Friday, October 5, 2007

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A small question about trade and parties

If you believe that trade liberalization benefits both the U.S. and global economy, which party is the party for you?

When I came of voting age, the answer was pretty obvious -- the GOP.

Now we live in a world where Obama's chief economic advisor is making more sense on the trade issue than rank-and-file Republicans. (both links courtesy of Greg Mankiw)

Obviously, it is slightly unfair to compare advisors with voters -- and the WSJ article linked above points out that the GOP frontrunners are still talking the talk on trade.

I'm beginning to wonder, however, whether either party will walk the walk.

Question to free traders -- which party do you think is likelier to promote trade liberalization?

posted by Dan on 10.05.07 at 11:48 AM


"Obviously, it is slightly unfair to compare advisors with voters"

Slightly? Give me a break. You're comparing apples to auto parts. Hell, you're not even comparing voters to politicians, but rather to a politician's advisor. Regardless of what Obama's advisor says, Obama voted NO on CAFTA.

What's pretty funny is a Democrat like Drezner trying to reconcile his own free trade views with those his party, which is manifestly anti-free trade.

posted by: A.S. on 10.05.07 at 11:48 AM [permalink]

A.S., prior to the Clinton presidency I would have agreed with you that the D party is "manifestly anti-free trade". Today, however, that statement is false.

Also, during a presidential campaign a candidate's advisors function as de facto spokespersons, so if an advisor says that the candidate likes free trade then it's safe to assume that the candidate likes free trade. If their prior voting record is otherwise then that is a manifestation of the phenomena generally known as "flip-flopping", which has been known to occur before among politicians.

posted by: Joel on 10.05.07 at 11:48 AM [permalink]

Post 1992, the democrats have had a clearly better record in practice.

posted by: Nicholas Weaver on 10.05.07 at 11:48 AM [permalink]

I hate to say it, but after watching the AFL-CIO debate, I worry about voting Democrat. I really just hope this is pandering to the base. I can't vote Republican, because they don't exactly have a coordinated plan on trade. Can't vote Ron Paul/Libertarian, because he claims "world governmental organizations like the International Criminal Court (ICC), NAFTA, GATT, WTO, and CAFTA are a threat to our independence as a nation" (from the website!). I can't even file a proper protest vote!

posted by: Dan M on 10.05.07 at 11:48 AM [permalink]

Will refers to Goolsbee's conservative colleagues at Chicago - I would regard most of his colleagues as classical liberals or libertarians. And none of them would say something as simple minded as a high tax rate is a "tax on going to college." Also, George Stigler was, like George Schultz, a professor in the GSB. The joint appointment in economics came later. One of my prize possesions is the 27 year old t-shirt I (and other GSB graduates) got with the picture of the very tall Stigler and very short Friedman walking down University Avenue. To get it, you had to listen to a hilarious pitch from Stigler as to why we soon to be alumni should donate money to the school (one part altruism, seven parts self interest) and then pledge. Almost the entire class turned up for the talk. Taking a class with Stigler was a different story - could be painful.

posted by: Martin on 10.05.07 at 11:48 AM [permalink]

Neither party will promote free(er) trade during the election cycle, but both will probably act to promote it post-election. What's worrisome is that Mrs. C. spouts hyperbolic rhetoric about curtailing the outrageous profits of US companies. What utter pandering BS. I wouldn't vote for any of the candidates from either party for bloody dog catcher! Frankly, I'm hoping Newt gets into the race.

posted by: Useless Sam Grant on 10.05.07 at 11:48 AM [permalink]

"[W]hich party do you think is likelier to promote trade liberalization?"

Uh, the Libertarian party.

Or the GOP, at least if Ron Paul gets the nomination.

posted by: VentrueCapital on 10.05.07 at 11:48 AM [permalink]

Parties talk on this issue. Presidents walk.

Congress will default to protectionism on behalf of organized interests unless these are opposed by other organized interests. Even if clashing interests block new protectionist measures, existing protectionism will remain in place unless a President who believes in trade liberalization, is willing to take risks on its behalf and has some measure of public confidence works out of the Oval Office.

President Reagan met all three conditions; the elder Bush coasted on Reagan's legacy. Clinton, following a pattern that defined his administration in other ways as well, took bold steps toward trade liberalization when he was least popular, early in his first term, and was much less active later. The fight within his party over NAFTA must have spooked him, because he never sought renewal of "fast-track" negotiating authority, essential to negotiating any significant trade agreement.

