC he has said that he was opposed any trade agreements which did not impose labor and environmental regulations on other nations which makes him far more protectionist than Bush.

So the only one who might be better than Bush on trade is Lieberman and that’s only with regards to steel tariffs. It does not sufficiently mitigate against Lieberman’s other positions such as his support for a minimum wage increase, a higher prescription drug benefit than the one proposed by Bush, opposition to tort reform, and his new found opposition to serious entitlement reform. Lieberman may be the best of a bad lot of nine but he’s still part of a bad lot. Especially since that lot is dependent on organized labor for the next election which is one of the most protectionist forces in politics.

posted by: Thorley Winston on 11.12.03 at 12:47 AM [permalink]



Lieberman's been pretty strong and consistent during his campaign in support of free trade, hasn't he?

He makes those arguments in front of Democratic audiences who would like to hear the opposite. For that, he deserves credit.

posted by: William Swann on 11.12.03 at 12:47 AM [permalink]



Lieberman's been pretty strong and consistent during his campaign in support of free trade, hasn't he?

If by which you mean he’s not as bad as his compatriots on most trade issues then yes. But supporting freer trade is a pretty minor issue compared to Lieberman’s position on other fiscal issues (minimum wage, tort reform, entitlement reform, federal spending, school choice, and regulatory reform) in which Lieberman is just awful and certainly worse than Bush.

Moreover considering that the last time Lieberman pursued a nation-wide office he did a 180 on his previous beliefs on school choice, Social Security reform, and opposition to governmental racial preferences and setasides to cater to the Democratic Party faithful, there is no reason to believe that he would not do the same if were in any danger of actually getting the nomination.

posted by: Thorley Winston on 11.12.03 at 12:47 AM [permalink]



I'm a free trader, but I'm still waiting to hear anyone come up with a policy that mitigates its downsides.

Flint happens.

You've got to have a realistic policy to deal with it.

posted by: praktike on 11.12.03 at 12:47 AM [permalink]



"Moreover considering that the last time Lieberman pursued a nation-wide office he did a 180 on his previous beliefs on school choice, Social Security reform, and opposition to governmental racial preferences and setasides to cater to the Democratic Party faithful, there is no reason to believe that he would not do the same if were in any danger of actually getting the nomination."

This particular criticism of Lieberman has resonated ad-nauseum in conservative circles. I think it's fundamentally unfair, and I find it especially odd when I hear it coming from professional commentators (which I have several times).

Every VP candidate since time immemorial has adopted the policy views of the person at the top of the ticket. Oftentimes, it's not an issue, because the nominee and the VP mostly agree on stuff. It wasn't an issue, for example, when Bush picked Cheney. When it is an issue, though -- for example, when Reagan picked Bush Sr. -- the VP dutifully falls in line with the agenda of the nominee. Bush Sr. didn't talk much about "voodoo economics" after becoming the VP candidate, did he?

There's no other way for it to work, really. When a party picks a candidate, they expect his campaign to reflect his views, not the views of someone they didn't pick.

What's impressive about Lieberman is that he returned to his maverick politics after the 2000 campaign. He held steady on Iraq in the midst of extreme pressure, and has been willing to give up his presidential aspirations rather than accede to the prevailing anti-war atmosphere of his party.

He also talks about free trade, and commits himself to it, in an atmosphere where we're losing manufacturing jobs and where unions are strongly represented in the core Democratic constituency.

Lieberman is, on the whole, a principled person who is honest and straightforward about what he believes. He will lose the Democratic nomination, but he has earned that level of respect.

posted by: William Swann on 11.12.03 at 12:47 AM [permalink]



I wonder if Robert Rubin's forthcoming book, which stresses the importance of deficit reduction, and U.S. free trade leadership, will have any impact on the Democrats. Somehow I doubt it. As Daniel said, Bush's committment to free trade is highly questionable, and the Democrats are even worse. I'll be watching closely to see how Bush responds to the steel tarrif decision.

posted by: Daniel Calto on 11.12.03 at 12:47 AM [permalink]



The democratic platform has huge support for free trade and balancing the budget. Until it comes to freeing trade and balancing the budget. Come on now, does anyone honestly in their heart of hearts think any of the nominees is going to balance the budget? I will go further, I will guarantee that not a single one would raise taxes high enough to even offset the additional spending they will propose, in essence they will spend more. There is simple no way short of gutting the military to balance the budget while tacking on free meds for oldtimers and all the other money they want to shovel into the federal furnace. I'm pissed at Bush for running fast and loose with discretionary spending, but Im damned sure none of these pols have any intention much less the political will to balance the budget.

posted by: Mark Buehner on 11.12.03 at 12:47 AM [permalink]



Mr. Buehner,

The paranoid style of your commentary would be interesting if not for its complete and utter comical lack of even moderately recent historical perspective. Don't trust any of these pols to reign in spending? Admittedly Washington has a well-earned reputation for profligacy but there are still plenty of authentic deficit hawks in the Republican party.

