Principled trade

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principled-trade

The failed Doha Round has set an uninspiring precedent for world trade policy as we encounter a global recession. The next important chapter on this matter will be the U.S. Presidential election. The McCain-Obama debate is one that divides the ASI office, but when it comes to trade, it's clear that McCain has the better policies.

Though Barack Obama asserts foreign trade is paramount to stimulating the American economy, he talks of only doing so to support American jobs. While this is an obvious attribute to desire, his populist rhetoric over the last 8 months (i.e. condemning NAFTA) leads me to believe his short-termism may shine through, and he will be too ready to adopt a protectionist and insular policy. He made this patent in the unpassed Patriot Employers Act which he co-wrote in 2007. In it, Obama attempts to use tax credits to coax American firms into increasing the ratio of workers in the US to workers outside of the US. By distorting the market, he would prevent American firms from hiring labour in countries that have the comparative advantage.

At the same time, Obama supports the subsidising of corn-based ethanol, which has been a significant factor in the escalation of food prices. John McCain, by contrast, has long been sceptical, and opposed the $300 billion farm bill approved by Congress this year. It was government intervention such as this which deterred India and China from making concessions at the Doha round after all.

McCain has even earned the praise of Karl Rove, being called ‘gutsy’ for championing the fundamentals of free trade in manufacturing states. For this principled position – at times when bashing trade would be politically expedient – McCain deserves our applause.