Obama on trade: An in-depth look

About a month ago, while the candidates were spending lots of time in Texas and Ohio, the economics blogosphere and press discussed Barack Obama’s views on trade liberalisation. Unfortunately, most of the analysis relied on inferring Obama’s views from his choice of economic advisers or legislative proposals. Moreover, political speeches tend to be short on details.

But there is one place where Obama has laid out his views on trade in detail: his 2006 book The Audacity of Hope. I haven’t seen anyone in the trade blogosphere take a serious look at it. On pages 172-176 (paperback edition), Obama writes:

CAFTA. Viewed in isolation, the agreement posed little threat to American workers — the combined economies of the Central American countries involved were roughly the same as that of New Haven, Connecticut… There were some problems with the agreement, but overall, CAFTA was probably a net plus for the US economy…

stronger labor protections… improved environmental standards… stronger protections for US intellectual property… Like most Democrats, I strongly support all these things. And yet, I felt obliged to say to the union reps that none of those measures would change the underlying realities of globalization… [T]hey won’t eliminate the enormous gap in hourly wages between US workers and workers in Honduras, Indonesia, Mozambique, or Bangladesh, countries where work in a dirty factory or overheated sweatshop is often considered a step up on the economic ladder…

And my union brothers and sisters would nod and say that they were interested in talking to me about my ideas — but in the meantime, could they mark me as a ‘no’ vote on CAFTA?…

As the pace of globalization has picked up, though, it’s not just unions that are worrying about the long-term prospects for US workers. Economists have noted that throughout the world — including China and India — it seems to take more economic growth each year to produce the same number of jobs, a consequence of ever-increasing automation and higher productivity…

We can try to slow globalization, but we can’t stop it. The US economy is now so integrated with the rest of the world, and digital commerce so widespread, that it’s hard to even imagine, much less enforce, an effective regime of protectionism. A tariff on imported steel may give temporary relief to US steel producers, but it will make every US manufacturer that uses steel in its products less competitive on the world market…

I told the President that I believed in the benefits of trade… But I said that resistance to CAFTA had less to do with the specifics of the agreement and more to do with the growing insecurities the American worker. Unless we found strategies to allay those fears, and sent a strong signal to American workers that the federal government was on their side, protectionist sentiment would only grow…

I ended up voting against CAFTA… My vote gave me no satisfaction, but I felt it was the only way to register a protest against what I considered to be the White House’s inattention to the losers from free trade.

I think we learn more from these pages than by other attempts to read Obama’s mind.

1. Obama is not a protectionist. Obama clearly understands the benefits of globalisation and the infeasibility of economic isolation. While he may not favor liberalisation at high speed, he would still infuriate real protectionists like Lou Dobbs.

2. Obama understands public opinion on trade. Obama realises that popular concerns about economic insecurity and income inequality are projected onto trade, even when trade itself is not the primary cause of such disruptions. This accords with the basic message you’d find from a pro-trade shop like the Peterson Institute.

3. Obama is a politician. In the end, Obama voted against a policy that he thought would be a net plus in order to signal his political commitments.

4. Obama is a politician. These days, Obama’s campaign website says that the candidate “will use trade agreements to spread good labor and environmental standards around the world and stand firm against agreements like the Central American Free Trade Agreement that fail to live up to those important benchmarks.” So much for “no satisfaction.”

5. Obama is not an economist. Expressing concern about productivity gains — “it seems to take more economic growth each year to produce the same number of jobs” — exactly inverts the view of economists, who see output and not input as desirable. This is an age-old fallacy.

Barack Obama’s views on trade are far from “reactionary, populist, xenophobic and just plain silly.” But they don’t inspire great confidence either.

1 thought on “Obama on trade: An in-depth look

  1. The Custom-House

    Obama Explains His Position on Trade to the AFL-CIO

    Obama addressed an AFL-CIO audience on a wide range of topics, including trade, on April 2 (Obama’s Remarks to the AFL-CIO). Here’s what he had to say:

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