Or didn't you remember the "rebellion" that Newt originally led to seize the House in the 90's? I won't say that the past Congress and Clinton Admin balanced the budget, but at least they came much closer to it than the present circumstances. One may argue that they had the benefit of a good economy, but conservative CBO numbers indicate that even if the economy is taking off now the deficit is here to stay. At any rate, moving toward fiscal responsibility is not a political impossibility. Bush has merely lacked the will or inclination, perhaps guided by the Norquistian doctrine of starving future Federal spending through deficits.

posted by: Oldman on 11.12.03 at 12:47 AM [permalink]



RC: According to your theory, Clinton should've been lousy about free trade. He wasn't. Unless you have some reason for thinking that he was an exception, I think your theory needs revising.
And if you haven't noticed the waning power of the union in American life and politics, you probably ought to be reading instead of writing.
Likewise, you explain why Dems might try to buy Southern and Midwestern votes with protectionism, but you fail to consider whether Republicans might do so, although we have ample examples of this (eg Bush's steel tariffs). Do you have any evidence or theories as to why the Dems would do this more than the Repubs (thus making them better free traders)?

Thorley: Thanks for the non sequitur; if you want to make a generalized post about why you don't like Lieberman, maybe you could find someplace more appropriate.
Also, to proceed from a single datum (ie Kerry voted for the farm bill) and conclude that therefore he must be worse than Bush on trade (for whom we have several non-free-trade data points, including the farm bill) demonstrates that your logic needs a little polishing off.
Im open to the argument that Bush is at least as good a free trader as X, but you should supply an actual argument, rather than merely pointing out, as you did above, that none of the Dems have perfect records.

Buehner: See RC; when your theory (Dems don't balance the budget) runs contrary to the facts (Clinton balanced the budget), you should reexamine your theory, and perhaps refine it. And examine your heart of hearts isn't exactly a compelling argument in favor of anything one doesn't already believe.

Wu

posted by: Carlteon Wu on 11.12.03 at 12:47 AM [permalink]



Carleton Wu wrote:

Thorley: Thanks for the non sequitur; if you want to make a generalized post about why you don't like Lieberman, maybe you could find someplace more appropriate.

Thank you for beginning your post by substituting rudeness and a strawman for an actual argument. It makes taking you down a couple of notches that much more fun.

Also, to proceed from a single datum (ie Kerry voted for the farm bill) and conclude that therefore he must be worse than Bush on trade (for whom we have several non-free-trade data points, including the farm bill) demonstrates that your logic needs a little polishing off.

Actually it looks like your reading skills might be what needs polishing off. Go back and read my post and you’ll note that I said that unless he voted against it Kerry (as well as Lieberman and Edwards) were just as guilty as Bush when it came to the farm bill (which the prevailing wisdom seems to consider a form trade of protectionism). I said nothing to imply that that vote in and of itself representative of whether a candidate was better or “worse” than Bush on trade merely to point out that Bush is not the only candidate who is culpable for that horrible policy.

Im open to the argument that Bush is at least as good a free trader as X, but you should supply an actual argument, rather than merely pointing out, as you did above, that none of the Dems have perfect records.

Actually I gave at least two examples in my earlier post of how Dean was worse than Bush on trade and pointed out that the only positive Lieberman seems to have over him on trade is steel tariffs. While I concede that point (assuming Lieberman does not follow his past history and flip-flop on that as well should he become a plausible candidate), I do not consider it sufficient to mitigate against his other horrible economic policies which are far more damaging than the steel tariffs. Unless one of the other Democratic contenders has decided to come out against those tariffs that I am unaware of, it looks like Lieberman is the only candidate who might be better than Bush but only on the matter of supporting freer trade.

posted by: Thorley Winston on 11.12.03 at 12:47 AM [permalink]






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