Protectionists-R-Us

Wow. I didn't expect to see Republicans and Democrats vying to see which party can appear to be the most protectionist (wink, wink). This essay argues that it is Republicans, not Democrats, who oppose free trade and that protectionist policies put into place by conservative administrations have made us stronger. The author is "a trade lawyer, was a deputy trade representative in the Reagan administration and the treasurer of Bob Dole’s 1996 presidential campaign":

Grand Old Protectionists, by Robert E. Lighthizer, Commentary, NY Times: Now that John McCain is ... the presumptive presidential nominee of the Republican Party, he can ...start worrying about winning over conservatives. ...

To prove his bona fides as a conservative, Mr. McCain and his defenders often cite his support for free trade. ... Mr. McCain may be a conservative. But his unbridled free-trade policies don’t help make that case.

Free trade has long been popular with liberals, and it remains so with liberal elites today. ... Ted Kennedy supported the advance of free trade. President Bill Clinton fought hard to win approval of the North American Free Trade Agreement. ...Barack Obama is careful to express qualified support for free trade, even when stumping in the industrial Midwest.

Moreover, many American conservatives have opposed free trade. Jesse Helms, the most outspoken conservative in the Senate for three decades, was no free trader. Neither was Alexander Hamilton, who could be considered the founder of American conservatism.

For almost 100 years after the Civil War, the Republican Party (led by men like Lincoln and McKinley) was overtly protectionist. Theodore Roosevelt, a hero of John McCain’s, wrote that “pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fiber.” ...

If you watched the Republican presidential debates ... you might believe that Ronald Reagan ... was a pure free trader. During a debate in Michigan, for example, Mr. McCain said that President Reagan “must be spinning in his grave” to hear Republicans expressing concerns about free trade. But ... President Reagan often broke with free-trade dogma. He arranged for voluntary restraint agreements to limit imports of automobiles and steel... He provided temporary import relief for Harley-Davidson. He limited imports of sugar and textiles. His administration pushed for the “Plaza accord” of 1985 ... that made Japanese imports more expensive by raising the value of the yen.

Each of these measures prompted vociferous criticism from free traders. But they worked. By the early 1990s, doubts about Americans’ ability to compete had been impressively reduced.

President Reagan’s pragmatism contrasted strongly with the utopian dreams of free traders. ... Anglo-American conservatism has rejected ivory-tower theories that disregard the realities of everyday life.

Modern free traders, on the other hand, embrace their ideal with a passion... They allow no room for practicality, nuance or flexibility. ... They oppose any trade limitations, even if we must depend on foreign countries to feed ourselves or equip our military. They see nothing but dogma — no matter how many jobs are lost, how high the trade deficit rises or how low the dollar falls.

Conservative statesmen from Alexander Hamilton to Ronald Reagan sometimes supported protectionism and at other times they leaned toward lowering barriers. But they always understood that trade policy was merely a tool for building a strong and independent country with a prosperous middle class.

Free traders like Mr. McCain instead rely too often on the notion that we should change the country to suit their trade policy — an approach that is not in the best traditions of American conservatism.

If Republicans want to label themselves as the party of protectionists (more walls!), that's fine with me. But attributing the strength of the US economy in the 1990s to the protectionist policies of the Reagan administration is more than a bit of a stretch. We're not sure why the economy took off in the 1990s, but it wasn't from protectionist policies for Harleys and sugar, or anything else.

Comments

[reason]

The GOP really is the party committed to the war against reality.

[ivan janssens]

Every argument the author gives against unbridled free trade (China becoming a superpower, U.S. diminished sovereignty because of the WTO bureaucracy, vanishingly small compared to, say, the CIA or the Pentagon, a falling dollar, rising trade deficits...)is wrong.

[reason]

This

His administration pushed for the “Plaza accord” of 1985 ... that made Japanese imports more expensive by raising the value of the yen.

Has nothing to do with free trade and everything to do with the real problem with globalisation as it actually is, a disfunctional international financial system.

[hari]

Congratulations Mark for finding this ideological piece on international trade policy ....

First, I'm confident Greg M will react dead against the perpetrator of this ideological protectionist nonsense.

Second, if true to color, and should McCain win, then we're surely in for end of WTO and Doha Round.

Third, what amazes me is that he's a trade lawyer of repute and should know better...trade policy is based not only on national interest but also global supply and demand in the international market place. International division of labour and comparative trade advantage plays significnt role in global trade policy. Otherwise, Wallmart would not have gone, as far as it did, on mainland China market. FDI/technology transfer by major S&P 500 firms would not have taken place; China's global trade could not have developed, as it has, since its membership of WTO. US made it all possible by negotiating China's entry into WTO!

