Redstate

Posted at 10:07pm on Jun. 30, 2008 More Evidence That Protectionists Are All Wet

By Pejman Yousefzadeh

Think that the current economic conditions are bad? Just remember that they could have been worse and that there are plenty of people who appear to be bound and determined to make them worse.

In other words, read this and note the following passage:

. . . Over the past two quarters, the US has recorded positive growth at an annual rate of 0.8 per cent (in spite of the pronouncements of many observers that recession had already set in). Its "net exports of goods and services", the gross domestic product equivalent of the current account balance, have strengthened at an annual rate of almost 1 per cent of GDP during that period. Hence the totality of recent US expansion has been provided by the strengthening of its trade balance. Domestic demand has been falling but the US has been saved from recession by the rest of the world.

And despite this, there are people who have no problem making noises about wanting to curtail free trade. One of them happens to be running for President of the United States.

Posted in Economic Ignorance | Economy | Free Trade | Protectionism — Comments (1)/ Email this page » / Read More »

Posted at 6:53pm on Jun. 21, 2008 The Schooling Of David Sirota

By Pejman Yousefzadeh

Found here. Whether the schooling actually works depends, of course, on whether the likes of David Sirota are willing to be educated on subjects they plainly don't know anything about. On that latter point, I am not optimistic. (Via Don Boudreaux.)

Posted at 9:51pm on Jun. 20, 2008 I Can't Keep Track Of The Flip-Flops

By Pejman Yousefzadeh

John McCain criticized Barack Obama's winks and nods towards protectionists today in a speech. The substance is notable, of course, and readers know that trade policy is very interesting indeed, as far as I am concerned, so the substance alone is enough to grab my attention.

But for this post, I want to focus my attention on the Obama campaign's response:

In a teleconference on Friday, the Obama campaign said "absolutely ... Barack Obama will reopen negotiations on NAFTA" to add tougher environmental and labor rules.

Otherwise, said Senator Sherrod Brown, an Obama administration "could" withdraw the United States from NAFTA.

"I have been assured by him and his economic advisor," said Brown. "There is no question, his position is constant and will stay that way on the North American free trade (pact) and on trade generally," he said.

So, this sounds as if Obama will act unilaterally to renegotiate terms and if necessary, pull the United States out of NAFTA. Which of course causes one to look back at this from yesterday. Remember these words?

In an interview with Fortune to be featured in the magazine's upcoming issue, the presumptive Democratic nominee backed off his harshest attacks on the free trade agreement and indicated he didn't want to unilaterally reopen negotiations on NAFTA.

"Sometimes during campaigns the rhetoric gets overheated and amplified," he conceded, after I reminded him that he had called NAFTA "devastating" and "a big mistake," despite nonpartisan studies concluding that the trade zone has had a mild, positive effect on the U.S. economy.

Does that mean his rhetoric was overheated and amplified? "Politicians are always guilty of that, and I don't exempt myself," he answered.

So which is it? Is Obama going to reopen negotiations unilaterally and potentially pull the United States out of NAFTA unilaterally as well? Or does the "my rhetoric was overheated and amplified so you really shouldn't pay attention to it" excuse stand?

Either way, this is a sorry display. Obama veers wildly from giving comfort to protectionists to trying to convince free traders that he really is on their side. I know that there is pandering in politics but usually, the pandering is carried off in a more . . . how to phrase this? . . . professional manner.

Then again, maybe this isn't pandering. Maybe Obama and his campaign genuinely don't have a clue as to what their policy is or is going to be when it comes to free trade. And if so, that's even scarier than finding that they are pandering.

Posted in Barack Obama | Economic Ignorance | Economy | Free Trade | Protectionism — Comments (6)/ Email this page » / Read More »

Posted at 10:28pm on Jun. 19, 2008 Obamanomics

By Pejman Yousefzadeh

Dan Drezner is not a fan. I guess the Obama campaign is back to demagoguing globalization and trade, after having initially sought to soothe us by saying that earlier condemnations of globalization and trade merely constituted "overheated and amplified" rhetoric.

Posted at 3:13pm on Jun. 19, 2008 Backtracking All Around

By Pejman Yousefzadeh

Given that he changed his mind about his earlier decision to take public financing for the general election cycle, it should come as no surprise whatsoever to find that Barack Obama is now conducting a whiplash-inducing policy change concerning the issue of trade:

The general campaign is on, independent voters are up for grabs, and Barack Obama is toning down his populist rhetoric - at least when it comes to free trade.

In an interview with Fortune to be featured in the magazine's upcoming issue, the presumptive Democratic nominee backed off his harshest attacks on the free trade agreement and indicated he didn't want to unilaterally reopen negotiations on NAFTA.

"Sometimes during campaigns the rhetoric gets overheated and amplified," he conceded, after I reminded him that he had called NAFTA "devastating" and "a big mistake," despite nonpartisan studies concluding that the trade zone has had a mild, positive effect on the U.S. economy.

Does that mean his rhetoric was overheated and amplified? "Politicians are always guilty of that, and I don't exempt myself," he answered.

Just out of curiosity, how responsible is policymaking in the Obama campaign when it is vulnerable to being altered 180 degrees simply because "during campaigns the rhetoric gets overheated and amplified"? We all have our moments when we say things that we regret, but the Obama campaign engaged in a deliberate, patterned, systematic and repeated effort to augment protectionist sentiments and to trash free trade agreements like NAFTA and the U.S.-Colombia Free Trade Agreement. Now, we are being told that all of this was just "overheated and amplified" rhetoric and that Obama committed a forensic boo-boo?

Give me a break. Go through the entire story and see just how much Obama has backtracked on the issue of trade and just how purposefully protectionist he sounded during the primary campaign season. The only thing we have to rely on when it comes to trade issues is Barack Obama's inconstancy. And the causes of prosperity and economic development both in this country and around the world deserve better than that from the next American President.

Posted in Barack Obama | Economy | Flip-Flopping | Free Trade | Protectionism — Comments (1)/ Email this page » / Read More »

Posted at 2:45am on Jun. 16, 2008 What Is Free Trade?

By Pejman Yousefzadeh

This.

Free trade, of course, leads to prosperity. Prosperity helps lead to this.

By implication, you can tell what I believe we ought to think of protectionists.

Posted at 1:32am on Jun. 13, 2008 A "Destructive Path" Indeed

By Pejman Yousefzadeh

Good on the Vice President for raising the alarm concerning America's increased and worrisome slide towards protectionism. I continue to be befuddled over the fact that we are not embracing free trade more fully as a way of enhancing prosperity for lower and middle income individuals and families and as a way of diminishing the power and intensity of recessions when the business cycle goes south. If ever there was a case of shooting oneself in the foot, the embrace of protectionism would constitute it.

It is, by the way, incumbent on McCain to push the free trade message as much as possible during the election campaign and to find a way to do it that will make clear the harm that will come to the United States if it continues to go down the protectionist path--not to mention the many benefits that we would enjoy if we actually embraced free trade. Elections have consequences and we have to choose whether we want to face the consequences of educating ourselves about the benefits of free trade and being in a better position to make the right policy choices as a consequence, or whether we will countenance having free traders avoid making the arguments against protectionism altogether, thus letting the protectionists own the debate and sabotage good policymaking in the process.

Posted in Democrats | Economic Ignorance | Economy | Free Trade | Protectionism — Comments (0)/ Email this page » / Read More »

Posted at 11:22pm on Jun. 8, 2008 Globalization Is Our Friend. Let's Treat It Like One.

By Pejman Yousefzadeh

Tyler Cowen has a great editorial highlighting the fact that despite all of the protectionist and antediluvian commentary to the contrary, globalization continues to reap wondrous and highly desirable benefits for the international community:

THE last 20 years have brought the world more trade, more globalization and more economic growth than in any previous such period in history. Few commentators had believed that such a rise in trade and living standards was possible so quickly.

More than 400 million Chinese climbed out of poverty between 1990 and 2004, according to the World Bank. India has become a rapidly growing economy, the middle class in Brazil and Mexico is flourishing, and recent successes of Ghana and Tanzania show that parts of Africa may be turning the corner as well.

Despite these enormous advances, however, there is a backlash against globalization and a widespread belief that it requires moderation. Ordinary people often question the benefits of international trade, and now many intellectuals are turning more skeptical, too. Yet the facts on the ground show that the current climate of economic doom and gloom simply isn't warranted. The classic economic recipes of trade, investment and good incentives have never been more successful in generating huge gains in human welfare.

The globalization process has had its bumps, of course, as reflected recently by rising commodity prices, but that is largely a consequence of how much and how rapidly prosperity has grown. Countries like China have become richer so fast that global production of energy and food have been unable to match the pace. But rapid economic growth is the right direction, even if some of the remaining poor are suffering from high food prices.

[. . .]

Trade advocates focus on the benefits of goods arriving from abroad, like luxury shoes from Italy or computer chips from Taiwan. But new ideas are the real prize. By 2010, China will have more Ph.D. scientists and engineers than the United States. These professionals are not fundamentally a threat. To the contrary, they are creators, whose ideas are likely to improve the lives of ordinary Americans, not just the business elites. The more access the Chinese have to American and other markets, the more they can afford higher education and the greater their incentive to innovate.

