Sunday, August 03, 2008

Political Economy: Trade In the Old Model

John Cranford has an interesting column-trade in the old model...its worth a read!


Tuesday, July 22, 2008

comparing the US presidential candidates on trade, the optimist on trade

By Susan Aaronson

Published: July 22 2008 11:32 | Last updated: July 22 2008 11:32

Around the world, the press has portrayed the 2008 US presidential election as a choice between freer trader John McCain and “protectionist” Barack Obama. That traditional paradigm has helped the media simplify the differences between the two men. However, such these labels do not accurately describe either candidate. And it does not fully portray the candidate, Mr Obama, who has the more optimistic vision of trade.

The conventional wisdom labels Mr McCain as a freer trader because he supports three bilateral trade agreements negotiated by the Bush administration. Mr Obama, in contrast, has come out forcefully against these agreements. Moreover, because Mr Obama states that he wants to review the effects of existing trade agreements, the press has found him to be unenthusiastic about trade liberalisation. (It is important to note that the US is already conducting a similar review of the World Trade Organisation.) Finally, Mr Obama has support from many US unions, which traditionally have taken a protectionist stance.

In fact, both men are pro-trade; they each support using trade agreements to open markets and create economic efficiencies. But the two have different perspectives regarding what trade agreements should do, what rules these agreements should include, and whom these agreements should directly benefit.

Mr McCain sees trade as a means to the end of economic growth and trade agreements as simply economic instruments. He has said very little about how he would use trade agreements to address negative side effects of globalisation, such as pollution. Nor has he articulated how the US can ensure that the economic growth stimulated by trade is equitable. Beyond suggesting tax breaks for business, he has not explained how the US can ensure that companies remain in the US and continue to hire US workers, rather than rely on technologies to remain productive. To bolster his freer trade bona fides, he has stated: “Only risks to the security of our vital interests or egregious offences to our most cherished political values should disqualify a nation from entering into a free trade agreement with us.” But Mr McCain’s support for freer trade has limits – especially when important constituents are adamant about trade bans. As an example, he supports continued trade sanctions against Cuba and Iran and enhanced targeted sanctions against human rights abusing nations Zimbabwe and Burma.

Mr Obama, in contrast, is a trade enthusiast as well as a trade agreements reformer. He sees trade as a means to the end of enhancing human welfare. Thus, he has stated: “From financiers to factory workers, we all have a stake in each other’s success.” He recognises that Americans cannot succeed unless globalisation promotes greater access to resources and opportunities for more of the world’s people (our future growth markets). Mr Obama also believes that trade agreements are essential tools of global governance. He recognises that public concerns about trade are really concerns about inadequate governance – instances where our trade partners are unwilling or unable to adopt and enforce rules to protect workers, consumers and the environment. Demanding such standards in bilateral agreements will not alter global market conditions or empower all workers. Nonetheless, trade agreements can, if properly written, improve both the supply and demand for good governance at the national and international level.

Mr Obama also has put forth a consistently positive vision of the potential of trade to promote human rights. Many human rights activists think trade with human rights abusing regimes is a form of complicity that can indirectly perpetuate wrongdoing in countries such as Sudan. But Mr Obama has openly questioned this view, asking whether the US has more or less leverage with less commerce. He has argued that cutting off trade may not be the best (or only) strategy to bring democracy to Cuba or Iran.

Like Mr McCain, Mr Obama’s vision of trade has some inconsistencies. He has yet to reconcile his internationalist and co-operative worldview with his promises to Democratic special interests. In addition, he has relied on jargon such as fair trade, without defining such terms in a global context.

Press coverage and public rhetoric about trade lags reality. Clearly when we talk about trade agreements today we are talking about regulations that can affect productivity, investment levels, prices and other important economic factors. But trade agreements can also ensure that more people have access to more resources such as credit, education, safe food and healthcare as well as greater opportunities. While Mr McCain sees trade agreements as a means of increasing the nation’s riches, Mr Obama sees trade agreements as tools that can both empower individuals and help our trade partners improve governance.

Thursday, June 05, 2008


Senators Sherrod Brown and Byron Dorgan (and allied interests) have put forward a new trade bill seeking to remake how trade policy is made and which branch of government makes it. Most observers have described it as the triumph of Democratic protectionist interests. Instead, I think we should take a more nuanced view of this bill. It can be downloaded at

There are provisions that deserve support among trade liberalization proponents. For example, by requiring that GAO investigate the impact of key trade agreements, Members, staff, and negotiators as well as the public could gain needed insights into trade agreements upon America and Americans. GAO is also required to seek public comment and hold public hearings. Given American interdependence, it is in our interest to expanding the circle of those who influence and understandtrade policy.