My point is simple. Fortress America is not only a self-defeating strategic error (in thinking) but reduces America to an insular country (eg. China under Mao!).

[pgl]

Well?! After Reagan's strong dollar policy that Kudlow so loves (see a few AB posts on this one) led to the 1982 recession and huge trade deficit, the political hacks in the White House had to do something. So what they did was to tell Reagan to ignore some young pup on the CEA staff (think this fellow was named Paul Krugman) and adopt beggar thy neighbor trade protection. Expenditure switching did help offset the reduction in investment demand - eventually. Oh wait - you could have done the same thing with dollar devaluation. But don't tell Kudlow that.

[anne]

"Expenditure switching did help offset the reduction in investment demand - eventually."

Say what?

[save_the_rustbelt]

Ah guys, quit worrying.

Both parties are whores to Wall Street, just to different degrees.

Neither party means what they are saying about helping blue collar workers, although the Dems may throw some bones to the unions.

Not to worry - unless you are a blue collar worker of course.

And the white collar workers in the middle class are next.

[anne]

Remember, the only possible way in which it is possible to construct an insult is to demean women. What is important is to use sexist imagery to show just how rotten women are. There can be no possible insult other than an insult directed against women. I am impressed.

[anne]

There is something joyful about showing how much we despise women, nothing personal of course, we just need to show how rotten, really rotten, women really are. What fun.

[anne]

Wording is so much fun, as a white shoe trade lawyer writes of liberal elites, because there are no conservative elites, and an economists writes of political hacks because how could a Presidential adviser possibly worry about dollar values, high or low, and not be a hack.

[wjd123]

I'm afraid it's too late for conservatives not to be labled as free traders.

John McCain has declared himself a conservative and an unabashed free trader. Today there is no reason to believe that the two don't go together. For the most part Republican vote for free trade policies and Democrats vote against them.

Most Americans don't believe that free trade is good for the country. That's the political reality McCain faces. He can either continue standing out in the political rain declaring himself a free trader or run under the "free but fair" trade shelter where Clinton and Obama are huddleing.

My guess is that McCain will find his own way to fudge the issue. Of course he will be saddled with a conservative Republican Party that has consistently voted in the majority for free trade policies. That's current history.

[Publius Agricola]

The protectionism practiced by the Republicans is for a small wealthy elite and their stooges.

The Great Iraq Swindle: How Bush Allowed an Army of For-Profit Contractors to Invade the U.S. Treasury

http://www.commondreams.org/archive/2007/08/31/3519/

[save_the_rustbelt]

Anne: there are whores of both genders, I believe in equality, don't you?

says...

"Modern free traders, on the other hand, embrace their ideal with a passion... They allow no room for practicality, nuance or flexibility. ... They oppose any trade limitations, even if we must depend on foreign countries to feed ourselves or equip our military. They see nothing but dogma — no matter how many jobs are lost, how high the trade deficit rises or how low the dollar falls."

Listen to the crazed language, meant solely to demean and devoid of true content. Pay careful attention to the foil between those who believe in "practicality" and those that believe in "dogma". Of course the "practical" are really deep down inside more dogmatists than free traders. They are unable to see that allowing politicians to make decisions for them is giving power to a bunch of monkeys. Instead the "practicalists" operate under the assumption that our politicians and think tanks are omnipotent God's for who we must worship(only the ones that agree with our own personal dogmatic beliefs of course). Only these omnipotent beings can make decisions that make *us* better off.

*us* of course can sometimes mean the median person, it can mean the average person, it can also mean the top 5% or the bottom 5%. Or sometimes it means making farmers better off at the expense of consumers or making the MIC better off at the expense of everyone else. When a politician spews the garbage ideal that they are going to make *us* better off, think carefully about who *us* is in the context, since there will always be winners and losers, especially when we let a bunch of monkeys dictate who can trade with who.

says...

Note there is no such thing as NAFTA. It can more accurately be called NAMTA (North American Managed Trade Agreement).

[save_the_rustbelt]

Now that the primaries are over Ohio is three feet deep in manure, we can reinvigorate the economy by mushroom farming for at least a decade.

All of the candidates made promises they cannot keep. NAFTA is old news, revising it will do nothing. The factories are closed and many have been bulldozed, although some have been turned into job training centers for jobs that do not exist.

Globalization will continue and a generation of blue collar workers will be devastated, and no one is going to do too much about it. Nibble around the edges, maybe. Substance, no.

[anne]

Remember, what is important is to use vile language to demean women and to use the language again and again to show how much we despise women. There is a curiously rotten sort of thinking that makes demeaning women too important to stop.

[anne]

There is a special horrid thinking to using vile language to demean women, then finding a reason to continue to demean women. I am so impressed by the lesson on gutter prejudice. Do continue.

says...

See Chang's "Bad Samaritans" for a thought-provoking exploration of the varying extents to which developed and developing economies deploy protectionist policies.

Bottom line: All economies use them, sometimes for decades, to facilitate the development of new industries. And that free trade is a complete myth, of course.

[ken melvin]

The shift to free trade while holding on to an antiquated economic model; it's the combination what's deadly. We've automated jeden dinge and offshored the rest without providing another (other wages) means for distributing the wealth.

[Callahan]

Whatcha goana protect now, Walmart jobs?

Too little too late. Nobody wants to be a mean old protectionist anyway, let them jobs go to where they are more needed, and someday (no kidding), someday, just yoo wait n see, why we will be rewarded for being unprotected.

Yup, think I'll even stop wearing DEE-O-DUR-ENT, don't want to be labeled one a them nasty protectionists. No sir.

[save_the_rustbelt]

Anne, perhaps you are too delicate to be a part of the real world.

Meet me in Cleveland, I will introduce you to some blue collar workers, we will drink shots, talk football, and curse with hyphens.

Plenty of women know me and love me, as I am a true gentlemen of great charm and true civility, not phony political correctness.

Have a nice day.

[save_the_rustbelt]

"Service Sector Rebounds, But Still Contracting" - WSJ Economics Blog

What am I missing in this headline?

[Organic George]

Ecnomic growth under Regan... Pizzas.....Look it up if you don't believe me.

says...

merriam-webster's whore def:

1: a woman who engages in sexual acts for money : prostitute; also : a promiscuous or immoral woman

2: a male who engages in sexual acts for money

3: a venal or unscrupulous person

Rusty, did you mean 1, 2 or 3?

[pgl]

A follow-up that ties this to the Kudlow endorsement of Reagan's strong dollar policy over at Angrybear.

[save_the_rustbelt]

says:

"3"

[anne]

There are people who are too perverse to give up rottenness; the term has been and is directed against women no matter how it may have come to be otherwise used by people who have come to enjoy demeaning women while pretending otherwise.

[The Baron]

anne, please suggest a politically correct and acceptable term for a person or persons of either gender who sells their assets, political, physical, or influence for personal gain to the detriment of their constituents or sworn responsibilities.

Because I am certain, no matter the outcome in November, that we will have great need to use such a word frequently when discussing political and economic personalities after that point.

So if we can all agree in advance on a term that adequately describes our future, not to mention current, leaders, then perhaps we can dispense with the long sidebar complaints and distractions about language and honestly confront the fact that everyone we put into power is selling themselves to the highest bidder faster than we can actually elect them.

[Cynthia]

It'll all boil down to who can engineer the best lobby-machine to protect their piece of the economic pie.

[save_the_rustbelt]

Anne:

When political correctness aleviates suffering then I shall become politically correct.

I however live in a real world where all is not nice and neat and tidy and polite.

And what the Baron said....

On other matters, bad news on foreclosure numbers today, and the Democrats self-created conumdrum in Michigan is playing out.

[anne]

"Please suggest a politically correct and acceptable term for a person or persons of either gender who sells their assets, political, physical, or influence for personal gain to the detriment of their constituents or sworn responsibilities."

I enjoy clever insults, but I am poor at stringing together insults quickly or even remembering them, but British comics can be superb at this and I have to think to Fawlty Towers or something close. I will think.

[bp]

ask not what one's country can protect
ask what one can protect for the country

boeing or northrop
that is the question

whether to be made
in the homeland or euro

is a moot point
behind the flagpin lapel

as the dole is passed 'round
among the state pols

parasite cuts
taken by the trolls

don't face the tradeoff
of lost primo work by the proles

notsofast northrop
the next one's boeing

a matter of national honor
to preserve this competition thing

[kthomas]

Prof. Thoma finds this is amusing (wink wink). Whereas, I laughed so hard I barffed some of my breakfast.

What next? Will the GOP start claiming how they championed workers rights and environmental laws?

And happened to Grover Norquist? Did he get strangled in a bathtub or something?

What fascinating times we live in.

[kroniks]

"Fortress America is not only a self-defeating strategic error (in thinking) but reduces America to an insular country"

When was the last time America had a trade surplus?

[Callahan]

kthomas "fascinating times", in Michigan we call them times something else, due in part to the ravages of NAFTA.