Conservative and liberal economists agree that new ideas are the fundamental source of higher living standards. We urgently need new biotechnologies, a cure for AIDS and a cleaner energy infrastructure, to name just a few. Trade is part of the path toward achieving those ends. A wealthier China and India also mean higher potential rewards for Americans and others who invest in innovation. A product or idea that might have been marketed just to the United States and to Europe 20 years ago could be sold to billions more in the future.

Those benefits will take time to arrive, but trade with China has already eased hardships for poorer Americans. A new research paper by Christian Broda and John Romalis, both professors at the Graduate School of Business at the University of Chicago, has shown that cheap imports from China have benefited the American poor disproportionately. In fact, for the poor, discounting in stores such as Wal-Mart has offset much of the rise in measured income inequality from 1994 to 2005.

Read on . . .

Posted in 2008 | Free Trade | Globalization | Protectionism — Comments (3)/ Email this page » / Read More »

Posted at 2:38am on Jun. 7, 2008 Free Trade: A Hero, Not A Villain

By Pejman Yousefzadeh

With the sudden jump in unemployment to 5.5% (still relatively mild but certainly noticeably more than the previous 5% figure), fears will naturally increase that the United States is, or will soon be in a recession. And the more such fears increase, the greater the propensity--as Daniel Griswold points out--for public officials to blame free trade for our economic woes.

Problem is that such scapegoating is complete and total bunk:

In recent decades, as foreign trade and investment have been rising as a share of the U.S. economy, recessions have actually become milder and less frequent. The softening of the business cycle has become so striking that economists now refer to it as "The Great Moderation." The more benign trend appears to date from the mid-1980s.

The Great Moderation means that Americans are spending more of their time earning a living in a growing economy and less in a contracting economy. Our economy has been in recession a total of 16 months in the past 25 years, or 5.3 percent of the time. In comparison, between 1945 and 1983, the nation suffered through nine recessions totaling 96 months, or 21.1 percent of that time period.

America's recent experience of a more globalized and less volatile economy has not been unique in the world. Other countries that have opened themselves to global markets have been less vulnerable to financial and economic shocks. Countries that put all their economic eggs in the domestic basket lack the diversification that a more globally integrated economy can fall back on to weather a slowdown. A country that increases trade as a share of its gross domestic product by 10 percentage points is actually about one-third less likely to suffer sudden economic slowdowns or other crises than if it were less open to trade. As the authors of this study concluded:

Some may find this counterintuitive: trade protectionism does not "shield" countries from the volatility of world markets as proponents might hope. On the contrary...economies that trade less with other countries are more prone to sudden stops and to currency crises.

Read the whole thing. The evidence is pretty much indisputable; if it wasn't for liberalized markets and freer trade (we have not, alas, yet achieved free trade), recessions would be more common, longer lasting and more devastating in scope and impact. Thanks to liberalized markets, we are able to augment periods of economic growth and lessen both the frequency and the destructive capacity of recessionary periods. We are not, of course, able to repeal the business cycle but we would not have nearly the economic prosperity and the cushion against the occasional recessionary period that we have now if it were not for free trade.

Just something to remember when you go into the voting booth and consider whether you really want to vote for a protectionist candidate for the Presidency. Not to mention fellow protectionists in that candidate's political party.

Posted in Barack Obama | Economic Ignorance | Economy | Free Trade | Protectionism — Comments (6)/ Email this page » / Read More »

Posted at 1:56am on May 30, 2008 On The American Manufacturing Sector

By Pejman Yousefzadeh

It's doing just fine, thanks. Now that this is established and the shibboleth that open markets have somehow conspired to destroy American manufacturing has itself been destroyed, can we have more free trade, please?

Posted at 7:02pm on May 29, 2008 Shorter John Kerry

By Pejman Yousefzadeh

"Hey, China and India, if you don't reduce greenhouse gas emissions, we'll make life utterly economically miserable for our own citizens!"

Really, that's what he's saying:

Sen. John F. Kerry (D-Mass.) told reporters today that the United States and Europe could limit the flow of foreign goods from India and China if the countries don't agree to start reducing their greenhouse gas emissions.

"I think Europeans and Americans are aware of those tools but acknowledge the focus is not to get to a place where they have to be entertained," he said.

Yeah. This threat will work wonders.

