Fred Bergsten thinks the US-Colombian PTA collapse is really bad:

Fred Bergsten, director of the Peterson Institute, said the consequences of the Colombia vote were “enormous” nevertheless.

“This is a calamity for the world trading system,” he said. “It undermines the whole basis for international confidence in the US as a trading partner.”

The decision to suspend the application of fast track was much worse than not having fast track authority at all, he said. It meant that no future fast track authority would be credible.

This is a classic moment from a few years ago, but I couldn’t find it in my archives, so I’m posting it again.

Jagdish Bhagwati in 2005:

I often say that, you know, we should never use the phrase “FTA,” free trade agreement, because politicians cannot go beyond a sound bite, which means they can’t read more than two words one time. So if they read “free trade agreement,” they’ll read only “free trade,” and so they’ll think it’s the same thing.

Tom Friedman in 2006:

Asked at a speaking gig, “Mr. Friedman, is there any free-trade agreement you’d oppose?” Friedman replied, “No, absolutely not,” adding, “You know what, sir? I wrote a column supporting the CAFTA, the Caribbean Free Trade initiative. I didn’t even know what was in it. I just knew two words: ‘free trade.'” (Um, dude, you also didn’t know its name: It’s the Central American Free Trade Agreement.)

Lane Kenworthy has a great post on why Democrats should embrace economic change, including globalization. It’s a long post that’s worth reading, but for those already intimately familiar with the economics and politics of trade, this is the punchline:

But once managed trade is introduced as an option, it ends up crowding out discussion of other approaches…

Neither Obama nor Clinton is likely to press for serious restrictions on trade or offshoring if elected president. This holds for most Democrats running for Congress too. But that isn’t the point. Even if they did follow through on a managed trade agenda, it probably wouldn’t have much impact on actual import levels. Pacts such as NAFTA seldom dramatically alter the degree of cross-border trade; had it not passed, imports from Mexico would not be much lower than they are today. The problem isn’t that managed trade rhetoric might lead to actual trade restrictions; it’s that it distracts from efforts to advance the scope and generosity of adjustment and cushioning policies…

My argument rests on a hypothesis that Democratic leaders’ trade rhetoric has a significant effect on the political feasibility of more generous and extensive social policies. I could be wrong about this. But given that any trade restrictions they might actually put in place would probably do little to stem globalization, it seems to me the potential costs of abandoning managed trade rhetoric are likely small.

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.

Willem Buiter and Anne Sibert say “Barack Obama’s proposal is reactionary, populist, xenophobic and just plain silly.”

Jagdish Bhagwati describes Obama as a saavy strategist:

Mr Obama has smartly seized John Kerry’s proposal to remove the incentive to invest abroad and has gone further by proposing that those who invest at home will be given a tax incentive. It is dubious that this proposal will survive challenges from existing bilateral and World Trade Organisation agreements, or can achieve much when other countries can do the same. It is exactly the sort of policy that a constituency fearful of losing jobs demands but, by meeting that demand, President Obama would be left free to abandon the anti-trade rhetoric and embrace the multilateral free trade that has served the American and the world interest so well.

But won’t publishing the machination’s workings in the Financial Times spoil the ruse?

HT: Muse

Clinton: “I will say to Mexico that we will opt out of NAFTA unless we renegotiate it.”

Drezner: “Democrats cannot simultaneously talk about improving America’s standing abroad while acting like a belligerent unilateralist when it comes to trade policy.”

No president will pull out of NAFTA. That would be an unmitigated foreign policy disaster. (It wouldn’t be an economic disaster, as the US already has low MFN tariffs on most products it imports from Canada and Mexico.) There simply won’t be a belligerent unilateral scuttling of our trade deal. On the other hand, diplomacy is about words, not merely actions. The neighbors may tire of being made scapegoats.

Drezner: “Scary fact of the day: the anti-NAFTA pandering is not the worst trade rhetoric emanating from the candidates. No, for that you’d have to turn to Obama’s co-sponsoring of the Patriot Employer Act — which Willem Buiter and Anne Sibert label, ‘reactionary, populist, xenophobic and just plain silly.'”

Pulling out of NAFTA may be worse. The Patriot Employer Act offers a voluntary tax break, not mandated protectionism.

Here comes the (academic) backlash! Lawrence MacDonald tires of the pandering in Ohio:

It was perhaps inevitable but it is nonetheless disappointing to see the Democratic candidates for president engaged in such energetic trade bashing… Of course the stakes are high in Ohio and Texas (and even in Rhode Island and Vermont, which also vote on March 4). But it is precisely when the stakes are high that we would hope that candidates for president show their mettle. Obama in particular tells voters he prefers truth-telling – pointing out to Detroit automakers the dire need for higher auto-fuel economy standards, for instance. It’s too bad that he and Senator Clinton aren’t giving us similarly plain talk on the challenges of globalization, and what should and shouldn’t be done about it. In recent years global trade has helped to lift 100 million Chinese from poverty—the greatest reduction in poverty in the history of the world—and through cheap imports helped to hold down inflation, too. Would America be better-off if this had not happened?

Over at Vox, Willem Buiter and Anne Sibert dissect Obama’s Patriot Employer Act:

If the Patriot Employer Act proposal is anything to go by, we are in trouble if Obama wins. The legislation would provide a tax credit equal to one percent of taxable income to employers who fulfill the following conditions:

· First, employers must not decrease their ratio of full-time workers in the United States to full-time workers outside the United States and they must maintain corporate headquarters in the United States if the company has ever been headquartered there.

