CWT Blog

The Republican Presidential Candidates on Trade

Thu, 20 Dec 2007 14:35:00 CST

Michael Virga

December 20, 2007 - The Republican primary ballot offers no shortage of possibilities for the undecided voter. However, several candidates show distinct potential for gaining their party’s nomination and they are: Rudy Giuliani; Mike Huckabee; Mitt Romney; John McCain; and Fred Thompson. Given these candidate’s conservative ideological underpinnings, it is not surprising that all support free trade to some extent. A closer examination, though, shows differences on the extent and nature of their support.

Giuliani:

Rudy Giuliani has been a vocal advocate for free trade while campaigning. Asked at a debate whether free trade benefited America, Giuliani responded, “Well, I think we're on a verge of going in one direction or another. I mean, for example, you want to get specific, the four trade deals with Peru, Colombia, Panama, South Korea that are in front of Congress right now, which the Democrats are trying to block, would be good deals for the United States.” Moreover, Giuliani’s “12 Commitments” plan calls for vigorously advancing free trade through tax and regulatory reform, in addition to renewal of the fast track authority and reinvigorating the Doha Round of WTO talks.

Huckabee:

Mike Huckabee has said that he supports free trade, ”as long as it is fair trade.” Neither his website nor previous statements offer much more clarity on his position, or to the priority that trade measures would receive in a Huckabee administration. During a recent televised debate, Huckabee stated that, “if somebody in the presidency doesn’t begin to understand that we can’t have free trade if it’s not fair trade, we’re going to continually see people who have worked for 20 and 30 years for companies one day walk in and get the pink slip and told ‘I’m sorry but everything you spent your life working for is no longer here.’”

Romney:

Mitt Romney has expressed support for free trade in terms of both economic and foreign policy. With regard to the former, Romney explained his stance at a recent debate, saying, “Well, I believe in trade, but I believe in opening up markets to American goods and services… I want to make sure that the American worker gets a fair shake. We need to make sure that the Chinese begin to float their currency and they protect our designs and our patents and our technology. We need to make sure that the American workers don't have to carry the burden of extra taxes as we sell our products around the world.” Romney also believes that free trade is a means of strengthening relationships with allies, especially in Latin America, and supports proposed and passed FTAs with countries of this region.

McCain:

John McCain has been a supporter of free trade in both his campaign statements and his voting record. According to his website, McCain believes in the benefits of opening up both foreign and domestic markets to competition, and is in favor of an increased Trade Adjustment Assistance (TAA) program. In response to a question on the benefits of free trade, McCain stated that, “it sounds like a lot of fun to bash Chinese and others, but free trade has been the engine of our economy in the last half of this year; it will continue to be. And free trade should be the continuing principle that guides this nation's economy.”

Thompson:

Fred Thompson boasts a pro-free trade voting record from his time in the U.S. Senate. He voted in favor of normalizing trade relations with China and Vietnam, establishing the Andean Trade Preference agreement, as well as for renewing the President’s fast-track authority. Thompson has also been an advocate for free trade on the campaign trail, saying at a recent debate that, “free and fair trade as been good for America; responsible for millions of jobs in this country. We cannot turn our back on that…But in terms of turning our back on free trade, that's not the direction to go in. It's meant too much for our country. And every country in the history in the world that's ever turned its back on free trade has suffered for it as a consequence.”

The Democratic Presidential Candidates on Trade

Thu, 20 Dec 2007 10:15:00 CST

Ezra Finkin

December 20, 2007 - A recent AP article asked both Republican and Democratic Presidential candidates their position on a wide range of issues from the Iraq war to stem cell research. On trade, the article stated this of the leading Democratic candidates:

Clinton: Seek to reopen North American Free Trade Agreement to strengthen enforcement of labor and environmental standards.

Edwards: Make human rights "central to our trade policy." NAFTA and other regional trade agreements have been a "total disaster." Supported bringing China into World Trade Organization, says it's "wrong to not hold them responsible for their obligations."

Obama: Seek to reopen NAFTA to strengthen enforcement of labor and environmental standards

Stump speeches by all three back up these broad positions on free trade.

John Edwards has taken the strongest position against trade. At a recent stump speech in Iowa, Edwards stated that he would would renegotiate the North American Free Trade Agreement and “come down hard” on the Chinese for dumping cheap goods on the American market. Edwards states: “… this agreement does not meet my standard of putting American workers and communities first, ahead of the interests of the big multinational corporations, which for too long have rigged our trade policies for themselves and against American families.” Here, Edwards fails to note that under this agreement, the United States gets to export products – made with middle-class American union labor – to Peru.

