Tuesday, June 7, 2011

Thinking Inside the Box on Trade

Former Minnesota Governor and GOP Presidential hopeful Tim Pawlenty delivered a rousing speech today on his economic vision for America.  The full text of the speech is here, and it's unsurprisingly receiving praise and sneers from the chattering classes (sometimes both in the same commentary).  His calls for a serious reduction in the corporate tax rate from 35% to 15%, the elimination of tax loopholes and a flattening of individual tax rates will certainly help improve American companies' global competitiveness (and attract foreign investment).  And his repeated call for reform of ethanol subsidies is, as I've already noted, not bad considering a lot of his current GOP primary competition.

But Pawlenty's stance on free trade was, well, utterly pedestrian::
Just as the federal government must break down barriers within our domestic markets. We must break down barriers in international markets.

Congress should ratify completed free trade agreements with South Korea — and Colombia. And complete the agreement with Panama. We should start new bilateral talks with our trading partners. To promote our exports.

President Obama set a goal of doubling exports. Yet his policies have prevented this. Mine will achieve it.
Ahh, yes, the political siren-song of mercantilism.  Grrreat.  Of course, this exports-good-imports-not-so-much position is in line with Pawlenty's previous statements on trade, as noted in the Club for Growth's handy primer on the candidate:
In an interview during a trade mission to China in 2010, Pawlenty said that “we all agree from an American perspective that the Chinese manipulation of their currency and pegging of it to the dollar is inappropriate and unfair.” In later comments, Governor Pawlenty did not rule out imposing tariffs on China.

Also, Pawlenty fought against lower trade barriers on sugar when CAFTA was being considered by Congress, and he was in favor of retaining the temporary steel tariffs imposed by President Bush.

While we understand the political considerations Pawlenty had in trying to protect his home state sugar beet industry, his support of trade barriers is equivalent to support of higher costs for consumers – both in Minnesota and across the country.

A 2011 MinnPost article described Pawlenty’s attitude towards trade policy this way: “Pass pending free trade deals with Colombia, Panama and South Korea while looking for more. And don’t be afraid to call out trading partners – China by name – when they don’t live up to their end of the bargain. ‘I’m for free trade, but I’m not for being a chump,’ he said to the approval of the crowd.”
Pawlenty's mercantilist message is, as the Club rightly notes, problematic from an economic perspective, and, of course, it contradicts the strong support for cutting most other types of taxes that the candidate outlined in his pro-growth speech today.  Furthermore, as Dan Ikenson and I noted in a recent paper, Pawlenty's exports-only trade message is also both unnecessary and counter-productive from a political standpoint.  In short, it's just the same old pablum.

Fairly or not, Pawlenty's been routinely characterized as an uninspiring "second-tier" candidate.  On some issues, his speech today might help the Governor shake that reputation, but his unoriginal stance on trade - one that fails to recognize the benefits of imports and the realities of a today's globalized economy, and that contradicts the rest of his pro-growth, low-tax message - sure won't.

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