Dual mandate of national trade policy
U.S. trade policy is at a cross-roads as the Obama Administration and the 111th Congress face a range of policy issues and challenges. The future direction of trade policy and how the issues will be addressed are unclear at this time and the subject of sharp debate within Congress, the Administration, and the trade policy community at large. While a number of issues are related to trade policy, the fundamental question that is the subject of this debate is which trade policy, if any, will maximize the benefits of trade and boost U.S. living standards.
(bolding mine)
In a simple statement of what has and can happen, the disconnect implied in the quote is striking. The benefits of trade are obvious to many, but the winners and losers in such trade is not at all obvious to many in the big picture.
If the ‘economy’ was the driver for this election, meaning I assume the perceptions each voter carried with him or her to the voting booth, then understanding our economy is better for us all.
One thing voters need to keep in mind is that trade is global in scope, and what is good for a trans-national monopoly is not the same as good for the voters. Maximixing benefits of trade may have little to do with maximizing US standards of living for most.
The idea of smaller government may be popular right now, but if you expect anyone else to protect overall voter interests, I see no other institution willing to do so other than the federal government if you can steer policy that way. Any other institution I am forgetting about??
In a second post to come involving Michael Pettis, Spencer England, and Paul Krugman, how this plays out is explored.
Good topic I’m looking forward to hearing more about it. One of the things I’ve noticed in recent years is how often small government conservatives are starting to realize that the “Free Trade lifts all boats” promise(s) haven’t really paid off.
So that cohort gets further subdivided into the “Not Free enough yet” and “Gee maybe we need to go back to some regulation” sects. The latter one is still trying to reconcile that position with the need to hire actual regulators to enforce the new rules. And once they have to examine the need for regulators it sort of runs against the small government doctrine which is going to make for some fun arguments.
Let’s not forget about Timmay. In October he was to rule on whether China is a currency manipulator.
This was postponed until after the elections and after the G20 meetings. These are all done now. The election outcome is we want lower taxes. The G20 outcome was no agreement on trade balances and currency wars. The only thing they did agree on was countries can use capital controls and tax unwanted hot money inflows.
So at the moment the equilibrium point for the US is more trade deficit, no tariff based tax revenue, weaker dollar everywhere except the crisis ridden eurozone, hot money outflows from the US looking for better returns/stronger currency outside the US, and then US investors paying taxes to foreign governments.
Your government at work. But we are told this policy will create jobs.
But on the lighter side, China equities and global commodities had a mini crash on Friday due to ongoing fears of monetary tightening in China. Tough to make a buck nowadays.
Still no word from Timmay on the currency manipulator thing.
The opening sentence of the mission statement of the Office of the United States Trade Representative states, “American trade policy works toward opening markets throughout the world to create new opportunities and higher living standards for families, farmers, manufacturers, workers, consumers, and businesses.”
Well, fine and good. So, what’s the problem? That depends on who is talking.
The economists and others supporting more offshoring and more importing of goods and services are perhaps best represented by Alan Greenspan’s trade policy testimony before the Senate Finance Committee in April 4, 2001. That’s the standard pitch from those economists and other supporters. The opposing voices may be best represented by Jeff Faux and Andrea Orr of the Economic Policy Institute in their May 3, 2011 paper, “Trade policy and the American worker”. Moreover, the problems with U.S. trade policy were detailed by the U.S. Trade Deficit Review Commission on November 14, 2000 with its report, “The U.S. Trade Deficit: Causes, Consequences and Recommendations for Action”. But no one wants to discuss that report.
President Clinton signed off on the WTO agreement, the accords of which have led to the record deficits experienced throughout this decade. The resulting trade deficit outcomes for goods produced beyond the U.S. border were predicable, but we still have that crowd of economists and others out there who didn’t see it coming. All part of the “no one could have predicted this outcome” crowd of denialists.
And here we are.
The opening sentence of the mission statement of the Office of the United States Trade Representative states, “American trade policy works toward opening markets throughout the world to create new opportunities and higher living standards for families, farmers, manufacturers, workers, consumers, and businesses.”
Well, fine and good. So, what’s the problem? That depends on who is talking.
The economists and others supporting more offshoring and more importing of goods and services are perhaps best represented by Alan Greenspan’s trade policy testimony before the Senate Finance Committee on April 4, 2001. That’s the standard pitch from those economists and other supporters. The opposing voices may be best represented by Jeff Faux and Andrea Orr of the Economic Policy Institute in their May 3, 2011 paper, “Trade policy and the American worker”. Moreover, the problems with U.S. trade policy were detailed by the U.S. Trade Deficit Review Commission on November 14, 2000 with its report, “The U.S. Trade Deficit: Causes, Consequences and Recommendations for Action”. But no one wants to discuss that report.