Yea, Republicans are a watchin out fer us, just as Bile O'liely sez.

[RogerClemens]

Kthomas, I believe the "wink wink" refers to Austan Goolsbee.

There are fools (and sell-outs) in both parties. To date, however, Obama/Clinton have engaged in more anti-free trade talk than has McCain. Merely pointing out one of them (or allowing him to publish in your newspaper) doesn't change that. Hopefully, the Dem nominee will change his or her tune in the general election (and perhaps thereafter).

Roger

[Holly W.]

Both parties are Wall Street's lap dogs, just to different degrees?

Or minions, flunkies, toadies, boot- (or other) lickers?

The lap dog image at least shows the eagerness with which our elected officials seek to please the folks with the money.

And STR, you know some of us still love you.

[Cynthia]

Brilliant comment, bp! And I swear, you won't have any trouble passing for paine.;~)

[Callahan]

Holly W. what we have is "the best government money can buy". One of Lou Dobbs quotes.

[lonesome_moderate]

Wow. I didn't expect to see Republicans and Democrats vying to see which party can appear to be the most protectionist (wink, wink).

Interesting. I have been expecting exactly that, in part because of the comments I have been reading about trade on this blog (many of them from people who obviously don't spend a lot of time hanging around economics blogs).

[lonesome_moderate]

I hate to ascribe racist motives to people, especially after years of hearing cries of "racism" over issues that have nothing to do with race. But I am having a hard time understanding the focus on Mexico and NAFTA in any other terms. Yes, we have lost a lot of manufacturing jobs to foreign competition, but the vast majority went to China and other Asian countries. When the finger is so often pointed at the Mexicans instead, it sounds to me like the normal human impulse to blame people you see every day, rather than unfamiliar distant ones.

I am not happy about having come to this conclusion. If anyone has any other explanation, I would love to hear it.

[hari]

Reuters News - Canada & NAFTA

PM Harper said it is unfair to Obama to release secret info from gov min to the press, and asked the Speaker in Parliament, to suggest that someone was michevious in releasing the communication on NAFTA.

[save_the_rustbelt]

Holly W.

Mutual, of course.

[save_the_rustbelt]

Anne:

What do you think of UC Berkeley getting into bed (there I go again with the sex stuff), figuratively speaking, with the Saudis?

And isn't Harvard all wrapped up in that good repressive Saudi money?

Aren't these the same Saudis who repress women, gays, Christians, Jews, critics and anyone else who doesn't fall into line? Don't the Saudis still have religious police?

Gotta love liberals.

Show me the money!

[save_the_rustbelt]

lonesome:

I don't think it is so much racism as a couple of things.

1) Mexico was the first stop for offshoring
2) the failure of NAFTA has brought millions of Mexican illegals here

All this noise about NAFTA reminds me of the debates about exactly how the Titanic sunk. Interesting history, but little relevance to the real problem. Too late.

[anne]

Ah, Holly has the right idea, and when I find another such fine string of insults I will write them down. STR always means well, I know that. And, being sexually suggestive can be wildly amusing or cutting.

I may even be wrong about the word I am complaining about, after all the word is used so readily, but I really do think the word at this time in history is a sort of bashing club. Might there be a difference in future? I do not know, I do not even know whether the word was similarly bashing in Shakespeare's time. I wonder, and think so, but am not sure.

[anne]

STR was, of course, right from the beginning about the foolishness in the way Barack Obama's advisers chose to approach Canada on trade and chose to be defensive about seeming duplicitous. I thought the issue meaningless, but I was wrong, and am surprised a Middle Western adviser in particular would not have been more understanding, and the adviser would never have pretended to be an ambassador before checking with others in the campaign.

As for Saudi Arabia? I am lost, but will look for a story.

[Peter Schaeffer]

The Republican party has a history of sanity on trade issues. It is good that at least someone (Robert E. Lighthizer) remembers this. In recent years, the Republican party has been hijacked on trade issues by "market fundamentalists". The Democratic party has been somewhat saner. Maybe the Republicans will catch up. They have quite a ways to go... And I rather doubt McCain will lead the charge, sad to say.

It's funny how people who denounce Republican "market fundamentalism" when it comes to other issues, get all gooey eyed and reverential when the topic is trade (and the "I" word). Take a look at

“Modern free traders, on the other hand, embrace their ideal with a passion... They allow no room for practicality, nuance or flexibility. ... They oppose any trade limitations, even if we must depend on foreign countries to feed ourselves or equip our military. They see nothing but dogma — no matter how many jobs are lost, how high the trade deficit rises or how low the dollar falls.”