The younger Bush did get fast-track authority through Congress, with mostly Republican votes, and he has hired three successive Trade Representatives whose level of competence is well above the average for Bush's appointees in general. On the other hand he has not been interested or effective in making a public case for trade liberalization, and has been unwilling to attack even the most egregious protectionist barriers and trade-distorting subsidy programs, particularly in the agricultural sector. During most of his second term he has been too unpopular to advance the trade ball very much.

In fairness to his administration, Bush has also confronted a more complex negotiating environment than earlier Presidents, precisely because earlier trade agreements addressed most of the subjects easiest to settle. The United States' reluctance to liberalize farm trade has been much more than matched by that of Europe and Japan, for example.

Among the major candidates, John McCain is probably the one most inclined to promote trade liberalization. Romney, maybe, because of his business background. The others are creatures of the permanent campaign, without views of their own strong enough to outweigh clamorous groups of supporters opposing specific trade liberalization measures. They will support "fair, not free trade," and will fight no battles for trade liberalization, but except for Edwards will probably seek to avoid irritating wealthy interests -- like the tech and entertainment industries -- that rely on trade by promoting overt protectionist measures or the renegotiation of major trade agreements.

posted by: Zathras on 10.05.07 at 11:48 AM [permalink]

Which U.S. political party is free-trade? The one which actually reads modern macroeconomic theory, or read any of the books of the past umpteen Nobel Laureates in Economics. That would be...

posted by: a Duoist on 10.05.07 at 11:48 AM [permalink]

Zathras, I don't think Prof. Drezner wants that kind of serious analysis. (Because no serious person would compare poll responses to cryptic questions to the detailed exposition of a professional economist.) Just tell him, "You're right, professor, the Republicans are just as bad as the Democrats," so he can justify himself in nodding along with the faculty lounge conversation.

posted by: y81 on 10.05.07 at 11:48 AM [permalink]

As usual, the difference is one of constituencies. Republicans will never be free agricultural trade.

posted by: Lord on 10.05.07 at 11:48 AM [permalink]

At this point how signifcant an impact would it have on the United States if the US were to open itself further to trade? Aren't we pretty open today, indeed far more open than most countries? Tariff rates are uite low for most goods, many goods have no tariffs at all, and non-tariff barriers are relatively low in most sectors (with obvious exceptions such as some agricultural products, steel ...)

I do understand that it could be very beneficial to the US if other countries were more open to trade (esp. in services) and FDI, but that's not what I'm asking. How much would lower steel prices really help the US auto industry (defined either as US flag automakers or all automakers producing cars nt he US,m and including parts manufacturers) to either increase exports or reduce import share? etc. etc.

Given the size of the US economy and that imorts are now about IIRC 16% of GDP, how much bang actually is left in that buck?

posted by: Gene on 10.05.07 at 11:48 AM [permalink]

There is a divide in the Republican Party. The “Reagan Democrats” who make up a decent percentage of the rank and file switched because of other issues but brought a traditional democratic opinion on trade with them. So now most of the leadership is pro free trade and a good percentage of the rank and file is protectionist.

posted by: Hank on 10.05.07 at 11:48 AM [permalink]

Post 1992, the democrats have had a clearly better record in practice.

That's just not true. Bill Clinton was very free trade, but Congressional Democrats are horrid on the subject. When Clinton forced through NAFTA, it was primarily Republicans supporting him. And CAFTA was almost entirely Republican (although, to be fair, by 2005 when the CAFTA vote was held, Bush could have proposed to declare National Be Nice To Your Mother Week, and Democrats would have voted against him).

posted by: David Nieporent on 10.05.07 at 11:48 AM [permalink]

There is no free trade when there is intellectual property (which is an obvious government intervention in the otherwise free market).