Of all the candidates, Hillary Clinton maintains the most detailed stance on trade. Like Edwards, she calls for a renegotiation of NAFTA in the name of protecting American workers and the inclusion of tough labor and environment standards in forthcoming free trade deals. However, her voting record remains an interesting mix of support and opposition to free trade. For example, she opposed the Central American Free Trade Agreement (CAFTA) but voted for the Australia free trade deal and supported Vietnam’s entry into the World Trade Organization. A recent article also suggests that many of her husband's key trade and international economics advisors are now on the Clinton campaign. These were the same advisors that counseled the President in support of the creation of the World Trade Organization and the North American Free Trade Agreement – the same deal she now wants to renegotiate. This on-again-off-again position on trade has caught the eye of some influential labor leaders who would like to see a stronger anti-trade position from the former first lady.

Obama too has a somewhat on-again-off-again position on trade. The junior senator from Illinois supported the Oman free trade agreement yet opposed the Central American free trade deal stating that labor and environment provisions were lacking. According to his campaign website, international trade does not even make it onto the key issues he plans to tackle. Yet Obama has made statements that he wants to rengotiate NAFTA to include strict labor and environment provisions. One sound byte heard over an over again is that trade agreements should be good for Wall Street and for Main Street.

Shifting American Attitudes on Trade

Fri, 7 Dec 2007 10:32:00 CST

Michael Virga

December 7, 2007 - It seems like more and more Americans are thinking differently on trade these days. A recent study conducted by the German Marshall Fund of the U.S. found some interesting trends among the American public regarding international trade, aid and investment. The GMF’s poll discovered that Americans are growing progressively more skeptical of the benefits of free trade, increasingly seeing it as more of a threat than an opportunity. According to the survey, while about half of Americans thought trade cost more jobs than it created in 2005, that number rose to 57% in 2007. Moreover, the percentage of American respondents that looked favorably on trade with some of the world’s poorest countries slumped from 75% last year to 69% in 2007.

These disparaging numbers beg to ask the question: What is souring the American people on trade? Among the people trying to find out are the researchers and scholars at the Third Way, a progressive think-tank looking into these recent declines in public support. It is engaged in a year-long study on why American attitudes are shifting on trade, and what is giving anti-trade voices more clout in this grand debate. In it’s initial paper on the topic, entitled "Why Lou Dobbs is Winning," the Third Way identifies several causes of the American people’s declining support for trade. The study points out that very often, those who lose from trade make a much more compelling case for protectionism than those advocating for free trade. These anti-trade activists appeal to values, such as the American working-man who is displaced by imports, while the pro-trade champion is to often far less persuasive, turning to abstract economic theory or cold statistical data to make their case. Moreover, the American government no longer attaches open trade policies to some higher calling or foreign policy priority, as it did in the contest with the Soviet Union during the Cold War. Perhaps most poignant of all the report’s findings was that American leadership is not offering a suitable vision of how to strengthen and grow the American middle class, and this uncertainty is leading many Americans to overestimate the negative impact of trade on their lives.

Despite the increasingly vociferous complaints of those who have unfortunately lost from trade, and the growing concern among ordinary Americans over the costs of trade, it seems that the facts continually back up the economic logic of free trade. Open trade continues to create more jobs than it costs. In looking at some of the recently-passed or proposed free trade agreements, for example, the countries we stand to cooperate with will only increase up the number of export-related jobs in America; furthermore, Peru, Panama or Colombia are not poised to take over the American market with an influx of their goods.
However, in communicating the realities of free-trade, especially in terms of explaining its wide-ranging benefits, separating negative emotions from assessing its impact, and offering a compelling case attached to an overarching goal, pro-traders have a long way to go. Thankfully, research institutions like the German Marshall Fund and the Third Way are continuing to offer incredibly valuable and timely information that will help accurately inform the American people, in addition to their policy makers, in the debate over trade.

In the Debate on Chinese Currency, Wall Street's Voice Resounds in Congress

Fri, 17 Aug 2007 14:42:00 CDT

Michael Virga

August 17, 2007 - Legislation has been working its way through both the House and Senate recently with the goal of forcing China to revalue its currency, the Yuan. Lawmakers and interest groups have been loudly accusing the Chinese government of grossly undervaluing its currency, thereby contributing to America's trade deficit with the People's Republic. Their argument is that if the Yuan is artificially cheap, Chinese producers have an unfair advantage in exporting products that are cheap in the U.S., while American firms cannot sell their comparatively more expensive goods in China. However, as is often the case in Washington, some of the outside voices calling for Congress to punish China have more than America's best economic interests at heart.

A recent article on the Washington Post's website by Albert Keidel, former Acting Director of the Office of East Asian Nations at the Treasury Department, sheds light on self-serving interests in the financial sector that are advocating for Chinese currency-change legislation. Keidel explains that American investors and speculators bought up Yuan-based financial assets following the most recent economic recession and corresponding drops in American interest rates several years ago; Chinese financial assets were paying higher interest at the time. However, fast-forward to the present and the motives of these speculators become quite clear. If America was somehow able to force China into letting its currency appreciate, as some proposed legislation aims to do, those individuals and firms holding Yuan-based financial assets would see their assets' value skyrocket. Think of it this way - Say you bought a Chinese asset, valued in Yuan, for $100, and then Congress enacted a bill that caused the Chinese currency to appreciate by 40%: your asset would be worth $140.

