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Trading Places

The Washington Post editors make a fine suggestion:

President-elect Barack Obama needs to reassure Americans and U.S. trading partners around the world that free trade will be part of his plan for U.S. economic recovery. If his campaign for the White House had a weakness, it was the mixed signals he sent in this regard. Mr. Obama frequently acknowledged the benefits of trade, but he just as frequently denounced specific agreements, including the North American Free Trade Agreement with Canada and Mexico, which he made an ill-advised pledge to renegotiate. Mr. Obama’s party is, of course, deeply divided between protectionist constituencies such as organized labor and pro-trade technocrats such as those who populate his economic team.

President-elect Obama’s reported first choice for Trade Representative, Xavier Becerra, has dropped out (or didn’t make the final cut). Although this may be a sign that the Obama team can only tolerate one pardon-plagued nominee at a time (the other being Eric Holder, of course), this might also be an indication that Becerra, whose record on free trade is mixed at best, was not ideologically aligned with the President-elect. We will see whether the nominee is more or less pro-trade than Becerra.

Protectionism is never  a good idea. The bipartisan consensus in favor of free trade has frayed during the Bush years, in part because the Democrats have demagogued the issue. But perhaps (like tax increases), the protectionist impulses can be deflected and restrained in light of the looming recession. It really would be Hooverism to pull up the drawbridge of free trade.

The new President will have to show more than just restraint. There are pending free trade agreements with South Korea and Colombia, which the Democrats have rebuffed. This is an issue on which it is not enough to “do no harm.” Rather President Obama will have to push his allies on the Hill to pass measures that open trade and disappoint their most important backer, Big Labor.

The latter isn’t doing so well these days, between the SEIU scandals, which J.G. and I have discussed, and the UAW’s role in playing chicken with the survival of the U.S. auto industry. So they might not be in a strong position to object, especially in the face of the new President’s pleas that these are extraordinary times.

Rahm Emanuel joked that you should never let a serious crisis go to waste. He meant it in the context of helping to facilitate the liberal agenda of regulation, nationalized health care and massive spending. But it might be equally true of free trade. The current economic crisis might be just the moment to revive that bipartisan support of free trade, without which neither we nor our allies can return to prosperity.


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