Friday, February 29, 2008

Obama and Clinton on trade (NAFTA)

From the editorialists of the WSJ, some nice observations and rhetorical bombs...

Democrats claim the world hates America because President Bush has behaved like a global bully. But we don't recall him ever ordering an ally to rewrite an existing agreement on American terms -- or else.

Yet that's exactly what both Hillary Clinton and Barack Obama are now promising to do to our closest neighbors, Mexico and Canada. At their Ohio debate on Tuesday, first Mrs. Clinton, followed ever so quickly by Mr. Obama, pledged to pull America out of the North American Free Trade Agreement if the two countries don't agree to rewrite it on Yankee terms. How's that for global "unilateralism"?

Democrats sure have come a long way from the 1990s, when Bill Clinton pushed Nafta through a Democratic Congress. And the truth is that both Mrs. Clinton and Mr. Obama have spoken favorably about Nafta in the past. Yet now they are sounding the loudest protectionist notes by a potential President in decades. More dangerous, neither is telling the truth about the role of trade in the U.S. economy....

While it is politically incorrect to say so, Nafta has been good for all of North America....In Nafta's first decade after 1993, trade between the U.S. and Mexico multiplied to $232 billion from $81 billion. Trade with Canada has also blossomed, with Canadian exports to the U.S. by surface transport rising 79% in a decade and U.S. exports to Canada increasing 38%.

The deal also increased U.S. productivity. U.S. firms found they could be more globally competitive by putting some manufacturing in Mexico or Canada while retaining high-end production in the U.S....Such flexibility may have saved thousands of U.S. jobs from going abroad. In the first 10 years of the deal, the U.S. economy added 18 million jobs and the jobless rate sank to record lows.

Nafta has also been crucial to Mexico's continuing development. After the 1994 peso devaluation, the political left in Mexico had all the ammunition it needed to turn back liberalization. But Nafta made that difficult. In the two presidential elections since the 1994-1995 peso crisis, Mexicans have voted for a modern economy. Nafta has helped Mexico develop strong retail competition for the first time and allowed the economy to diversify beyond oil. Other gains include greater transparency in Mexico's fiscal accounts, an independent central bank and an inflation rate that is now lower than in the U.S.

None of this counts with Mr. Obama, who is whacking Mrs. Clinton for saying in 2004 that Nafta had been good for New York state and the country. He also points out that "in her own book Senator Clinton called Nafta 'one of Bill's successes.'" Instead of defending the economic record of the 1990s, Mrs. Clinton's response has been to call for a "time out" on trade deals...

But the Illinois Senator is less than honest about his own Nafta history. In his race for his Senate seat in 2004, he told Illinois farmers that the U.S. benefits from exports under the World Trade Organization and Nafta, and he recommended that the U.S. go after more deals like it. He also discouraged protectionism, warning that "as an exporting state, Illinois would be hurt by a trade war sparked by tariffs. This would be particularly devastating to our agricultural economy."

But that was when he was trying to appeal to farmers who rely on exports. Now that he's battling for union endorsements...

As the Democratic contest continues, it is becoming a race to the bottom on protectionism. Perhaps the best trade demagogue will win, but someone should point out that the last President who tried to govern as a protectionist was Herbert Hoover. It didn't turn out so well.


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