For his part, Keidel does not believe that any legislation will be able to force China to revalue its currency, and that even if it were possible, a more valuable Chinese Yuan would not change America's trade deficit with China. In looking at American trade with China, it is important to realize that American exports to China are growing at a faster rate than with any other country in the world, creating jobs in the process. It is also a neglected truth that trade with China allows Americans to have access to a wide array of affordable consumer goods. However, the Wall Street speculators calling for Congress to take action against China are just one voice in a chorus that wants to put protectionism and special interest before the American people's economic well-being.

Who Exactly Are Safety Standards Protecting?

Thu, 9 Aug 2007 13:04:00 CDT

Michael Virga

August 9, 2007 -- Most people would agree that governments have a legitimate role in ensuring the safety of any goods, ranging from food to medicine to children's toys. Here in the U.S., consumers are protected by a network of Federal agencies. Enormous entities like the Food and Drug Administration and the Consumer Products Safety Commission are devoted to this task. Similar government agencies exist in other countries. Yet when it comes to imports, an alarming trend shows that many governments have begun using their role as consumer guardians to play politics with safety issues. This is nowhere more true than with regard to imported food. Many of the world's major trading nations, including India, China, Russia and the United States, are restricting each other's food imports over claims of uncertain product safety; however, safety may not be the only thing on the agenda for many of these governments.

Using safety standards to protect consumers from dangerous products is certainly a laudable policy. Yet using safety standards to protect domestic producers and farmers from foreign competitors is not only unfair but hurts consumers. After many decades of reducing import taxes, many countries can no longer use these taxes to protect certain domestic producers from the global marketplace. With tariffs on certain products already low, governments may use safety concerns an effective way to exclude imports that would otherwise out-compete these domestic producers.

As it pertains to agricultural commerce, trading nations impose their own specific safety and sanitary regulations on imports referred to as "Sanitary Phyto-Sanitary (SPS)" standards. There is no internationally agreed-upon set of SPS standards, so countries can essentially concoct whatever standards they want under the guise of consumer safety. For example, the European Union prohibits the import of many U.S. agricultural commodities containing genetically modified organisms for fear of food safety despite broad scientific evidence to the contrary. A recent article in The Wall Street Journal shows how countries are increasingly using SPS standards as a non-traditional, non-tariff barrier to food and goods entering their respective states.

This type of discriminatory trade policy hurts consumers in a number of ways. Limiting imports of cheaper foreign products will undoubtedly drive the price of those goods much higher, as well as limit the variety foods and goods available to consumers. Another dangerous risk associated with using arbitrary safety rules to exclude imports comes from the risk of retaliation from our trading partners. For example, if America were to slap an arbitrary ban on another country's exports for supposed fear of safety, there will likely be retaliatory safety bans by that country against American goods. Such a development would hurt America's exports to the rest of the world and potentially even result in a loss in American jobs. It is important that governments employ safety mechanisms to protect their citizen-consumers, but the use of safety standards as trade barriers could prove more harmful than any faulty product.

A Closer Look at America's Trade with China

Thu, 2 Aug 2007 13:16:00 CDT

Michael Virga

August 2, 2007 -- China has now become the 4th largest purchaser of our exports. The People's Republic bought $52 Billion worth of American goods in 2006 - a 32% increase over the previous year. U.S. exports to the world's most populous country are rising five-times as fast as our exports to the rest of the world, and there is no reason to expect this trend won't continue. Despite our record-setting sales to China, we are buying more from China than it buys from us. To some elected members of Congress, this is just inherently unfair and they are quick to call for putative import taxes on Chinese goods purchased by American consumers.

The average American family saves when we import goods that are cheaper to buy abroad than produce at home. In fact, hard working families and the neediest of Americans stand to benefit the most from our trade relationship with China since that country has been an enormous source of competitively-priced consumer goods. It is clear that without this trade relationship hardworking families would be forced to pay more for the essentials of life.

Instead of recognizing the importance of our trade relationship with China - both as a growing destination for our exports and the opportunity to offer millions of needy Americans price savings - Congress appears to be moving towards imposing putative measures on China. Some of out elected representatives claim that the Chinese undervalue their currency, the Yuan, to make their imports cheaper in U.S. markets while at the same time making our exports more expensive in Chinese markets. Some of these proposals call for import taxes of up to forty percent on everything Americans buy from China in order to punish the Chinese. Of course, this proposal will most likely inflate the prices that needy Americans pay for the essentials of life while doing almost nothing to promote American exports to China. It is about time the members of Congress consider needy American consumers in their rhetoric about China.

