Friday, July 06, 2007

Democrats Move to Protectionism

More signs of protectionism are blowing in the wind this day. From the New York Sun, "Clinton Signs Gephardt as Key Advisor: Collapse of Support Seen for Free Trade":

Signaling the collapse of support for free trade in the Democratic Party, Senator Clinton's presidential campaign has signed up as an economic adviser a former House leader who staunchly opposed major trade deals, Richard Gephardt of Missouri.

Mrs. Clinton's decision to make Mr. Gephardt an official member of her economic team is a blunt repudiation of her husband's strategy from 1992, when he won the White House in part by distancing himself from unions and protectionist elements in the Democratic base.

"I think there's a large coming together within the Democratic Party in the last few years on the trade issue," Mr. Gephardt told reporters yesterday as he announced his endorsement of Mrs. Clinton and his new role with her campaign. "Senator Clinton has been at the center of that coming together. We've now defined a position that is for trade, that is for free trade treaties, but also requiring that there be a proper observance and a concern about labor and environmental rights in those treaties. We're in a time where there's much more agreement in the party."

While Mr. Gephardt put Mrs. Clinton at "the center" of the Democrats' new approach, the prevailing orthodoxy in the party now is nearly identical to what he was advocating in the 1990s when he led opposition to the North American Free Trade Agreement, which President Clinton championed.

And we read in the Financial Times, "Clinton and Obama Back China Crackdown":

Hillary Clinton and Barack Obama, the frontrunners for the Democratic presidential nomination, have agreed to co-sponsor legislation that would levy punitive duties on Chinese goods to cajole Beijing into revaluing its currency, according to aides.

The endorsement is a sign that trade with China is emerging as a hot political issue in the upcoming ­election and increases the prospect of the legislation passing with a veto-proof majority, analysts said.

A critical stance on US trade policy has become increasingly de rigueur for candidates as the Democratic presidential field tilts towards a populist stance on economic issues.

The bill, introduced by Senators Max Baucus, Chuck Grassley, Charles Schumer and Lindsey ­Graham, would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency and calls for a trade case to be brought by the US at the World Trade Organisation.

Analysts said the sponsorship of the bill by the two leading candidates made it more likely the US would take a more aggressive stance towards Beijing on trade issues if the Democrats took the White House.

In a separate letter sent recently to Hank Paulson, US Treasury secretary, Mr Obama warned that the “administration’s refusal to take strong action against China’s currency manipulation will also make it more difficult to obtain congressional approval” for free trade agreements.

The legislation could be voted on as early as the autumn and has been presented by its advocates as a WTO-compliant version of a more radical bill introduced in the last Congress by Senators Schumer and Graham that would have applied 27.5 per cent tariffs on Chinese goods and violated international trade rules.

Protectionism remains in my list of real concerns in our present environment. The ability of politicians to pander to the fears and hopes of voters in spite of the truth never ceases to amaze me. The theory of comparative advantage, developed late in the 1700's by David Ricardo, a contemporary of Adam Smith, apparently hasn't made its way to the halls of Congress as yet. All we need in the upcoming years is another Smoot-Hawley Act which was one of the major drivers of the Great Depression.

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