At the same time, much of the proposals are troubling....Members are unlikely to approve such a bill given that it essentially requires the President to renegotiate (and therefore abrogate) existing agreements. Rather than keeping the Executive Branch on a tight leash, the bill proposes that Congress put him in a straightjacket.

The strategy underlying the bill is out of date and based on a flawed assumption. The sponsors of the bill ignore the reality that many of our differences with nations (over labor rights or food safety as example) stems from inadequate governance. Many of our trade partners lack the will, funds, or expertise to put in place stronger regulation and enforce it. Moreover, the bill does little to help policymakers abroad build a demand for higher labor or food safety standards. The drafters simply presume that demanding US determined standards will yield higher global standards. It puts forth no incentives to U.S. trade partners to put time, money or expertise towards higher standards.

Finally, in its demands that Congress create a committee comprised of the chairs and ranking members of each committee whose jurisdiction is affected by trade agreements to review the president’s plan for renegotiations; restore Congressional oversight of trade agreements, the bill seeks to alter the shared oversight put forth by the founders.

Simply dissing the bill and calling its proponents "protectionists" will do little to gain broader support for trade agreements or trade liberalization. Instead they should acknowledge that public and Member concerns about trade deserve both respect and additional fact-finding. It would be interesting if advocates of expanded trade picked up its call for GAO to develop further information on the impact of existing trade agreements. Proponents of freer trade should want to let the record of trade agreements speak-- in a comparison of jobs lost and gained, of benefits and costs to workers skilled and unskilled, and benefits and costs to American (and global) health, labor, consumers and taxpayers and to our polity.

I welcome your thoughts.

Sunday, March 02, 2008

There is no magic equation to build support for trade liberalization

In his Washington Post column,"Democrats Off course on Trade," at
Sebastian Mallaby argues that if the Democrats could be honest about trade's effect on jobs and link trade policies to wage insurance, all would be well.

I wrote to him that
share your dismay that the Democrats have become more critical of NAFTA and bilateral trade agreements. But I don’t think if we could provide wage and health insurance, we will have enough of a social compact to ensure support for trade liberalization. I think there is an additional problem, which stems from our failure to be honest about what trade agreements do. They no longer govern simply commercial policies; rather they govern many aspects of policies that were once solely the turf of domestic policymakers from procurement policies to health and safety standards. They are governance agreements (really global regulations) that facilitate trade and limit how and when policymakers can use domestic (and commercial policies) to distort trade. Thus, as you know, some Democrats truly believe that these governance agreements need to be linked to capacity building and strategies that bolster the demand abroad for good governance. Others take advantage of this rubric, but are really protectionist. I do not believe either Obama or Clinton are truly protectionist, but they need this groups support and these candidates remain fearful of being honest about what trade agreements do. If they were honest, they could make a better case for how globalization can be regulated so Americans of all class, education, etc.. can benefit.

Susan Ariel Aaronson, Ph.D.

Associate Research Professor,

Graduate School of Business and the Elliott School of International Affairs

George Washington University

Tuesday, January 29, 2008

the major Presidential candidates on trade and human rights

Summary of the implications:
1. All Democrats want to add labor rights and environmental standards to trade agreements, but have not pushed for such standards as central to WTO negotiations, despite labor rights negotiating mandate in TPA 2002. When candidates talk about trade, they are talking about bilaterals.
2. Despite press reports and description, no candidate can be described as “protectionist” populist, or a nationalist. Not one candidate has stated that trade is not in the interest of Americans or that trade agreements don’t benefit Americans by setting shared rules to govern globalization. These terms are too vague and have a political tint that doesn’t fit a world where protectionist tools can be health and safety standards or procurement rules. Instead, all the Democrats (and Huckabee) have stated they want a different approach and language in trade agreements.
3. Republicans with the exception of Huckabee say little about trade and question less. They do not campaign on trade as an issue.
4. No candidate has questioned/strongly criticized distinction between Bush Administration rhetoric on trade and reality of focusing on small country bilaterals (Korea is of course an exception).
5. Obama is the only candidate to consistently support trade as human rights enhancing—but with caveat that trade rules should be remade to include human rights/labor rights/environmental standards.
6. Each candidate touting fair trade has a distinct definition of what is “fair trade.” One man’s fair is another man’s protectionism.
7. All candidates have broken with Bush hope that trade will export democracy and freedom.
8. The Democrats all oppose Colombia, but they have not clarified when it is appropriate to use a trade agreement as an incentive to promote human rights. With the exception of Obama, all the candidates are quick to ban trade in the interest of promoting human rights. But none appear to have truly examined how to use trade to advance human rights at home or abroad.

email if you want the summary chart