Democrats against the world

I wrote a week or so ago about the trade policies of Richard Gephardt, who astonishingly is seen as one of the mainstream candidates for the Democratic presidential nomination. It's getting serious.

Four years ago the Gore-Lieberman ticket campaigned on a platform that had a non-serious approach to trade. It stated:

Trade has been an important part of our economic expansion - about a third of our economic growth in recent years has come from selling American goods and services overseas. There is no doubt that with trade - and with investments in giving American workers the skills they need - we can out-compete workers anywhere in the world.

It's clear we live in a globalized world - and that there is no turning back. But globalization is neither good nor evil. It is a fact - and we have to deal with it. Democrats believe we must be leaders in the new global economy, not followers. We believe that globalization will work for all Americans only if there are rules of the road, as in the domestic economy, that promote both a strong economy and our basic American values.

We need to make the global economy work for all. That means making sure that all trade agreements contain provisions that will protect the environment and labor standards, as well as open markets in other countries. Al Gore will insist on and use the authority to enforce worker rights, human rights, and environmental protections in those agreements. We should use trade to lift up standards around the world not drag down standards here at home.

On the face of it, it's downright alarming that the Vice-President in an administration that, after an initial ill-advised foray into strategic trade policy, had a highly creditable record on international economics should be under the impression that the task of trade is to 'out-compete' other countries. Competition takes place between companies, not nations. Trade is not a zero-sum game: it's a mutually enriching exchange that allows gains in living standards through each country's being able to specialise in what it produces. But Gore knows this, and the most likely explanation for the appearance of this passage in the Democrat programme was its role as a talisman for party activists (especially among organised labour). Linking trade to labour and environmental measures performs much the same role in Democratic politics as opposition to abortion plays among Republicans. It is an issue on which activists feel very strongly, and no responsible administration will legislate in the way that party activists desire.

This time it's different. With one noble exception, the Democrats are out-bidding each other in opposing trade agreements worthy of the name. Lamentably this is a major issue in the Iowa campaign according to Associated Press:

Democrat Dick Gephardt has stepped up his criticism of Howard Dean, accusing his chief rival of favoring deep cuts in health programs and bad trade policies.

The Missouri congressman, who's in northern Iowa today, says Dean would have pushed through cuts in Medicare costing average taxpayers thousands of dollars. During a stop in Britt, he also said Dean would have backed trade policies that have sparked "a race to the bottom.''

Richard Gephardt is too far gone on this issue to care, but the other candidates ought to pay attention to an article by Michael Kinsley in Slate last week. Kinsley coins the useful term 'Free Trade Butter'. This has nothing to do with trade in dairy products: a Free Trade Butter is a politician who prefaces his remarks, "I support free trade" and immediately follows it with the word "but". As Kinsley notes:

Almost everyone acknowledges some exceptions to the general rule that a nation is better off if it doesn't try to tell its citizens what they are allowed to buy from or sell to foreigners. A free trade butter (FTB) is someone whose exceptions take a big bite out of the rule itself.

It's a matter of incredulity and even distress to me that, with the exception of Joe Lieberman (whom I admire and whose political location on the Right-wing of the Left is where I also stand), every one of the candidates for the Democratic nomination - the supposedly mainstream and the undeniably flaky alike - is a Free Trade Butter. Discounting the fringe candidates, the one I hold in greatest contempt is Gephardt, for a reason that Kinsley - whose article is not entirely accurate, but is exactly right in this respect - nicely encapsulates:

[T]he effect of a "level playing field" rule—blocking imports that weren't produced in accord with American-level regulatory standards—will not be to make jobs in poor countries as well-paying, safe, and good for the environment as jobs in America. The effect will be to wipe out those jobs.

And that is not just the effect of the "level playing field" concept. It is the very purpose. "Level playing field" advocates—including, most prominently, the labor unions—say that it will prevent American jobs from being stolen. Another way to say this is that it will prevent jobs in poor countries from being created. Essentially, the "level playing field" concept forbids poor countries to take advantage of their poverty. When poverty is their main asset, this is no favor.

Not only is it 'no favour': it's morally reprehensible. No party of the liberal Left should regard it with anything other than the deepest distaste. The sight of Democratic politicians - with, as I say, the one outstanding and honourable exception, who thus has no chance of winning the nomination - vying with each other to see who can proclaim fidelity to the 'level playing field' the loudest is a betrayal of liberal internationalist principles, which the Democrats once stood for.

ADDENDUM: Brad DeLong succinctly states both the rationale and the defects of the type of strategic trade policy that was widely popular but sensibly rejected in the early days of the Clinton administration:

[A] strategic trader [is] someone who believes that the government, by imposing selective tariffs and quotas in the interest of important and strategic industries, can "pick winners" and shape the distribution of industries across nations in such a way as to ultimately enhance productivity.

Back in the Clinton administration, we economists spent a lot of time arguing against this strategic-trader belief: we argued that the U.S. government lacked the analytical capacity to make such judgments, that the U.S. political process was much too subject to industry lobbying for the government to be able to make good trade-industrial policy even if it did have the analytical capacity, and that the consequences of attempting such policies would be disastrous for world economic growth--that even if we did manage to grab a slightly smaller share of the surplus from world trade, the fact that we were endorsing beggar-thy-neighbor policies meant that others would as well, and that the size of the pie would shrink much faster than our relative share of the pie would grow.

By and large, we prevailed. And I think the expansion of world trade and the benefits to the U.S. of participation in the international division of labor have shown that we were right.

Amen to that. Yet the current popularity of protectionism (for that is what it is) among Democratic politicians lacks even the theoretical case behind strategic trade policy. It's a form of nativism, and it doesn't belong on a civilised liberal-Left.

Comments

[back40]

Well said.

[john s]

Please come and comment over at Crooked Timber; the same issue is being discussed as a result of an article by Nicholas Kristof in the New York Times. I'm a bit lonely trying to make the same point you make here.

[axiom]

The Iowa Caucus, Democratic Face Off and Liberalism used to accompany eachother every 4 years, but with Unions seeing power dwindle to a meager 10% of the labor population the issue of protectionism, 'fair trade' and isolation are increasing the factor for the Democrats. I like to defer to George Will on the issue of trade and how Conservatives were wrong about the issue of free trade yet as a whole Conservatives have come around to see the obvious benefits of free trade.

Gephardt has moved towards the protectionist view because his base IS the big unions. In the Midwest especially, the unions wield adament power. It's not quite the unchallenged power of the past when unions represented 60% of the American Labor force, but it's still formidable to elevate a candidate such as Dick Gephardt.

Between Dean and Gephardt they have quite similar views on trade; both want 'fair trade'. Dean tried to define it after a recent speech to a questioner by describing 'fair trade' like so.

I'm paraphrasing from memory, but this is pretty accurate.

"Here's what I'm proposing. I'm proposing a trade policy that protects workers rights, environmental rights and a living wage. There are consequences such as an increase in the costs of goods on the shelf, but the benefit is that moving operations or manufacturing overseas won't look as appealing due to the new regulations that other nations would be required to enact."

In reading Dean I see it like this. Other nations can put their people into mass graves, but if they dare do a thing to labor rights or environmental rights well then the US isn't going to trade with them. This stretch is really an attempt to put Deaniacs in a fit so I can get a clear cut answer as to how Dean would handle Iraq differently.

[rob]

The Guardian leader 17/1/04 sees Bush's faults & Democratic candidates' virtues in the following light -

"But a readiness to pursue a more collective, more respectful, less confrontational, less obviously self-interested approach to global issues"

The Guardian in their eagerness to oppose Bush have not noticed the anti-free trade stance of Dean, Gephardt & co.

