Race to the bottom?


One of the worst aspects of the Clinton–Obama battle for the Democratic presidential nomination has been the increasingly protectionist rhetoric coming from the candidates. Each seems desperate to appear more isolationist on trade than the other. This is a shame, because as this excellent new trade briefing paper from the Cato Institute points out:

[F]ree trade is a vital component for maximising economic growth. America's ongoing commitment to expanding trade – a commitment shared by previous Republican and Democratic administrations – has resulted in lower prices and greater product variety for consumers, job growth for exporters, and higher levels of productivity and innovation that increase prosperity in America and abroad. Accounting for the phases of the business cycle, indicators of American worker and household well-being and prosperity continue to improve. The decades-long decline in manufacturing employment (although not matched by a decline in manufacturing output) has corresponded with an increase in service-sector jobs, with a net 26 million new jobs added since NAFTA took effect in 1994, and an increase in real compensation of nearly 23 percent.

What makes it worse is that I'm sure Hillary Clinton and Barack Obama both know this. After all, Bill Clinton was an enthusiastic free-trader who passed the now much-maligned NAFTA (don't forget, Hillary was a 'key part' of that administration...), while Barack Obama's advisers told Canadian diplomats that his protectionism "should be viewed as more about political positioning than a clear articulation of policy plans." Perhaps whoever wins will swing back to the centre once the primaries are over, but I wouldn't want to bet on it.