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President Obama’s State of the Union address was, in my
opinion, pretty awful (although James Pethokoukis at the American
Enterprise Institute thinks it could have been worse).
I know SOTUs are political theater at its worst, and I watch them
always with something not unlike disgust, but I found almost nothing to
like in the substance last night. The electioneering, partisan,
self-aggrandizing tone didn’t help.
Let me turn specifically to trade policy, which was more thoroughly
covered last night than in recent SOTUs. In an election year, and from a
president who is ambivalent (at best) on trade, a trade-heavy speech is
not always a good thing: trade policy can get caught up in broader
political arguments about inequality, unemployment and economic growth.
And rarely does that combination work well for those of us who want and
promote free trade between people regardless of the political borders
behind which those people happen to live.
But first, the Good news from last night’s speech. President Obama did make a passing and veiled reference to the need for Congress to extend Permanent Normal Trade Relations to Russia,
necessary for the United States to treat Russia as any other member of
the World Trade Organization when it joins the body later this year
(i.e., allowing Americans to access Russian goods and services more
readily). And at least he painted the recent passage of the trade
agreements with Colombia, South Korea and Panama as a positive
development, albeit on mercantilist grounds (more on this later).
The Bad? The president said precisely nothing about the Trans Pacific
Partnership negotiations currently underway with nine other
Asia-Pacific countries (with Canada, Mexico and Japan interested in
joining in the future). The TPP is supposedly the crowning achievement
of his administration’s trade efforts and a deal that he was itching to
complete in 2012. What does it say about his priorities that it warrants
not a mention in his main speech of the year? Maybe his political
supporters in organized labor aren’t buying this “21st century trade
agreement” stuff any more than I am
and he sees merit in keeping it quiet. But that then raises worrying
questions about the ability of the negotiations to be completed on
schedule if they don’t have full-throated political support at the
highest level. The president made no mention of the World Trade
Organization or its struggling Doha round of trade liberalization
negotiations, either, although maybe there he is simply showing
acceptance of the round’s (near) death, an assessment he would share
with most trade watchers.
And the Ugly? Once again the president displays no appreciation for
the true benefits of free trade – the benefits from specialization and
exchange. They include the economic benefits that come from increased
competition, and from access to cheaper and more variable goods and
services for Americans. From his silly (and, I suspect, futile) goal to
“double exports in five years” to his rhetoric about how America can
“win” if the playing field is level (what does “winning” mean in that
context anyway?), the speech was peppered with nationalistic, misguided
and quite frankly inflammatory rhetoric that will not help trade
relations – let alone lead to enhanced trading opportunities for
Americans – one bit. Creating yet another government agency, this time
to “investigat[e] unfair trade practices in countries like China”, will
just add to tensions. Claiming the tires debacle
as a model of trade enforcement success is yet another example of how
the concept of unintended consequences is apparently lost on this
president.
Matthew Yglesias has some excellent things to say on the mercantilist nonsense in Obama’s message, and the ill-conceived manufacturing fetish
he conveyed. And Obama managed to combine both economic illiterate
concepts when wailing about the unfairness of having to compete with
“foreign manufacturers [who] have a leg up on ours only because they’re
heavily subsidized.” (He then, inevitably, went on to include all sorts
of subsidies or tax breaks that he would like to extend to certain
American firms/industries – Chris Edwards has amply covered the tax
stuff here). Overall, I give this speech a “D” on trade. Must try harder.
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