Clive on Hillary on Trade

Hillary Clinton has some generally sensible things to say on trade in today's FT, for which Clive Crook takes her to task. Basically, Hillary's point is that we need to take a breather from negotiating trade agreements on the accepted model, and think our way through what a new set of trade relationships might look like for the 21st century.

[W]hat I have called for is a time-out which is really a review of existing trade agreements and where they are benefiting our workers and our economy and where the provision should be strengthened to benefit the rising standards of living across the world and I also want to have a more comprehensive and thoughtful trade policy for the 21st century. There is nothing protectionist about this. It is a responsible course. The alternative is simply to pick up where President Bush left off and that’s not an option.

Clive Crook thinks this is all misguided and reflects a tendency for the democrats to jettison multilateralism in favor of unilateral (read protectionist) trade policies.

I would agree with Clive that giving up multilateralism would be a bad idea. But I read Hillary's interview differently, as an argument in favor of a renewed set of multilateral rules. What she seems to be saying is: let's focus our energies on  making sure we have a better set of (multilateral) rules, commanding greater legitimacy, instead of pushing for continued market-access through traditional trade agreements.  

As such, this is quite a defensible argument, in fact much more so than business-as-usual.  The real risk facing globalization today is not that markets are not open enough, but that the political support for the existing set of rules is eroding to the point where it becomes difficult to maintain the openness we have. It is a far better use of political capital to bring those rules into conformity with ordinary voters' sense of what is fair than it is to negotiate one market-access expanding agreement over another. 

The economic gains from the existing strategy are meager; the economic costs of not pursing the legitimacy-enhancing strategy are huge. This is the trade-off globalization's cheerleaders are overlooking.

UPDATE: And this whole thing about what Paul Samuelson said and meant and whose position it provides support for is such a red-herring.  Hillary should not have brought up Samuelson, but I wish her critics would stick to the issues instead of chiding her for using his name in support.

Comments

[Lafayette]

DR: "What she seems to be saying is: let's focus our energies on making sure we have a better set of (multilateral) rules, commanding greater legitimacy, instead of pushing for continued market-access through traditional trade agreements.

What can that possibly mean, in light of these facts:
1) That the GATT agreements on tariff reductions (in the 1990s) have already been a giant leap forward in trade multilateralism, having done most of the work. And,
2) The next step in these agreements, tackling agriculture, are locked because of the inability of both the US and Europe to agree to the pain that will be necessary to achieve a concensus (that, notably, acknowledges the harm being done to third world farmers by excessive EU/US farm subsidies).

So, is Hillary prepared to take on BigAgri and cut its corporate welfare? Pray, do tell. Or is Hillary’s discourse just an ounce more pap for the masses in a sea of electoral pap for the masses.

The present set of PotUS candidates are all trying hard to slalom between the raindrops of lobbyist counter-funding. When what this country needs is certainly not “more of the same” but “boldly different than business-as-usual”."

Has Hillary the courage for such? Methinks not.

PS: She’s slaloming on Health Care as well. But, they all are.

[Joseph Janzen]

"It is a far better use of political capital to bring those rules into conformity with ordinary voters' sense of what is fair than it is to negotiate one market-access expanding agreement over another."

I am skeptical about the gains from appealing to ordinary voters sense of what is fair. By all means bolster the multilateral framework for trade we have at present, which for all its flaws still has at its heart the idea that free trade is in some sense good. At the same time, bringing everyone onside before we continue to move forward seems like a tremendous waste of scarce time.

[Per Kurowski]

The following are my comments on the interview of Senator Hillary Clinton by the Financial Times.

Protectionism: Full fledged competition in a globalized world would have eroded the profitability of many companies had we not awarded them the protection of intellectual property rights, and invested some serious money in making that shield mean something. Can you imagine Microsoft in a world where efficient software copiers are free to roam?

Therefore since most of labor have not been furnished similar new protections, and some old ones have in fact been taken away, it should not come as a surprise that the share of labor income as a percentage of GDP is dropping, and that this is, certainly and rightly, creating a source of conflict.

So what’s to be done? There are only two choices? Either we award to labor similar protections which would set us all on a de-globalization route, a lose-lose proposition; or we must require that the beneficiaries of intellectual property rights give back some extra of their quasi-monopoly based extra earnings to the society. As an absolute minimum, this should represent the direct cost of enforcing and defending their rights. Is this protectionism? No at all!

Review of existing trade agreements: Absolutely. In some of the US bilateral agreement some prohibitions were imposed on developing countries because at the time they were considered as appropriate, but hindsight has led to other conclusions and so these clauses need to be revisited. For instance some US trade agreements prohibit any restrictions on capital movement even though now these restrictions are deemed quite good at taking away some of the excessive volatility that the waters of the global financial oceans can have on local bathtubs.

Energy and environment: “the most important thing is getting the US focused on energy efficiency, on clean renewable energy, combating global warming on raising gas mileage etc.” Just like the recent Nobel price recipient Hillary Clinton does not have the courage of spelling out what is primarily needed to really alter the energy and environment realities in the US, namely a substantial tax on gasoline consumption.

Housing crisis: Just like the US can sometimes use a Strategic Petroleum Reserve I would suggest the government buying a large amount of the houses currently involved with subprime loans; at a price below the current outstanding mortgage; financed by the current mortgage holder; and giving the current debtor a option to repurchase his house in a couple of years at a price that would keep the tax-payer form being harmed. That’s what I would do… but then again I am no PhD and so I could be wrong

[paine]

tired
of the TNCs'
hired hands chatter ???

hillary shows some
TNCs see
the dark clouds ahead
for open border a go go

then again what is a pause
its hardly a repudiation

in the long run
a pause is just
a polite way of saying
"no the cavity must be removed
but i feel your pain so i'll stop drilling for a moment"

it basically
bluffs
pro native wagelinger
demands for
real immediate serious policy chance
but promising
" a serious review "

[wjd123]

"In the ordinary case, additional imports may put some domestic producers out of business, but the displaced capital and labor get applied to more efficient new uses, so the economy as a whole still gains."--Clive Crook

Isn't this faith based economics. Because we have a need to use the capital it will find its way into something "new" and more "efficient." Is this an iron law of economics or wishful thinking?

What if new and more efficient turns out to be investing out of country where the new gains in productivity come from cheaper labor?

I can't understand why economist believe that capital will automatically find its way into new and more efficient uses. As a non-economist I'd like to know why this is true empirically?

[hari]

Hillary is sounding more like a protectionist. Why?

Because there's an audience out there in middle-america which will vote for that position now.

[ad]

A politician who talks about a "review of existing trade agreements" in the middle of an election campaign is talking about protectionism. And how factories in, say, China, should be prevented from selling goods in America, in the interests of the Chinese employees.

And there is always an audience who thinks that they should be protected from "unfair competition".

[athreya]

"Hillary should not have brought up Samuelson, but I wish her critics would stick to the issues instead of chiding her for using his name in support."

Bringing up Samuelson to buttress her 'nuanced' approach on trade is exactly the kind of thing Hillary would do to sound intelligent and Presidential. Meaning that is what her advisers would have suggested after running the policy position through focus groups and number crunching poll figures.

She might actually have read Samuelson. But this is one more thing that sounds insincere coming from the Senator. Since the Senator's sincerity is itself a campaign issue there is nothing wrong with critics shining the spotlight on her dropping names.

[Agu]

Mr Rodrik,

Could you be a bit more specific about your call "to bring those rules into conformity with ordinary voters' sense of what is fair.

Firstly, who is your "ordinary voter", and secondly is you find two of them in the REAL world, please can you show that their notions of fairness are equal?