· Second, they must pay a minimum hourly wage sufficient to keep a family of three out of poverty: at least $7.80 per hour.

· Third, they must provide a defined benefit retirement plan or a defined contribution retirement plan that fully matches at least five percent of each worker’s contribution.

· Fourth, they must pay at least sixty percent of each worker’s health care premiums.

· Fifth, they must pay the difference between a worker’s regular salary and military salary and continue the health insurance for all National Guard and Reserve employees who are called for active duty.

· Sixth, they must maintain neutrality in employee organising campaigns.

Only the last of these conditions does not raise serious issues…

Companies ought to decide the location of their headquarters and their domestic and foreign employment levels without being subjected to fiscal incentives. It is also unenforceable. Foreign branches of domestic companies, whose workers count as employees of the parent, would be changed to subsidiaries, whose workers no longer count as employees of the parent. Companies ever headquartered in the United States would be sold to shell companies or shut down and immediately reopened with a different name and legal identity, headquartered abroad. Let Commerce Department lawyers try to use corporate DNA fingerprinting to determine the ancestry of these new corporations! Unfortunately, idiotic legislation that is unenforceable is not harmless – it breeds contempt for laws and institutions…

The Patriot Employer Act seeks to transfer wealth from the truly downtrodden of the world to a limited number of favoured US workers: mainly those in once dominant manufacturing industries that have lost their global competitive edge. It is breathtaking hypocrisy to object to the often appalling conditions of work and employment in developing countries and emerging markets, including sweatshops and child labour, while at the same time trying to prevent the operation of the normal and effective mechanisms for remedying these deplorable circumstances: foreign direct investment, outsourcing, off-shoring and all other manifestations of free trade.

Sen. Barack Obama’s proposal is reactionary, populist, xenophobic and just plain silly. It is time for him to stop pandering and to show the world that hope and reason are not mutually exclusive. Instead of increased protectionism, the United States might increase its competitiveness by sensible investments in infrastructure and education.

Somehow I doubt these objections will alter the candidates’ campaign strategies.

Update: The Economist blog defends Obama: “This bill is much less bad than it could be, primarily because the restrictions it contains are optional… There is a case to be made that Mr Obama is the most economist-friendly candidate out there… This bill is bad, but it’s not dangerous. It’s far less offensive than many of the anti-trade, anti-immigration proposals seen elsewhere in the campaign.”

Andrew Leonard:

For the next two weeks, we can expect Obama and Clinton to trash NAFTA in Ohio while never mentioning it in Texas. Do we need a better demonstration of how tricky the politics of trade can be?

I’ve previously reported on speculations that Obama is more of a free trader than Clinton. At the Guardian, Daniel Koffler argues that friends of markets, domestic and international, should be attracted to Obama:

Obama’s language of personal choice and incentive is a reflection of the ideas of his lead economic advisor, Austin Goolsbee, a behavioural economist at the University of Chicago, who agrees with the liberal consensus on the need to address concerns such as income inequality, disparate educational opportunities and, of course, disparate access to healthcare, but breaks sharply from liberal orthodoxy on both the causes of these social ills and the optimal strategy for ameliorating them…

Goolsbee and Obama’s understanding of the free market as a useful means of promoting social justice, rather than an obstacle to it, contrasts most starkly with the rest of the Democratic field on issues of competition, free trade and financial liberalism…

Whereas Clinton has recently taken to pulling protectionist stunts and rethinking the fundamental theoretical soundness of free trade, and Edwards is behaving like the love child of Huey Long and Pat Buchanan, Obama instinctively supports free trade and grasps the universe of possibilities that globalisation opens up, and seamlessly integrates it into his “audacity of hope” theme. As he remarked in a recent debate: “Globalisation is here, and I don’t think Americans are afraid to compete. And we have the goods and the services and the skills and the innovation to compete anywhere in the world.”

At the moment, Obama’s and Clinton’s positions on trade are roughly equivalent – both deserve credit for taking initial steps toward dismantling the obscene US government-supported agricultural cartels – but the present dynamic is Obama moving more and more in the direction of economic freedom, competition and individual choice, and Clinton wavering if not moving away from it…

Perhaps it goes without saying that Obama’s belief in freedom in labour markets and freedom in capital markets, sets him apart from the Republican field as well as the Democrats. Under ordinary circumstances, one would expect Republicans at least to respect free trade, but alas, they are inconsistent at best. As for freedom in immigration, even in politically propitious times, the modern GOP makes tactical concessions toward its xenophobic wing; in this season of famine, the Republican candidates, even those who have supported immigration in the past, have set up their nominating contest as a race to see who can take the most thuggish and contemptuous possible attitude toward Mexicans (the euphemism for this posture is “out-Tancredo-ing Tancredo”).

Ironically, the nativist lunacy sweeping through the GOP underscores the conceptual connection between free trade and immigration, as mutually supporting pillars of economic freedom. Obama properly understands economic freedom as the best vehicle for accomplishing the historic goals of the left, which Irving Howe and Lewis Coser long ago described as wanting “simply to do away with those sources of conflict which are the cause of material deprivation and which, in turn, help create psychological and moral suffering.”

While this is encouraging, it’s hard to verify claims about candidates’ motivations. And how much sway does Goolsbee really have?

UPDATE: Emmanuel says Obama is tied to the usual protectionist lobbies: “Obama is as protectionist as they wanna be, especially on corn. His rhetoric and actions do not suggest otherwise.”