Tuesday, March 22, 2016

Hillary’s Cave-in to the Left on Free Trade

The New Jersey Star-Ledger last fall chastised Hillary Clinton for her failure to take a firm position on global trade, in particular her stance on President Obama’s Pacific trade pact, which suffered a defeat at the hands of the Senate on so-called fast track authority, mainly due to Democrat opposition. (Clinton has since come out against the pact.)

To its credit, the Star-Ledger is pro-free trade. But Clinton, whose husband pushed through the North American Free Trade Agreement (NAFTA) in the 1990s, may be hesitant to take a stand in the face of primary opposition from the protectionist Bernie Sanders. The Star-Ledger asks, “Hillary Clinton, where are you hiding?” In Hillary's dodge on trade dilemma, the Star-Ledger explains the mutual benefits of free trade to trading countries, but also stated that “the concerns raised by reluctant Democrats are valid.” It also noted what it called “a dark side to globalization, too. American manufacturers have moved millions of jobs abroad since trade began to boom in the 1970s.”

The Star-Ledger also supports fast-track authority, which has been granted numerous times in the past to presidents of both parties, for Obama. Fast track authority “bars Congressional amendments to negotiated deals, [and] force[s] an up or down vote. That's a practical necessity. If Congress fiddles with the terms, other countries would as well, and negotiations would never end.”

I left these comments:

I agree that reducing political impediments to international trade is a major economic imperative. I would also argue that it’s a moral imperative. Americans have as much right to trade with people across national boundaries as New Jerseyans have to trade with Minnesotans, or Newarkers have to trade with Camdenites. Trade is a win-win, wherever it takes place.

But I take issue that the movement of manufacturing jobs abroad “is a dark side to globalization.” This narrow view ignores context. As Bastiat observed, a good economist takes into account not only what is immediately visible, but also secondary effects that are not seen but are just as real.

For example, the reduced cost of imports lowers the cost of living, thus raising the standard of living of Americans, particularly lower income Americans. The extra money Americans have to spend due to savings from the lower prices of the imports then fuels growth in other domestic industries, offsetting job losses with more hefty job gains elsewhere. The added spending power of Americans helped fuel the technology revolution. Furthermore, it’s not a one-way street. The  “offshoring” trend of U.S. jobs is beginning to reverse, thanks to the American-led Second Industrial Revolution and the trade-induced growth of prosperity abroad. Last year [2014], more jobs were brought into the U.S. than left. Obama’s Pacific free trade pact will accelerate that trend. Market forces are dynamic. The overall impact of free global trade is people around the world getting better together.

On the big picture, though, I agree with the editors here. Hillary is the best 2016 candidate the Democrats have [or, more accurately, the least bad]. It’s a shame she’s kowtowing to protectionist demagogues like Elizabeth Warren and Pat Buchanan. Protectionism violates Americans’ individual rights to spend and invest their money as they see fit, and makes us generally poorer. Hillary needs to step up and tell us where she stands on the issue of global trade.

Free trade is often an easy scapegoat for politicians who ignore the responsibility of bad domestic political policies for America’s economic problems. E.G.:

  • The housing boom, bust, and related financial crisis and Great Recession and the consequent huge misallocation of human and capital resources into housing-related industries at the expense of other sectors—the primary cause of which was the Fed’s easy money policies and the Clinton/Bush “affordable housing” crusade.
  • The huge expansion of the regulatory welfare state in the past 15 years.
  • The highest-in-the-world corporate income tax, coupled with the fact that the U.S. is the only major industrial country to tax overseas earnings of domestic corporations. This is keeping U.S. capital locked up abroad, rather than reinvested in America.

All of this also coincides with reduced wage growth. Blaming global trade is short-sighted and narrow-minded.

Related reading:

No comments: