Wednesday, June 22, 2011

More Commentary on the GOP Presidential Candidates, Trade and US Manufacturing Jobs

Last week I blogged on the GOP presidential debate in New Hampshire and the candidates' responses to a basic question on the decline of US manufacturing jobs.  Since then, several smart people have weighed in on the issue.  First,'s Simon Lester pointed out in the comments to my original post that Governor Pawlenty certainly isn't the only one who's been blaming trade for job losses:
Check this out from Romney the other day:

VAN SUSTEREN: The IMF is predicting that China's economy is going to surpass our own in the year 2016. First of all, how does -- what does that mean to us? What does that mean to the average American? How do we feel that? And secondly, why is China able to surpass us?

ROMNEY: China is able to surpass us in part because over last couple of decades, American policy has been so relaxed towards China. We've allowed them to manipulate their currency to make our products more expensive than theirs. And that has allowed them to come into our country and replace a lot of jobs in this country. …

We, frankly, have been turning a blind eye to China's policies with regards to our economy for far too long, and America has to get serious about saying, We want to make America the most attractive place for business in the world, not China. And the consequence of not doing that would be potentially seeing our standard of living decline and over time, seeing China build a military that could rival any in the world.

VAN SUSTEREN: How do we actually, though, turn that around? China is our bank. We owe them, you know -- you know, so much money that it's almost breathtaking. They hold more of our debt than any other nation. You know, what do we actually do to sort of turn that around so that they don't take our jobs, so that our dollars aren't going there to get their cheaper goods?

… you have to make it very clear that to trade with America on the most favored basis that you have to honor our laws. You have to allow your currency to float. You have to make sure that the products that come into the U.S. have not been, if you will, pirated through technology that's been stolen by various companies in China. We're going to have to be serious with China about enforcing our laws, enforcing agreements that are fair and free and not giving them the kind of free ride that they've had so far.
I'd argue that Romney's response isn't as bad as Pawlenty's comments in New Hampshire, but still, it's a good catch by Simon and, well... ugh.

Next, Dan Drezner expressed similar concerns about what was said - and not said - at the GOP debate:
In presidential campaigns, this amounts to "don't expect to see any new trade deals anytime soon." As for the other dimensions of globalization, well, peruse the section on immigration provided you have a green card if you dare. No one said anything about the positive economic and demographic benefits America receives from immigration.

The other thing that was striking was what wasn't said during the debate. All of the candidates focused like sharks with frikkin' laser beams attached to them on the economy. The standard GOP litany of solutions for jump-starting the economy were offered: tax cuts, cutting regulation, tax cuts, cutting government spending, tax cuts, reigning in the Fed, tax cuts, ending Obamacare, tax cuts. Not one of the candidates, however, mentioned trade liberalization as part of their fornmula for getting America moving again.

To be fair, this isn't as bad as when Obama and Clinton were debating over who would eviscerate NAFTA faster in 2008 (and funny, isn't it, how that never happened). And it's not like I was a huge fan of Obama's trade policy. To be just as fair, howeever, at least the current president completed KORUS negotiations and signaled strong interest in the Trans-Pacific Partnership. I get the sense that no one in the GOP field is going to stick their neck out on international trade or investment. For the party that claims to be in favor of lower taxes and regulation, this is a travesty.
I commented on Dan's post when it was published, and I always refuse to admit I'm wrongtry to be consistent, so just I'll be lazy and just repeat my instant analysis here:
I think you're right to be concerned about Pawlenty's statements and the other GOP candidates' silence in the NH debate (hence, why I blogged about it).

However, I think you got two things sorta-wrong here:

(1) I wouldn't oversell the NH debate too much, especially as a forecast for any future GOP president's support for new FTAs or trade more generally. Almost all (if not all) of the candidates have come out in support of the pending FTAs with Korea, Colombia and Panama - even Pawlenty did so in his big economic speech at the UChicago last week. And a few have been even bolder (check the Club for Growth's reports on each candidate for a full rundown). Moreover, recall that a large majority (about 80%) of GOP House freshman (incl. lots of Tea Partiers) recently wrote a letter calling for passage of the pending FTAs. So the GOP still - it seems - supports free trade, with the usual mercantilist, "get tough" caveats (unfortunately).

(2) I think you're too optimistic about this President's "support" for free trade. First, he sat on the 3 FTAs for 2+ years and only began to consider moving them thru Congress after watering them down (raising tariffs, onerous labor and tax provisions, etc.) to appease Big Labor. Even now, he's holding the agreements hostage until the GOP relents on the bloated TAA expansion that was rammed thru as part of the Stimulus* Bill - another sop to labor, btw. Second, his big "push" for TPP has produced a lot of soundbites but very little substance, and seriously risks failure now that they've moved off their November 2011 deadline for a deal. Finally, Doha is - at best - comatose and more likely dead, and a big part of the blame must rest on the administration's refusal to submit an agressive offer on farm subsidies and industrial market access (coupled with pretty crazy demands on developing countries' participation in voluntary, plurilateral agreements).

Given these two things, I think it's very safe to say that a Republican president would be a pretty big step up from the current resident of 1600 Pennsylvania Avenue.

Of course, none of this changes your primary message - that GOP contenders who embrace snake-oil protectionism are betraying their fiscally conservative message, and that voters should be wary of these charlatans.
Next, AEI's Phil Levy did an excellent job elaborating on some of the problems that Dan, Simon and I noted with respect to the GOP candidates, trade and US manufacturing jobs, and he then throws down the gauntlet:
What are the early prospects for Republican presidential leadership on trade? Dan Drezner and Scott Lincicome last week took Gov. Tim Pawlenty to task for his debate remarks on the topic. Pawlenty espoused "fair trade" and increased enforcement as the primary response to the country's manufacturing employment woes....
[T]allying up each party's merits and demerits on trade is a distraction from the more important point. We know from two years of experience that President Obama is inclined, at best, to "lead from behind" on trade. At a time when global trade talks are engaged in a prolonged and dramatic death scene and U.S. foreign relations increasingly hinge on the ability to cement commercial ties, there is a desperate need for leadership of the sort that can only come from the White House. Dan and Scott are right to scrutinize the Republican candidates and see whether any of them might provide it.

There is a temptation to excuse statements like Pawlenty's. After all, in his call for "fair and open trade," he was hardly embracing protectionism. Fair trade is the sort of elastic term that means different things to different groups, but seems to poll well with all of them. Isn't this just smart politics on Pawlenty's part? Why should Republicans cede enforcement fervor and the embrace of fairness to the Democrats? This could be cast as the equivalent of a pro-motherhood, pro-apple pie platform.

Such temptation should be resisted. It is misleading to tell Americans that the prime cause of manufacturing job loss lies with imports. This offers the false hope that very real employment problems can be fixed with judicious application of trade barriers. As with any snake oil, there is the dual danger that the potion will not work and that reliance on the false cure will preclude a search for a true remedy. One of the great challenges that any American leader will face in coming years is how to structure the social safety net to meet a job market that is far more dynamic than in times past, one in which Americans will change both employers and perhaps their type of employment with greater frequency than ever before. Trade is one driver of this dynamism, but technological change and domestic competition are at least as important, likely more. Any candidate who misses the broader challenge and misattributes the problem to foreign cheating is not just pandering; they are failing to engage on a central economic issue and missing an opportunity to win a mandate for a much-needed policy response.

There has been an intriguing battle among Republican candidates, in the wake of Indiana Gov. Mitch Daniels's withdrawal from consideration, to claim the role of Teller of Difficult Truths. The first skirmishes have come over ethanol subsidies, which some candidates -- including Pawlenty -- have dared to oppose (though John Dickerson has questioned just how brave this stance really is). Trade offers the candidates another such opportunity. It may be too soon to render final judgment, but it will be telling to see which candidates use the opportunity to offer a vision for American engagement in modern commerce and which opt to pander to easy prejudices.
Great stuff, as usual, by Phil.

Finally, EconLog's David Henderson provides, in my opinion, the best response that a presidential candidate could give on American manufacturing jobs:
It's unlikely that we'll have more manufacturing jobs. The story of economic progress is one of doing more with less. This has been especially true in U.S. manufacturing, where the value of manufacturing, in inflation-adjusted terms, reached an all-time high before our current recession. And while that has happened, we've had fewer and fewer people becoming more and more productive. Moreover, every major manufacturing economy, including China's, has lost manufacturing jobs.
He then adds:
Manufacturing employment declined from the mid-1990s to 2002 in a number of countries whose economies are rapidly developing, including China, Brazil, and South Korea. In fact, China, Brazil, South Korea, and Japan had steeper percentage declines in manufacturing employment over that period than the United States.

This is from Economic Report of the President, 2004, p. 76.
So who's gonna step up and tell the American people these "hard truths"?

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