Thursday, March 6, 2008

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That's an.... interesting interpretation of recent economic history

Robert Lighthizer has an op-ed in today's New York Times that essentially argues that conservatives have a long tradition of trade protectionism that John McCain should embrace:

Free trade has long been popular with liberals, and it remains so with liberal elites today. The editorial pages of major newspapers consistently support free trade. Ted Kennedy supported the advance of free trade. President Bill Clinton fought hard to win approval of the North American Free Trade Agreement. Despite some of his campaign rhetoric, Barack Obama is careful to express qualified support for free trade, even when stumping in the industrial Midwest.

Moreover, many American conservatives have opposed free trade. Jesse Helms, the most outspoken conservative in the Senate for three decades, was no free trader. Neither was Alexander Hamilton, who could be considered the founder of American conservatism.

OK, this kind of argument requires a few mental gymnastics, but there is a patina of plausibility to this narrative. It's not the whole truth, mind you, but truth is contained in those paragraphs.

Then we get to these paragraphs:

President Reagan often broke with free-trade dogma. He arranged for voluntary restraint agreements to limit imports of automobiles and steel (an industry whose interests, by the way, I have represented). He provided temporary import relief for Harley-Davidson. He limited imports of sugar and textiles. His administration pushed for the “Plaza accord” of 1985, an agreement that made Japanese imports more expensive by raising the value of the yen.

Each of these measures prompted vociferous criticism from free traders. But they worked. By the early 1990s, doubts about Americans’ ability to compete had been impressively reduced.

Um.... wow, where to begin:
1) On what planet can voluntary export restraints be described as "working"? I mean, they certainly did work... in the sense that they encouraged Toyota and Honda to create luxury car divisions like Acura and Lexis in order to boost profits -- and make even further inroads into Detroit's market share. Most trade experts I know consider the VERs to be the single dumbest trade policy deployed in the last thirty years.

2) Which free traders opposed the "Plaza" agreement? Why would this agreement be seen as protectionist? Seriously, I want names. There was a general consensus in 1985 that the dollar was overvalued -- just like there is general consensus now that the yuan is overvalued (what to do about overvaluations is often a more contested issue).

3) On what basis can Lighthizer plausible claim that "By the early 1990s, doubts about Americans’ ability to compete had been impressively reduced"??!!! The early nineties was the peak of anti-Japan hysteria (go and read Rising Sun if you don't believe me).

Indeed, doubts about American competiiveness did not subside until the mid-to-late nineties -- after NAFTA and the Uruguay round of the GATT had been ratified.

The latter did not directly cause the former, of course -- robust economic growth is what alleviates public fears about trade. But if Lighthizer can make mendacious claims on the New York Times op-ed page (seriously, who fact-checked this piece of garbage?), then I get to do it on my blog.

posted by Dan on 03.06.08 at 08:17 AM


Best verbal spanking I've seen in quite a while. Well done, Dan!

posted by: Howard on 03.06.08 at 08:17 AM [permalink]

This clown should spend a few days in Ohio and Michigan.... taking the empty factory tour.

Then he should read McCain's comments in Michigan (McCain was more honest than Romney for certain).


posted by: save_the_rustbelt on 03.06.08 at 08:17 AM [permalink]

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