Are Democrats worried about trade diversion & stumbling blocks?

Dr. Menzie Chinn of Wisconsin-Madison hypothesizes that Democrats may have opposed FTAs not because they have protectionist sentiments, but because they prefer multilateralism:

In the wake of the midterm elections, and the failure to renew Vietnamese PNTR, there has been a lot of talk about how more protectionist Democratic lawmakers are…While the rhetoric from some quarters of the Democratic Party is more protectionist than from the Republican Party, I think the story is a little more complicated than initially appears to be the case, although I will not claim to have the answer to the question…

[I]t’s wrong to equate all FTAs with freer trade. Indeed, the proliferation of FTAs poses a number of well-known problems for the global economy…

So, just because American business interests favor these pacts, while labor often opposes, it’s not clear free trade is enhanced by such initiatives; in other words, one should not confuse export-oriented mercantilism with support for free trade…

In this context, it’s of interest to note a paper by Evenett and Meier; they document that many of the pro-bilateral trade agreement incumbents that lost their seats were replaced by skeptics of such agreements. However, interestingly, such skeptics were not similarly skeptical of multilateral trade agreements, such as the Doha Round.

So, the question comes down to [1. trade creation vs diversion 2. stumbling vs building blocs]…

It’s not enough to promote the trade agreements in order to be pro-free trade. One has to implement measures that will sustain an interest-group coalition that will continue to support globalization into the future. Such coalitions must be more durable than the ephemeral political coalition constructed, say, by trading off (steel) protection for TPA; rather, it needs to be one where support for globalization is built upon a recognition of gains — and a safety net that reduces the risk to labor of losses — arising from increasing trade.

So do Democrats favor multilateral trade liberalization to FTAs because they’ve learned a lot from Jagdish Bhagwati? I doubt it.

First, Evenett and Meier use votes on PTAs as their measure of trade skepticism because there hasn’t been a WTO pact on the table since 1994. Democrats haven’t had a chance to vocally oppose multilateral negotiations. Who would waste energy attacking a trade round that isn’t going to be completed for a number of years?

Second, the last time a Democrat attempted to bring up labor standards at the WTO, it basically ended the negotiations. Repeating that error would be silly. Democrats are able to include labor and environmental standards in PTAs because the United States has significantly more bargaining power in a bilateral setting. Bhagwati:

[T]he popularity of the PTAs in the United States… is largely due to the fact that all sorts of lobbies, whether intellectual-property rights or financial sector or labor groups or environmental groups, see the bilateral framework where the United States, a gigantic power, can face down a small power like Chile or Morocco as an ideal framework of trade negotiations where, in exchange for preferential entry into the big United States market, they extract all kinds trade-unrelated concessions desired by these lobbies. And nearly all of these concessions are harmful to the trading system and to the smaller countries!

Senator Chuck Grassley may understand and appreciate the negative impacts of bilateral PTAs upon the multilateral trading system, but I don’t think that Professor Chinn’s line of reasoning matches the motivations of the typical Democratic opponent of PTAs.

1 thought on “Are Democrats worried about trade diversion & stumbling blocks?

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    Democrats, trade protectionism and Latin America

    In light of the most recent US elections, many have been questioning what a win for the democrats will mean for US trade policy. The Washington Post’s Sebastian Mallaby: The two parties have opposing attitudes on the subject of trade:

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