Free Trade: Blowing Campaign Smoke

April 25, 2008

By Abraham F. Lowenthal

The competitive scramble for votes in the Ohio, Pennsylvania and other Rust Belt Democratic presidential primaries has created the impression that, if elected, either Hillary Clinton or Barack Obama would try to renegotiate NAFTA and scuttle the recently proposed free trade agreement with Colombia. Some believe that a Democrat in the White House would more generally abandon long-standing U.S. efforts to expand international trade, particularly with Latin America and Caribbean countries and also perhaps in Asia. There is concern in business circles and internationally about this prospect, but this worry may well be misplaced.

The current attack on “free trade” — and the attacks during the earlier Republican primaries on immigration — respond to intensifying concerns among U.S. workers, both blue- and white-collar, about the increasingly evident combination of looming recession and rising inflation. People are very worried about the sub-prime mortgage and wider credit crises, the accelerating decline in real estate values, job insecurity, the shrinking consumption rate, increasing health care costs, uncertain pension rights and the weakening dollar. This gathering anxiety leads naturally to the search for scapegoats: trade agreements, unauthorized immigrants, greedy corporations and executives, and corrupt or incompetent regulators and economic policy officials.

In this environment, the comments the Democratic candidates make about trade policy — like the immigrant-bashing comments of the Republican candidates — are efforts to connect with the anxieties of voters, not to present detailed and actionable policy proposals.

The next U.S. president and Congress will have to tackle the challenge of re-stimulating the U.S. economy. As they focus on this crucial task, the pros and cons of trade agreements will probably be nowhere near the center of consideration. Decisions about fiscal and monetary policy, taxes, budgets, entitlements, investment, safety nets, retraining, infrastructure, energy and the environment will be much closer to heart.

If and when a new national strategy for economic recovery and growth can be fashioned, renewed emphasis on expanding trade is actually more likely than not, no matter who is elected in November; this is because U.S. prosperity is so obviously linked to international competitiveness. The 2007 agreement between the Bush administration and the Democratic leaders in Congress and the government of Peru is a likely model for new trade agreements. Substantial programs for worker retraining and adjustment in the United States are probable, as well. It is unlikely that any of the three candidates will scuttle free trade agreements, fundamentally challenge NAFTA or downplay trade. Nor will any — even Senator John McCain — proceed forward on new agreements without incorporating labor standards and environmental provisions into the proposals and including aggressive retraining and adjustment programs at home.

The Colombia free trade agreement recently championed by Bush has become the unfortunate victim of political calculations that have little to do with the situation in that country. The AFL-CIO, weakened in many ways over the past 20 years, has chosen to draw the line on Colombia, as a battle it thinks it must and can win. The administration’s decision to set a 90-day countdown clock on the decision backfired, because the Democratic leadership in Congress would rather fight the administration on this procedural issue than risk division on the terms of the agreement itself. The administration’s attempt to turn this vote into a national security issue hasn’t been credible, especially when put forward by a president who has played this card too often.

Latin American and other developing countries around the world will be best off with a new U.S. administration that focuses on revitalizing the U.S. economy, that restores multilateral and respectful approaches to international relations, and that works hard to secure comprehensive and proactive immigration reform. That kind of administration, of either party, would also seek a bipartisan and sustainable new commercial policy that takes into account the needs of those displaced by expanded trade, both in the United States and our economic partner countries.

Any of the three currently competitive candidates for the U.S. presidency should move in these directions. It is far too soon to ring alarm bells about the next administration’s foreign and trade policies.

Abraham F. Lowenthal is Robert F. Erburu Professor of Ethics, Globalization and Development and professor of International Relations in the USC College of Letters, Arts and Sciences. He is also president emeritus and senior fellow of the Pacific Council on International Policy.