Keep the Democrats Honest on Trade

Originally published October 21, 2008

           Obama and the Democrats are on a roll. Could be a landslide.  As for this swing voter, I am leaning Obama because of Sarah Palin, but probably won’t decide until I pull the curtain shut on November 4th and it’s just me, Obama and McCain. 

I understand the surge of support for the Democrats.  It makes sense.  They do government intervention well.  A deepening financial crisis is when government must act, so we need the Democrats now more than ever.  But please, when they take power, join me in holding their feet to the fire on trade.

The Republicans have been hamstrung by their ideology, their love of anything that looks like a market solution.  We need a government solution to a market failure.  Sure, a President McCain, who unlike Obama has a record of bipartisanship, could forge a coalition with Democrats and likeminded Republicans, not unlike what Paulson put together for the $700 billion rescue. However, McCain could be resistant to the kind of “bold, persistent experimentation” required.  A President Obama, working with large Democratic majorities, could enact a new New Deal.    

What worries me most about the Democrats is trade policy.  Free trade, pioneered by Britain in the 19^th century, has driven the greatest increase in prosperity and reduction in poverty humankind has ever known.  During the Great Depression, global trade collapsed. As the pain of the 1929 Crash was felt, governments failed to act jointly, pursuing instead “beggar-thy-neighbor” policies, including erecting trade barriers.  According to one estimate, global trade declined 33% from 1929-32, aggravating unemployment which was skyrocketing, and putting in peril capitalism and liberal democracy.  

Protectionist Republicans at the time passed the Smoot-Hawley tariff increase of 1930, with other governments following suit.  Totalitarian governments came to power overseas, sealing off their economies. Still, by 1934 the Democrats under FDR had the wisdom to begin reducing trade barriers in concert with America’s trading partners. 

So, I applaud the cooperation today among governments making economic policy. I applaud the coordinated bank rescues, interest rate reductions, and fiscal stimulus packages.  I applaud Bush, Paulson, and yes, Pelosi, Reid, and Mitch McConnell, but also Sarkozy, Merkel, Brown and other world leaders.  I applaud the fact that governments, so far, have not resorted to trade protectionism.

The bad news is that the Democrats of today in their mad dash to the White House and to larger majorities in Congress have left free trade twisting in the wind.

The Democratic presidential candidates earlier this year promised to scrap NAFTA and staunch trade liberalization in order to win votes in places like Ohio and Pennsylvania.  In these and other states, some industries have declined as our economy has been transformed from one based on manufacturing to one based on knowledge.  Renegotiating NAFTA, attaching environmental and labor riders to existing trade agreements, halting multilateral trade negotiations, opposing CAFTA with Central America and the Caribbean, killing the free trade agreement with our ally Colombia, imposing tariffs on China — these were the promises the Democrats made on the campaign trail and in the U.S. Congress. 

I was disappointed by Barack Obama’s remarks on trade Wednesday night in the final debate, which seemed a calculated sugarcoating of his protectionism.  Likewise, he parroted the defamation of the Colombian government found on AFL-CIO blogs dealing with the failed Colombia free trade agreement. 

Maybe Barack Obama, Pelosi, Reid, and bash-the-Chinese Chuck Schumer can wiggle out of this one after January 20^th.  I hope so.  Ohio ain’t gonna like it. 

The truth should be told in the Rust Belt, as John McCain did in Michigan.  Economic adjustment is inevitable.  For all the pain experienced in Midwestern factories, there has been gain in border areas trading with Mexico and Canada and in the knowledge-based industries located all across the country.  This includes Wisconsin, which has lost manufacturing jobs, but has also gained knowledge-based jobs due to its superior universities.  Sure, we should soften the blow of adjustment through job training, out-placement and an adequate social safety net.  And, education must be a top priority in the knowledge-based economy.  

The record of the Democrats on trade during the 20^th century was generally good. From FDR to Bill Clinton, free trade talks were pursued with vigor.  We have more to do, such as liberalizing trade in agriculture and services, protecting intellectual property, and bringing more countries into the global trading system. 

The Democrats today are confused.  They don’t want to oppose trade and be seen as protecting the privileged few.  So, they come up with a nifty construct: we’re for “fair trade.”  They propose attaching labor and environmental riders to free trade agreements in order to protect the poor from abuse and pollution.  In principle, it’s not a bad argument.  But it’s pure politics.  Some American labor unions seek to derail free trade agreements in order to protect their industries.  Environmental and labor accords may be better negotiated separately, rather than used to hold up trade liberalization. 

If the Democrats can accelerate trade liberalization while at the same time attaching labor and environmental protections, they should be supported.  But, my suspicion is that these are arguments designed to hamper free trade in deference to important Democratic constituencies.  

Now, I agree that trade policy should not be the sole driver of this election decision.  If it were, I would vote Republican.  However, if the United States does not lead on this issue, then the world could slip into another bout of protectionism, which (at the risk of sounding hyperbolic) could threaten civilization as it did in the thirties.

            I believe it is time for Responsible Centrists to keep the Democrats and Republicans honest.  There has been a lot of negative campaigning.  Passions are running high.  We should all calm down a bit.  Obama and the Democrats look set to win, and win big, but please, let’s put their feet to the fire on trade.