Here’s just one example of why it matters that the people and institutions setting economic and trade policy actually know what they’re talking about. Americans have been experiencing sticker shock at the gas pump. Knowing how much cheaper gas is in the United States than in so many other countries I’m usually quite sanguine about gas prices here (it helps that I don’t have a daily commute, I admit) but even I’ve been shaken by the fact that it takes $40.00 to fill up my little car. Well, one of the Republican candidates has promised to get gas back to $2.50 per gallon if he is elected. This statement ignores the reality that the price of gasoline is affected by a world market, not just by what happens in the United States. And it appears that one of the factors causing this price increase has been the rising demand for gas in the emerging economies. As consumers there get more disposable incomes they buy cars, among other things. Their growing demand is one of the key factors pushing up the prices for everyone, notes the Christian Science Monitor. Meanwhile, US refineries are losing money and closing, relocating to the markets of the immediate future. India is home to the largest oil-refining complex in the world, with a refining capacity equal to what exists in the Northeast US. Increasingly, however, its products are being reserved for domestic consumption.
So, false and illusory promises aside, what are the Republican candidates saying about what would be their trade policy, if elected President?
Rick Santorum’s agenda focuses on negotiating free trade agreements so that US companies can export more. Point 8 of his 10-point First 100 Days Economic Freedom Agenda says within his first year in office, he would negotiate and submit to Congress at least five trade agreements that increase US exports. Putting aside his questionable timetable, his best bet would be to focus on negotiating with the emerging markets, and be prepared to make significant reductions to US subsidies of domestic agriculture, an issue which has stalled the WTO’s Doha Round, Free Trade Agreement of the Americas (FTAA), and other trade negotiations. Alternatively, he could instead focus on concluding negotiation of the Trans-Pacific Partnership (TPP) with nine countries begun by the person he hopes to succeed.
Newt Gingrich’s Contract with America includes a plan for job creation, which focuses on tax cuts and regulatory reform, but contains no details on what his trade policy would be.
Mitt Romney’s platform more clearly articulates a direction for his trade policy, very briefly on his website, and more explicitly in his American Century White Paper. In this paper he articulates a plan to rebuild the foundations of US economy by, among other things, increasing trade, energy production, human capital, and labor flexibility.
With respect to trade, the paper’s highlights include:
The launch within his first 100 days in office of a public diplomacy and trade promotion effort in the Americas – the Campaign for Economic Opportunity in Latin America (CEOLA) to “extol the virtues of democracy and free trade” and build on the benefits conferred by the free trade agreements already in force between the United States and countries in the region (with Chile, Colombia, Panama, Peru, CAFTA, etc.) Apart from planning to use it as a campaign to isolate Cuba and Venezuela, CEOLA will also seek to involve US and Latin American private sectors to expand trade through the region with initiatives that help US companies do business in LA and vice versa. CEOLA will be a Latin American precursor to a second key highlight of Romney’s plan –
Creation of a Reagan Economic Zone which will involve pursuing deeper economic cooperation among like-minded countries (code for excluding Cuba, Russia) around the world that are committed to principles of open markets. The benefits of the zone, which will codify the principles of free trade, will be a “powerful magnet that draws in an expanding circle of nations seeking greater access to other markets”. China, the plan continues, will be offered the opportunity to join as an incentive to end its “abusive commercial practices”. However, should it choose not to join, the trade with its regional neighbors will isolate China; similarly, trade pacts with Russia’s neighbors will presumably have a similar effect on that other giant.
There is so much to criticize in these quite vague and grandiose plans — not least of which is the value of any plan which aims to isolate two of the world’s largest economies — but this post will limit itself to one comment. Romney’s plan ignores the existence, and the lessons to be learnt, from the World Trade Organisation (WTO), which already has the mission of liberalizing access to markets around the world among its 153 members, including China, and soon to be Russia. The WTO is the club to which all countries aspire to join because, despite its shortcomings, it provides a multilateral forum within which developed and developing countries can assert their concerns and issues. Despite the challenges of operating in such a forum, it is unlikely to be replaced by a US-led Reagan Economic Zone any time soon!
Any US President should focus his or her administration’s efforts on building on the existing foundations, and working to address those aspects of its trade policy which pose such challenges to the countries to which it wants to export.