[Scott]

I'm afraid that the world seems poised to enter another round of protectionism; led, once again by the U.S.A. It just seems to be where the political winds are going. A close relative who runs an economic survey agrees. It's not a sure thing, but I'm afaid of the passage of some legislation akin to the Taft-Hartley act that would lead to protectionist barriers accross the board and economic stagnation. (My worries are somewhat selfish, I'm entering my wealth building years, but either way such events would not be a good thing).

[Simon]

I am afriad that no one can win the Iowa, South Carolina and other primaries without some gesture towards protectionism. It is clear that Gephardt is by far the worst of them. The Slate article is also very good. However, it is worth analysing their views BEFORE embarking on the campaign trial to see perhaps more realistic views (Dean supported NAFTA, Clark spoke forcefully for Free Trade). Bush's treat to ruin the WTO and retreat to bilateralism, with favourable terms for those who support his wider agenda, is only made to look sane when confronted by the worst of Gephardt's lunacy.

[JK]

Gephardt is not in practice taken that seriously as a candidate. See the price quote over time for his candidacy on the Iowa Electronic Markets:

http://128.255.244.60/graphs/graph_DConv04.cfm

[greeneyeshade]

scott,
good post, but the protectionist law you mean is smoot-hawley; taft-hartley was about labor unions.

[Scott]

"'Level playing field' advocates—including, most prominently, the labor unions—say that it will prevent American jobs from being stolen. Another way to say this is that it will prevent jobs in poor countries from being created."

It's this simple: why should a job in one country be lost so that a job can be created in another country? What obligation does the US have to the world that is so important that it must allow its own citizens to be deprived of jobs so that someone overseas can have one?

Is this just down to the have-nots drowning out the voices of the (for the time being) haves or is there some silver lining for the recently fired American employee in this picture that I am missing?

I'm not saying free trade is good or bad, just raising a very simple point -- one which I have yet to see any Gephardt opponent / anti-anti-free trader / etc take the time to respond to. It was one thing when it was just textiles jobs that were headed overseas, but now it's the tech sector, and that's going to hit a lot closer to home with anyone who dreamed of hopping on the PC/e-gravy train of the 80s and 90s, once it gets up to speed.

I can almost guarantee you this is why politicians seen to be protecting -- by any means, right or wrong -- American jobs, will gain votes even if they otherwise don't appear to offer anything else of any merit. I voted for Bush Jr in 2000 mainly because he was suggesting the budget surplus be "returned" to the taxpayer -- I didn't care too much about the exact details, I just wanted that issue to have a big part in the national dialogue, ie I was sold on one issue that I considered that important.

If the democratics ever wake up to it, this is probably the one issue (with the right marketing) that could rival terrorism in the eyes of the average American voter, and give them a decent shot at reclaiming the White House.

[Ryan]

"Trade is not a zero-sum game: it's a mutually enriching exchange that allows gains in living standards through each country's being able to specialise in what it produces."

I'm surprised noone has challenged this. As you may be aware, I am not an expert in economics. Nonetheless this sounds like a ridiculous statement. Trade will ideally be a mutually enriching process, sure. But sometimes you get ripped off, no? Sometimes a country like vietnam starts selling a whole load of coffee on bad IMF advice, and there's a glut in the coffee market, and prices plummet, and this is enriching for consumers of coffee and enpoverishing for producers of coffee.

Sometimes countries aren't able to specialise in what they have a competitive advantage in, for example when the US/UK floods the developing world with agricultural products and erects tarrifs. It's still trade, if not 'free' trade. So I dispute your claim that trade is a mutually enriching exchange.

Go ahead Mr Kamm, sneer at my ignorance, I thought I'd rattle the cage anyway.

PS: Gore and Leiberman wanted to protect the environment and labour standards? No way! What fools! If we insisted that products were built in factories with a fire escape, then the poor would never escape from poverty! -he writes with sarcasm.

[JK]

"Gephardt is not in practice taken that seriously as a candidate".

Just a few hours later and he's already out of the race altogether. I rest my case.