Posted in Economic Ignorance | Economy | Free Trade | John Kerry | Protectionism — Comments (5)/ Email this page » / Read More »

Posted at 12:49am on May 26, 2008 The Free Trade Antediluvians

By Pejman Yousefzadeh

James Surowiecki titles his piece on free trade "The Free Trade Paradox." I don't quite know what is paradoxical about it, since his piece makes clear that supporting free trade is a no-brainer and that as a consequence, we ought to be deeply concerned about the trade stances of Barack Obama and Hillary Clinton:

All the acrimony in the primary race between Barack Obama and Hillary Clinton has disguised the fact that on most issues they're not too far apart. That's especially the case when it comes to free trade, which both Obama and Clinton have lambasted over the past few months. At times, the campaign has looked like a contest over who hates free trade more: Obama has argued that free-trade agreements like NAFTA are bought and paid for by special interests, while Clinton has emphasized the need to "stand up" to countries like China. Two weeks ago, both senators signed on as sponsors of a new bill that would effectively impose higher tariffs on China if it doesn't revalue its currency. The candidates are trying to win the favor of unions and blue-collar voters in states like Ohio and West Virginia, of course, but their positions also reflect a widespread belief that free trade with developing countries, and with China in particular, is a kind of scam perpetrated by the wealthy, who reap the benefits while ordinary Americans bear the cost.

It's an understandable view: how, after all, can it be a good thing for American workers to have to compete with people who get paid seventy cents an hour? As it happens, the negative effect of trade on American wages isn't that easy to document. The economist Paul Krugman, for instance, believes that the effect is significant, though in a recent academic paper he concluded that it was impossible to quantify. But it's safe to say that the main burden of trade-related job losses and wage declines has fallen on middle- and lower-income Americans. So standing up to China seems like a logical way to help ordinary Americans do better. But there's a problem with this approach: the very people who suffer most from free trade are often, paradoxically, among its biggest beneficiaries.

The reason for this is simple: free trade with poorer countries has a huge positive impact on the buying power of middle- and lower-income consumers--a much bigger impact than it does on the buying power of wealthier consumers. The less you make, the bigger the percentage of your spending that goes to manufactured goods--clothes, shoes, and the like--whose prices are often directly affected by free trade. The wealthier you are, the more you tend to spend on services--education, leisure, and so on--that are less subject to competition from abroad. In a recent paper on the effect of trade with China, the University of Chicago economists Christian Broda and John Romalis estimate that poor Americans devote around forty per cent more of their spending to "non-durable goods" than rich Americans do. That means that lower-income Americans get a much bigger benefit from the lower prices that trade with China has brought.

Read it all. That the "reality-based community" should find itself on the wrong side when it comes to this issue should come as no surprise whatsoever. But it'll be a nasty shock to policymaking if the campaign rhetoric of the remaining Democratic Presidential candidates--and much of the Democratic party--actually gets codified as our national approach to trade issues.

Posted in Barack Obama | Economic Ignorance | Economy | Free Trade | Hillary Clinton | Protectionism — Comments (16)/ Email this page » / Read More »

Posted at 1:22am on May 20, 2008 Well, At Least Someone's Not Pandering

By Pejman Yousefzadeh

It would be very easy for John McCain to go the protectionist route and try to win votes by engaging in the purportedly popular art of free trade-bashing. Thankfully for the Republic, when it comes to the issue of free trade, McCain has decided to opt for the difficult right choice rather than the easy wrong one:

John McCain on Monday argued that low taxes and free markets were the best remedy for the US's slowing economy and cast Barack Obama as a traditional "big-government Democrat" who would raise taxes and stifle growth.

The presumptive Republican presidential candidate accused Mr Obama, the likely Democratic nominee, of engaging in "old-style politics" by exploiting public resentment of foreign trade rather than focusing on how to make the US more competitive.

But he acknowledged that more must be done to help people who lost jobs because of globalisation and promised more rigorous enforcement of trade agreements to protect US interests.

Addressing a business convention in Chicago, Mr McCain said the US faced a fundamental choice in November.

"Senator Obama and Senator Clinton agree on so much in economic policy that it's not always clear what the big argument is about in their party," he said. "In both cases we'd end up with the same package of more federal taxes, more federal regulation, more government control of the economy, and more government spending." Mounting public concern about the economy and globalisation is generally viewed as a threat to the Republicans. But the McCain campaign believes it can win the economic debate by appealing to the deep-rooted belief of many Americans in the benefits of low taxes, small government and free enterprise.

(Emphasis mine.) There aren't too many politicians brave enough to swim against the protectionist tide. For them, winning votes is the alpha and omega of involvement in public service. But there are some things more important than winning the votes of others. Winning one's own self-respect intellectually is one such thing.

Posted in Barack Obama | Economic Ignorance | Economy | Free Trade | John McCain | Protectionism — Comments (29)/ Email this page » / Read More »

Posted at 1:14am on May 20, 2008 My Only Disagreement Concerns Point Number 6

By Pejman Yousefzadeh

Barack Obama does not advocate "fair trade." He advocates protectionism. Let's call it by its real name.