President Clinton signed off on the WTO agreement, the accords of which have led to the record trade deficits experienced throughout this decade. The resulting trade deficit outcomes for goods produced beyond the U.S. borders were predicable, but we still have that crowd of economists and others out there who didn’t see it coming. All part of the “no one could have predicted this outcome” crowd of denialists who have grown increasingly quiet over the last few years.
And here we are.
The opening sentence of the mission statement of the Office of the United States Trade Representative states, “American trade policy works toward opening markets throughout the world to create new opportunities and higher living standards for families, farmers, manufacturers, workers, consumers, and businesses.”
Well, fine and good. So, what’s the problem? That depends on who is talking.
The economists and others supporting more offshoring and more importing of goods and services are perhaps best represented by Alan Greenspan’s trade policy testimony before the Senate Finance Committee on April 4, 2001. That’s the standard pitch from those economists and other supporters. The opposing voices may be best represented by Jeff Faux and Andrea Orr of the Economic Policy Institute in their May 3, 2011 paper, “Trade policy and the American worker”. Moreover, the problems with U.S. trade policy were detailed by the U.S. Trade Deficit Review Commission on November 14, 2000 in its report, “The U.S. Trade Deficit: Causes, Consequences and Recommendations for Action”. But one would be hard pressed to find an ongoing discussion of that report’s contents.
President Clinton signed off on the WTO agreement, the accords of which have led to the record trade deficits experienced throughout this decade. The resulting trade deficit outcomes for goods produced beyond the U.S. borders were predicable, but we still have that crowd of economists and others out there who didn’t see it coming. All part of the “no one could have predicted this outcome” crowd of denialists who have grown increasingly quiet over the last few years.
And here we are.
The opening sentence of the mission statement of the Office of the United States Trade Representative states, “American trade policy works toward opening markets throughout the world to create new opportunities and higher living standards for families, farmers, manufacturers, workers, consumers, and businesses.”
Well, fine and good. So, what’s the problem? That depends on who is talking.
The economists and others supporting more offshoring and more importing of goods and services are perhaps best represented by Alan Greenspan’s trade policy testimony before the Senate Finance Committee on April 4, 2001. That’s the standard pitch from those economists and other supporters. The opposing voices may be best represented by Jeff Faux and Andrea Orr of the Economic Policy Institute in their May 3, 2011 paper, “Trade policy and the American worker”. Moreover, the problems with U.S. trade policy were detailed by the U.S. Trade Deficit Review Commission on November 14, 2000 with its final report, “The U.S. Trade Deficit: Causes, Consequences and Recommendations for Action”. But one would be hard pressed to find an ongoing discussion of that report’s contents.
President Clinton signed off on the WTO agreement, the accords of which have led to the record trade deficits experienced throughout this decade. The resulting trade deficit outcomes for goods produced beyond the U.S. borders were predicable, but we still have that crowd of economists and others out there who didn’t see it coming. All part of the “no one could have predicted this outcome” crowd of denialists who have grown increasingly quiet.
And here we are drifitng along.
“The idea of smaller government may be popular right now…”. Well, maybe. That statement reminded me of Prof. Krugman’s post on how US voters don’t really care terribly much about the US Federal deficit according to poll results. See here. Maybe we’re entitled to ask “popular with whom?” REpublicans and Tea Partiers? And even with those people, there’s a difference between being angry with Govt. tout court and being angry with Govt. waste, indifference, false priorities and ineffectiveness.
A trade policy that raises living standards and grants the benefits of trade would, in the first instance, involve something closer to sustainable balance in trade flows. The Fed is doing what it can, while it can, in that direction. Of course, it is suffering criticism from lots of folks for doing things that get lip service, but little else, from those critics.
Whne investment flows from rich countries with lots of physical capital too poorer countries with less physical capital, things make sense, and poor people get to eat. When current account surplus countries run fiscal deficits and expansionary monetary policy during times of low capacity use, that makes sense, and poor people get to eat. When private demand is slack and public sector borrowing costs are low, the public sector can spend to restore economic health. All three of these notions are being resisted by policy makers in the relevant countries. The Fed, faced with a second-best (3rd-best?) world, pursues a second-best policy option, one which indirectly addresses those better options that have been refused.
The WTO led to record trade deficits? Now there’s an assertion awaiting evidence. The standard take on trade flows is that they are driven by relative savings rates, mediated mostly by currency rates. Trade agreements have an impact on how much trade there is in total, and the nature of that trade, but not so much on the overall balance.
Maybe the reason nobody predicted the WTO causing trade deficits is because something else cause them.