Tuesday, July 17, 2012

Breaking the Mercantilist Campaign Feedback Loop

In a new post at his Foreign Policy blog, Dan Drezner argues that, sure, the protectionist rhetoric coming from both US presidential campaigns is mind-numbingly bad, but - hey - don't worry about it:
It's ridiculously offensive, however, because it baldly asserts that doing business with Mexico, China or Switzerland is un-American. Other idiocies like the Olympic-uniform controversy feed into the public perception that having the other countries make stuff is an abomination of the first degree.

So, does it matter for policy? Well.... no.

Mario Cuomo once said "You campaign in poetry. You govern in prose." Now, Mario Cuomo was clearly the world's worst poetry connoisseur. Still, to update his observation for our current needs, we can say, "You campaign as a mercantilist; you govern as a free-trader."...

Americans loooooooove mercantilism, so this kind of [protectionist] rhetoric makes tactical sense during a campaign. As stomach-churning as I find this kind of ad, I must reluctantly agree with Yglesias and Brooks that it doesn't matter all that much for governing....
Although I agree wholeheartedly with Drezner that President Obama and Governor Romney don't actually believe much of the protectionist nonsense that they're spewing on the campaign trail, I must disagree that their rhetoric "doesn't matter for policy."  Sure, neither candidate will enter office and instantly start a trade war with China or throw US "outsourcers" in jail.  But that doesn't mean that mercantilist - and outright protectionist  - campaign rhetoric doesn't take a toll on American trade policy, which is actually pretty crappy these days.  I covered much of this stuff last month (and in this 2011 Cato paper with Dan Ikenson), so I'll just paste the highlights here, but be sure to read the whole thing if you haven't already:
[W]hile Romney's position probably won't lead to the implementation of new protectionist policies if he becomes President (undeniably good news), Obama's similar protectionist proclamations in 2008 show us that such rhetoric is far from harmless. Indeed, as Ikenson and I noted last year, historical data from Pew's annual survey of US views on trade show that American attitudes toward trade are shaped largely by what Americans hear from the media and their elected (or campaigning) officials:
The dramatic decline in pro-trade sentiment between 2007 and 2008 coincided with a U.S. presidential primary election campaign season in which the Democratic candidates routinely criticized U.S. trade policy and certain trade partners. Perhaps most memorable was the late-February 2008 debate at Cleveland State University on the eve of the Ohio primary, when the late Tim Russert extracted renunciations of NAFTA and pledges from candidates Hillary Clinton and Barack Obama to reopen and renegotiate terms of the agreement...

The results of the 2009 Pew poll... suggest that political leaders can indeed influence public opinion about trade. The greatest fluctuation in public support for trade between 2007 and 2009 came from self-identified Democrats — those paying most attention to the Democratic primary elections and President Obama's early speeches — with opposition swinging wildly from 37 percent in 2007 up to 50 percent in 2008 and down to 30 percent in 2009. Meanwhile, support among Republicans remained steady during this period, as the issue was almost nonexistent during the GOP primaries and rarely discussed by Republican nominee John McCain during the general election campaign.
Assuming that Romney's China-bashing speeches and commercials have a similar effect on the electorate in 2012, it's quite likely that public support for free trade will wane this year and into next. Indeed, the harmful effects of Romney's message on US trade sentiment could be even bigger than in 2007-08, given that the Democratic party (including President Obama) routinely engages in protectionist pandering during election season, and Romney's position as the leader of the Republican party will certainly diminish the GOP's traditional pro-trade counterweight.

Thus, while Romney's political advisers may view his China-bashing as a harmless way to help pave the road the White House in 2012, President Romney and his team may arrive there in 2013 facing an trade-hostile US electorate that makes any major free trade policies too politically unpalatable to be undertaken.

And they'd have only themselves to blame.

So, if/when this all happens, does anyone actually expect the Romney administration to advocate its new trade proposals using anything except the same old, self-defeating mercantilist arguments? I try to be optimistic - really, I do! - but it sure ain't easy.

