Friday, January 27, 2017

Some trade is better than no trade, so...

...the more trade, the better. That has actually been the official position of the US government, along with much of the West, since WWII and the Bretton Woods conference that led to the creation of the IMF, World Bank, the Global Agreement on Tariffs and Trade (GATT) and later the WTO. That effort was spearheaded by John Maynard Keynes who decried the restriction of global trade during and after WWI in his Economic Consequences of the Peace. I'm going to write a few posts on the benefits of trade and the dangers of logical inconsistency and political posturing on the issue. Adam Smith may have fired one of the most well-defined blows against Mercantilism over 200 years ago, but Mercantilism always finds a way to rear its head.

I don't blame Progressive voters if they were confused a little yesterday. Nobel Laureate and self-proclaimed Progressive economist Paul Krugman, who has used his column in the NY Times to criticize the TPP and conservative commentary on issues such as free trade, yesterday suddenly lashed out at any talk of a tariff on Mexican goods:

Unfortunately, political campaigns over the last 30 years have devolved into arguments that capitalize on mercantilist ideas, and the Left's attack on Republicans for "outsourcing jobs to ______" (first Mexico, then China, etc.) are now embraced by a President who states that these countries "steal our jobs."  Arguments that are politically expedient, convincing voters that jobs are "lost" to trade, appear to not actually be believed by those who use them-- except apparently in the case of Trump. I believe Krugman is an example of one who may use the argument but understands its consequences, the same way he will talk about job creation under Democratic versus Republican presidents, even though he has written a book, Peddling Prosperity, about how such comparisons are nonsense.

President Obama's political advisor David Axelrod railed against Republican candidate Mitt Romney's support of trade in his memoir The Believer. Axelrod wrote that it was easy to characterize Romney as someone who "sends our jobs to China." Yet, President Obama supported trade deals like the Trans-Pacific Partnership that Progressives railed against. 2016 Democratic candidate Hillary Clinton held contradictory positions in her campaign. In her memoir Hard Choices, HRC wrote glowingly about her role in promoting entrepreneurship and greater trade with foreign countries while Secretary of State, but seemed to disown such talk as candidate, criticizing the TPP and joining the "he sends our jobs to China" rhetoric. Clinton summed things up quite honestly in remarks delivered in speeches that were in the Podesta email leaks (remarks from emails below unedited by me). She is against protectionism and for a hemispheric common market-- meaning no tariff barriers between countries in our own hemisphere:

*Hillary Clinton Said Her Dream Is A Hemispheric Common Market, With Open
Trade And Open Markets. *“My dream is a hemispheric common market, with
open trade and open borders, some time in the future with energy that is as
green and sustainable as we can get it, powering growth and opportunity for
every person in the hemisphere.” [05162013 Remarks to Banco Itau.doc, p.
*Hillary Clinton Said We Have To Have A Concerted Plan To Increase Trade;
We Have To Resist Protectionism And Other Kinds Of Barriers To Trade.
*“Secondly, I think we have to have a concerted plan to increase trade already under
the current circumstances, you know, that Inter-American Development Bank
figure is pretty surprising. There is so much more we can do, there is a
lot of low hanging fruit but businesses on both sides have to make it a
priority and it's not for governments to do but governments can either
make it easy or make it hard and we have to resist, protectionism, other
kinds of barriers to market access and to trade and I would like to see
this get much more attention and be not just a policy for a year under
president X or president Y but a consistent one.” [05162013 Remarks to
Banco Itau.doc, p. 32]
I highly agree with Secretary Clinton's statements above-- we need to resist protectionism and increase opportunities for trade. It would be good for Anti-Trump Progressive voters and Trump voters to understand why it is that liberals like Hillary Clinton and Paul Krugman can be supportive of trade and in opposition to tariff barriers with countries like Mexico. Gains from trade are theoretically sound and empirically proven.

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