Is that ever true. Foreign protectionism, no matter how profound, isn’t even trivially criticized. Indeed, if anyone even dares to suggest a modest, the dreaded “P” word is invoked as some sort of totemic defense against any possible action.

Right now China is using exchange rate protectionism to impose a 100+% tariff on American goods while providing an equal “effective subsidy” to China’s exports. Note that the “effective subsidy” phrase is from Bernanke.

Of course, if someone suggests that the US demand RMB revaluation or impose compensatory tariffs and we get hysteria over “protectionism” and invocation of the dreaded Smoot-Hawley law as a complete defense against any action at all. A prior generation of Republicans were much more clear headed as in

“But ... President Reagan often broke with free-trade dogma. He arranged for voluntary restraint agreements to limit imports of automobiles and steel... He provided temporary import relief for Harley-Davidson. He limited imports of sugar and textiles. His administration pushed for the “Plaza accord” of 1985 ... that made Japanese imports more expensive by raising the value of the yen.”

[anne]

Worry about the effects of trade or population flows is reasonable, since there are always disruptions involved even in better times as the later 1990s while the middle 2000s are not better times, but as Paul Krugman in trying to be fair has shown in his latest writing knowing the cause of disruptions is difficult and cautious study is needed while scapegoating is simply destructively wrong.

says...

"Free trade has long been popular with liberals, and it remains so with liberal elites today. ... Ted Kennedy supported the advance of free trade."

Hahaha, what a crock of shit. Thanks to Kennedy I can't voluntarily trade my labor for less than $5.85/hour.

And who are these "liberal elites" in favor of free trade? I sense Lighthizer defines the "free" in free trade the same way Michael Moore defines "free" in free healthcare.

[donna]

"please suggest a politically correct and acceptable term for a person or persons of either gender who sells their assets, political, physical, or influence for personal gain to the detriment of their constituents or sworn responsibilities."

Um, a Repubican? ;^)

says...

odds are a "democrat" (~55-45%))

[EE@EE.com]

That's amazing since...

Georege W. Bush has signed, or attempted to sign more "Free Trade" agreements than ANY OTHER PRESIDENT IN US HISTORY. I can't imagine why progressives hate him so much, he's pushing their trade agenda full steam ahead---"Free Trade" first, then we can all talk about a non-existent social safety net that can't be paid for by the payroll taxes of minimum wage jobs INFORMATION WORKER jobs.

See the link, and stop hating yourself, just give in to your hate for poor & uneducated people!

http://www.ustr.gov/Trade_Agreements/Section_Index.html

[EE@EE.com]

"I enjoy clever insults, but I am poor at stringing together insults quickly or even remembering them, but British comics can be superb at this and I have to think to Fawlty Towers or something close. I will think."

Man-whores the world over are recoiling at your blatant sexism for deliberately pretending that they do not exist.

Blatant Sexist!

[EE@EE.com]

"I am not happy about having come to this conclusion. If anyone has any other explanation, I would love to hear it. "

I think people are upset because they are directly facing foreign competition with which they can't possibly compete due to wage - cost of living differentials, and local competition for jobs that were paying alot more just 10-15 years go from illegal aliens. The illegal aliens are local and have faces, so psychologically you can put a face to "Free Trade."

Then again, if you are one of those who is in the AMT tax bracket, then you wouldn't understand.

However, in my opinion, NAFTA didn't really lead to all that much offshoring of jobs--the company I work for did move a few factories there, but once China was in the WTO, then the flood gates opened.

NAFTA hurt the fail Mexican economy and created a lot of economic "Losers" who have to eat. They came here since going south of Mexico isn't economically much better. You would do the samething if you were in their shoes, they are acting rationally.

Ending NAFTA will not send 12m people home so that US citizens can better compete by having a more restricted labor supply, the illegals are here illegally remember?

Things need to get economically better in Mexico, then no walls or Minutemen will be needed. Otherwise, the INS would have to become larger than the FBI and local police force combined and you'd need a wall and sea wall, you'd basically have to create Constantinople's fortifications around the US.

If citizens are rational actors, as in most economic models, and citizens believe they are only getting negative results from "Free Trade," then what do you think will happen? Waving your hands will only change the minds of Fox news viewers.

[lonesome moderate]

EE, thanks, as an explanation for why people blame NAFTA what you say makes sense. I of course strongly disagree with that characterization of NAFTA's impact, but we can leave that debate for another time.

One thing I do need to mention, though--south of Mexico isn't economically "not much better", it's worse, far worse, and the gap is growing. You can see this in the apprehension numbers by the INS, which show apprehensions of Mexicans declining while those of Central Americans continue to increase.