Workers and Consumers Get a Raw Deal from Sugar

Mon, 16 Jul 2007 17:30:00 CDT

Ezra Finkin

July 12, 2007 -- Just this week the House Agriculture Committee released its Farm Bill outlining new changes to federal support for farmers. As the bill relates to sugar, it looks like consumers and workers might get less than a sweet deal.

For years our Sugar Program as it is known channels big subsidies to sugar growers to reduce their costs and let them grow more sugar. Yet that's not all Big Sugar gets. The sugar program also severely restricts the amount of foreign supplies of sugar that is allowed into the US market. These restrictions - a blend of very high border taxes and quotas - are designed to make sure that US consumers don't get the benefit of tasting sugar grown in other countries such as Brazil and Haiti.These trade restrictions on foreign supplies of sugar have actually been partly to blame for the elimination of 11,000 sugar refining and candy manufacturing jobs. These industries have had to close their doors to US operations and open shop overseas to take advantage of cheaper supplies of sugar abroad. Of course these jobs wouldn't be lost if Congress eliminated the combination of highly restrictive quotas and tariffs.

Instead of turning things around Congress has made this bad system worse. The recently released Farm Bill proposes to make it that much more difficult for US candy makers and consumers to get access to foreign supplies of sugar. In the end, it is workers and consumers that will pay for this kind of protection offered to such a wealthy few.

Click here to read CWT's letter on the proposed changes to the sugar program.

Congress on Track to Renew Regional Free Trade Deal

Tue, 26 Jun 2007 15:26:00 CDT

Ezra Finkin
June 26, 2007 - If all goes to plan, a free trade pact comprising many South American countries will be renewed before July 4th. Many of the countries comprising the Andean Trade Preference Act, are responsible for sending consumer products to American stores. The deal offers benefits in the form of tariff reductions or eliminations on many products. For consumers, this means lower prices and a wider selection of goods. The extra boost in production in these countries, like Peru, means the potential to offer many workers better wages and a better way of life. So it really is a win-win for everyone.

Yet the original trade deal is set to expire soon. So our elected members of Congress are intent on renewing these trade benefits for another two years. Click here to read CWT’s letter urging swift Congressional action.

Consumers Once Again Foot the Bill for Corporate Welfare

Mon, 25 Jun 2007 16:32:00 CDT

Ezra Finkin

June 25, 2007 - Last week, the Senate passed its energy bill that included provisons designed to reduce greenhouse gas emissions and improve fuel standards for automobiles. Unfortunately, the Senate failed to include a provision eliminating very high tariffs on ethanol. These high tariffs are designed to keep out efficient foreign supplies of ethanol - most notably from Brazil - by making them very expensive relative to US supplies. Yet these high tariffs help contribute to high gasoline prices at the pump and food prices at the grocery store.

Of course eliminating these tariffs would help reduce fuel and food prices paid by consumers. In the name of "energy independence", the Senate agreed not to eliminate or even reduce these tariffs that benefit the many large corporate ethanol producers.

It is time that our elected officials consider the virtues of energy independence against the real costs to American consumers. In fact it is the neediest Americans that will pay the price of this ethanol policy through persistent high gas prices and paying more just to feed their families.

Time is Running Out for a Successful Doha Round

Mon, 25 Jun 2007 09:18:00 CDT

Sarah Press

June 22, 2007 -On June 21st, four major WTO players met in Potsdam, Germany to breathe life in the current round of free trade talks that formally commenced in 2001 in Doha, Qatar. Unfortunately, the talks between leaders of developed nations, the US and EU, and advanced-developing nations, India and Brazil, failed to reach a consensus. Brazil and India were hoping to get a reduction in the subsidies the EU and US give their own farmers that results in artificially cheap food prices relative to agricultural goods grown by poorer developing economies. Meanwhile, wealthy countries were hoping for a cut in relatively high tariffs in many developing nations for example: to gain more access to Brazil and India’s highly protected industry sectors. Representatives for the developed and developing economies just couldn’t agree.

Stalled free trade talks is nothing new. In fact the previous round of formal trade talks that engendered the World Trade Organization – the Uruguay Round - took over six years to complete. Consumers, not only in the US but around the world, stand to loose the most from stalled efforts to reduce border taxes.

Even if trading partners can reach an agreement, time is running out to make the Doha deal a reality. Trade Promotion Authority granted to the Bush Administration is scheduled to expire very shortly, on June 30th. With the Bush Administration lacking the fast-track TPA, Congress will need to approve ro disapprove the deal with a straight up-or-down vote not subject to amendments. So far, Congress has not renewed this fast track authority and Congressional leaders have not seriously signaled their intent to do so.