So we'll probably do this all over again in 2014 and 2016 and, well, until we find a politician brave - and smart! - enough to ditch the mercantilism and adopt a new approach to trade based on the realities of today's global economy and the abject falsity and immorality of the anti-trade position. Trust me, these politicians do exist (I've worked with them), but it's increasingly - and depressingly - clear that they won't be in the White House anytime soon.
I think that just about covers it, but let me add a few points:

First, I think that one of the reasons why Americans' views on trade policy are so malleable is because it's just not a big concern for them - consistently 
falling outside the top 10 issues that voters consider "very important."  Most people don't have direct interaction with trade (i.e., they're not importers or exporters or trade lawyers or policy wonks).  The issue also isn't in the news much, and when it is, the reporting is typically shoddy or simply parroting some dumb politician's protectionist demagoguery.  Thus, people are far more likely to buy into politicians' campaign "facts" and promises on trade than on other issues, like education or health care, where they have direct experience and strongly-held views.

This lack of interest, as public choice theory teaches us, also permits unprincipled politicians to pursue protectionism/mercantilism while in office or to spew ridiculous protectionist myths on the campaign trail because the only people really paying attention are those that stand to reap the concentrated benefits of such policies.  Only the most principled politicians avoid such temptations and pursue an unabashed and "true" free trade position (i.e., no trade barriers and no subsidies).

Second, the combination of malleable public opinion, a lazy/uniformed media and a large number of unprincipled, poll-driven politicians creates a vicious negative feedback loop (one I've experienced firsthand), whereby hackish politicians and their super-smart political consultants cite to sagging poll support for trade to justify their own protectionism or mercantilism, without ever acknowledging that their rhetoric might very well be driving those bad poll numbers.  This feedback loop is illustrated by the following (very high-tech) graphic: 
Mercantilist/protectionist pablum --> bad poll result --> more mercantilist/protectionist pablum --> another bad poll result.
Rinse. Repeat.  And, of course, American trade policy will continue to suffer. (See my June post, and the great article by Ramesh Ponnuru cited therein, for more details on that.)

Finally, it already appears that we're seeing this dynamic play out again in 2012.  The Financial Times reported earlier this week that "The Mellman Group, a Democratic polling organisation, and North Star Opinion Research, a Republican counterpart, will on Monday release the results of a survey showing 62 per cent of Americans want to get tough with China 'and use every possible means to stop their unfair trade practices.'"  The FT goes on to note that this poll - being pushed by (surprise!) an anti-trade US manufacturing group - explains why Obama and Romney are racing to out-protectionist each other on China trade, but neither the article nor the poll's snazzy factsheet ever considers the undeniable fact that economically-anxious American voters have been constantly bombarded by protectionist propaganda - from both political parties and a lot of mainstream media outlets - over the last couple years.  This is bound to have an effect on future US policy: sure, President Romney or President Obama won't be starting a trade war with China in 2013, but the tit-for-tat US-China protectionism will almost certainly continue.  And the American economy will be worse off for it.

And until we start having a better political discussion about trade and globalization - maybe, oh I don't know, starting with smart pundits like Drezner and Brooks getting a little more worked up about the stuff our "leaders" are saying on TV for 18 straight months - other, more significant (and much needed) reforms to US trade policy also will remain out of reach.

I guess that's a really long-winded way of saying that, yes, this stuff matters for policy.  Unfortunately.


DRDR said...

I strongly disagree with Drezner that this weekend's WaPo article on Obama & manufacturing doesn't suggest any substantive policy changes. The article clearly describes how Obama's advisers were divided between economists (Summers & Romer) and the rest on manufacturing policy, and the economists lost. In a second Obama term, we would not see anything as extreme as a NAFTA renegotiation, but we would see a lot more fetishizing of manufacturing.

DRDR said...

What we get with Sperling as NEC chair is cherry-picked research rationalizing the manufacturing fetish ( http://www.whitehouse.gov/sites/default/files/administration-official/sperling_-_renaissance_of_american_manufacturing_-_03_27_12.pdf ).

When Romer left, Obama lost an objective approach to this particular issue ( http://www.nytimes.com/2012/02/05/business/do-manufacturers-need-special-treatment-economic-view.html ).