Thursday, February 28, 2008

How to Win Friends and Influence People - Blame Them For All Your Problems

Update at bottom

Today's Investor's Business Daily looks at the Clinton and Obama positions on NAFTA and finds them a little disturbing:

In Tuesday's debate, Democrats blasted the North American Free Trade Agreement. Sure, they're pandering for Rust Belt votes. But do they ever consider the impact of their statements on our allies?

First off they apparently don't know which countries belong to NAFTA:

"In Youngstown, Ohio, I talked to workers who have seen their plants shipped overseas as a consequence of bad trade deals like NAFTA, literally seeing equipment unbolted from the floors of factories and shipped to China, resulting in devastating job losses and communities completely falling apart," Democratic front-runner Barack Obama said at a Texas debate last week, making sure that all the woes of China trade got wrapped in the word NAFTA.

or know what provisions it contains:

"I would immediately have a trade timeout, and I would take that timeout to try to fix NAFTA by making it clear that we'll have core labor and environmental standards in the agreement," said Obama's rival, Hillary Clinton. Likewise, Obama spoke of using the "hammer" of withdrawal to enforce compliance.


The demagoguery is particularly objectionable because it's dishonest. First, the NAFTA pact wasn't shoved through by fiat. It was negotiated over years by the Clinton administration, with major input from both Republican and Democratic Congresses.

Everyone got his or her say at the time, and after many debates, the agreement passed both houses in late 1993.

Unlike our trade with China, which is subject to tariffs but contains no major labor or environmental demands, NAFTA did include labor and environmental standards, with the trade-off for Mexico and Canada being the permanence of the treaty.

Subsequent ones, such as 2007's Peru free trade agreement, and the nearly identical pending Colombia pact, required even tougher labor and environmental standards to ensure passage.

Or in all actuality understand the purpose of agreements like NAFTA, which aren't really about trade at all but about stability.

By signing agreements like NAFTA the United States basically guarantees that if the other trade partner implements some political and economic reforms we will reward them by providing an outlet for their products. It's like your parents co-signing the loan on your house. What Hillary and Obama are doing is basically calling the bank and saying come foreclose because we aren't going to guarantee the loan anymore.

This not only insults our allies and trading partners, it signals to everyone else that America's capricious, chest-thumping protectionist ally, Mexico, a third-world nation that is trying hard to transform itself into a first, bears the brunt of this coded jingoism.

That's because trade pacts these days are about more than just trade — they represent long-term strategic partnerships. But after this talk, who'll want to sign a permanent trade deal knowing they'll be threatened by ambitious politicians every election season?

Far from being an enemy, Mexico is a partner with whom we did $350 billion in two-way trade last year. In the process, we've gained millions of high-paid jobs in the U.S. The relationship has boosted U.S. incomes an average $2,000 per family since 1994. Besides buying 35% of our global exports, Mexico and Canada are also two of our biggest oil suppliers, selling us energy we'd be in huge trouble without.


Nations give up a lot to sign free trade pacts with the U.S. And some, such as Mexico, endure considerable internal opposition.

But they do it not because selling cheap toys here is such a big deal, but because embracing the trade pact's legal infrastructure comforts investors and helps lure foreign investment.

For these countries, those investments are their future.

Threatening to renege on a permanent treaty — as Clinton and Obama are doing through their identical vows to "opt out" of the deal — signals loudly that America's word is no longer its bond. A permanent pact with the U.S., it turns out, isn't so permanent.


BTW - Any guesses on which administration granted China permanent Most Favored Nation status and paved the way for China's WTO entry? Anyone? Anyone? Bueller?

Update 2/28/2008 0727

The Financial Times aske the trade representatives of Mexico and Canada what they thought about Clinton's and Obama's trade rhetoric. Predictably they aren't thrilled.

Arturo Sarukhan, Mexico’s ambassador to the US, told the Financial Times that the US, Canada and Mexico had all benefited from Nafta and warned against reopening negotiations.

“Mexico does not support reopening Nafta,” he said. “It would be like throwing a monkey wrench into the engine of North American competitiveness.”

Mexican diplomats believe a renegotiation could resurrect the commercial disputes and barriers to trade that the agreement itself was designed to overcome.

Jim Flaherty, Canada’s finance minister, also expressed “concern” about the remarks by the Democratic candidates.

“Nafta is a tremendous benefit to Americans and perhaps the [candidates] have not had the opportunity to familiarise themselves with the benefit to Americans and the American economy of Nafta,” he said.

h/t Megan McArdle (even though she is a rich and famous Atlantic blogger and doesn't really need it)

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