Wednesday, March 05, 2008

Obama's NAFTA Problem

Obama's NAFTA problem has become highly amusing to me. I wrote earlier of Obama's transformation into an anti-NAFTA crusader just in time for the Ohio primary. Understandably, the Canadian government was quite concerned about the potential leader of their largest trading partner reneging on our trading agreement. So the Obama camp sent his economic advisor Austan Goolsbee to reassure them that this is all just campaign rhetoric and that Obama has no crazy plans to change NAFTA. This soon leaked to the press. The memo reported that "He (Goolsbee) was frank in saying that the primary campaign has been necessarily domestically focused, particularly in the Midwest, and that much of the rhetoric that may be perceived to be protectionist is more reflective of political maneuvering than policy."

It is a relief to hear that the the Obama camp may have some understanding of the benefits of free trade to our country. This story also shows that Obama is perfectly willing to mislead the American people to get votes, even by promoting policy that he knows is bad for our country.

Fareed Zakaria exhoriates both Clinton and Obama for their protectionist rhetoric in his most recent column in Newsweek. Please read the whole thing, it's great. Highlights:
...The two Democratic candidates are united in the view that one of the big benefits of electing either of them would be an improvement in America's reputation and relations with the world. Hillary Clinton promises to send special envoys to foreign capitals the day after she's elected. Barack Obama offers to reach out to America's foes as well as friends. Unfortunately none of this will matter if they continue to spout dangerous and ill-informed rhetoric about trade.
The facts about trade have been too well rehearsed to go into them in any great detail, but let me point out that NAFTA has been pivotal in transforming Mexico into a stable democracy with a growing economy. And, in Lawrence Summers's words, '[it] didn't cost the United States a penny. It contributed to the strength of our economy because of more exports and because imports helped to reduce inflation.' Trade between the NAFTA countries has boomed since 1993, growing by about $700 billion. There are no serious economists or experts who believe that low wages in Mexico or China or India is the fundamental reason that American factories close down. And labor and environmental standards would do very little to change the reality of huge wage differentials between poor and rich countries' workers.
But both candidates surely know that no one is really paying attention to their policy papers on the topic. It is their general attitude and rhetoric that matter. And on this crucial topic they are pandering to the worst instincts of Americans, encouraging a form of xenophobia and chauvinism and validating the utterly self-defeating idea of protectionism.

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