I don't see any party proposing to dismantle intellectual property. "free trade" policians are about as honnest as 99% of "free trade" economists here in forgetting the biggest tarriff of all...

posted by: Laurent GUERBY on 10.05.07 at 11:48 AM [permalink]

Honestly, I really don't know. Unfortunately, I don't expect either party to promote trade liberalization -- I'm just hoping that inertia will prevent free trade from being rolled back.

posted by: Slocum on 10.05.07 at 11:48 AM [permalink]

I wonder the same thing as you. '08 will be a very interesting year, no?

posted by: Valley Girl on 10.05.07 at 11:48 AM [permalink]

Clinton did seek to renew fast-track. Gingrich insisted he deliver 100 dems (which would put about 20 dems in trouble back home). Clinton came close but couldn't get that many. Despite more than enough votes it never got to the floor. Trade has been a straight party line vote ever since then. Bush rebuked any attempt to build a consensus with moderate dems. Passed every trade bill by a narrow margin, just to prove to the business community that dems weren't really on their side. All the while putting in place special protectionist measures for steel states in true old-time McKinley fashion. Which was something Clinton never did.

And now we are stuck. The bi-partisan consensus in favor of trade is broken. The national consensus that it is generally a good thing is gone.

So the repub. base may be more sympathetic to trade (though the more nationalistic their message becomes the less that is true. Trade may soon be like immigration for conservatives, i.e. foreigners are all bad) but repub. leadership is so inept that they can't pass/negotiate anything of substance. Dem base generally opposes freer trade, but the leadership tends to lean in favor.

Trade ain't going anywhere any time soon.

Also, if you think anyone by Holbrooke will be SoS if the dems win, you are wrong. Don't doubt his desire for the job and his pull to get it. No one else has that.

posted by: RT on 10.05.07 at 11:48 AM [permalink]

Well, free trade is based on interlocking commitments and largely managed by agreements and a reasonably powerful international organization. The Republicans under GWB have spent considerable time and energy trashing the very idea that the United States has binding international commitments. Until Republicans disavow that strong thread of the present administration, hoping that they will push anything like freer trade is a fool's errand.

posted by: Doug on 10.05.07 at 11:48 AM [permalink]

Right now, I'd say the left is more likely to promote trade liberalization. The right is currently consumed with protectionism. However, in a few years, it could changed back.

posted by: Shawn on 10.05.07 at 11:48 AM [permalink]

Increased trade may enhance the US economy but it is punishing many US citizens.

(Shopping at Wal-Mart does not make up for losing a job and a pension.)

The losers from trade may not have direct access to the government and the media but they certainly are capable of showing up at the polls.

There is a huge gap between the elites in this country (especially tenured economists) and middle class white collar and blue collar workers.

Those who lose from increased trade may well outnumber those who gain, at least in the next generation or so. Unless you count cheap lead-coated toys from China as a gain to American workers.

posted by: save_the_rustbelt on 10.05.07 at 11:48 AM [permalink]

Interestingly, none of the commenters mention the rabid opposition to free trade by the unions, wo which the Democrat party remains a wholly owned subsidiary.

Save-the-rust-belt's comment of "Shopping at Wal-Mart does not make up for losing a job and a pension" reflects the nostalgia of a bygone era, when manufacturing reigned in the US with union shops. Never to return, STRB, and it's not Wal-Mart's fault/cause. No different than steamrolling supermarkets and returning to the corner grocery.

Ag free-trade? Unfortunately, not in my son's lifetime. Don't we all love to pay twice as much for sugar and subsidize the ethanol scamsters, whose production is so counterproductive, they don't save a hp of energy. Besides, the world loves paying more for food than they would otherwise.

posted by: John Corn on 10.05.07 at 11:48 AM [permalink]


I'm not nostalgic for anything, and I know globalization is going to coninue.

I do find it interesting that the great minds of political science and economics have missed something very obvious, some people lose from increased trade and the losers are not going to vote for more trade.

Also, politicians respond to voters - duh.

Apparently one can receive a PhD these days without comprehending Poli Sci 101 - the part about people voting their personal interests.

posted by: save_the_rustbelt on 10.05.07 at 11:48 AM [permalink]

STR, You're 100% correct on this, but you overestimate Prof Drezner. I think he slept through econ as well. Macro and micro. There are a number of models that predicted the harm to work-class Americans (notably Ricardo), and the macro data that we have in hand today confirms it. Still, the esteemed professor insists that globalization is a win-win.

posted by: OpenBorderMan on 10.05.07 at 11:48 AM [permalink]

I would think that if you hear people talking positively about "fair trade" that's a good bet they're against free trade.

I don't find it surprising that a lot of voters would be against free trade; a lot of voters are for an increased minimum wage too...

posted by: CJS on 10.05.07 at 11:48 AM [permalink]

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