Perspective on trade in the Obama Administration
During the presidential primaries and in the campaigns, there was a lot of rhetoric about the need for “fair” trade instead of free trade. Candidates were in a populist mode, catering to critical manufacturing states that have lost jobs and serving up trade as the villain.
Now that Senator Barack Obama is the President-elect, there is renewed speculation on what path his administration will take on international trade. Will he make good on his campaign rhetoric that echoed the Democratic platform’s call for renegotiation of trade agreements to include even more stringent labor and environmental standards? Will he continue to hold up pending trade agreements with close U.S. allies? Will he embrace isolationism and protectionism or adapt to geopolitical realities?
In a new C:\Spin publication, I provide some perspective on the outlook for trade in the Obama Administration. I opine that President Obama will face enormous pressure to make good on some of his campaign promises on trade. But, with his top-notch economic advisers, he may pull back from drastic anti-trade actions that would harm the fragile economy and alienate U.S. allies and trading partners.
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More Trade Means More Peace
If goods do not cross borders, then soldiers will.
It’s an old saying. Maybe even a cliché. But there is some truth to it. What wonderful news, then, that India and Pakistan have re-opened a trade route through the Kashmir region.
Soldiers have been crossing that border for 60 years. Replacing those soldiers with spices, apples, and other, ahem, non-fatal goods will have two positive effects. First, those goods will become cheaper and more abundant in India and Pakistan.
Second, the new trade route will help to strengthen the blossoming but still fragile peace; killing the customer is bad for business. Indians and Pakistani in and around Kashmir are developing a financial incentive to get along.
Expanding international trade is not just good economics. It is good foreign policy. Congress and our next president, whoever he is, would do well to heed that lesson.
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Putting my money where Chevron’s mouth is
Chevron has plastered a series of posters all over the Washington, D.C. metro system as part of an advertising campaign titled, “will-you-join-us?” Join Chevron how? By becoming an employee and helping Chevron produce the petroleum products consumers need? Nope. By buying Chevron stock and becoming a shareholder? No again. By joining the fight against anti-consumer policies like oil drilling bans and carbon cap-and-trade schemes? Not a chance.
Each poster features an earnest-looking adult who vows to consume less energy—or at least think about it. Here are some of the captions: “I will use less energy,” “I will leave the car at home more,” “I will unplug stuff more,” “I will reuse more stuff,” “I will finally get a programmable thermostat,” “I will carpool to work,” “I will consider a hybrid” (how bold!), and (bolder still), “I will take my golf clubs out of the trunk.”
To join Chevron means repenting of our fuelish ways. It means buying less of Chevron’s products. But if buying less is good, then buying none is better. Doesn’t Chevron CEO Dave O’Reilly understand this simple logic?
Maybe Mr. O’Reilly thinks Chevron will earn green brownie points by talking as if oil consumption were an addiction to be broken. But de-legitimizing his company’s product is suicidal, because instead of appeasing those who seek to tax and regulate Big Oil out of existence, disparaging energy use will only reinforce the perception that the oil bashers occupy the moral high ground.
Until and unless Chevron changes its tune and starts explaining why abundant, affordable energy is essential to human flourishing, I will “join” Chevron by boycotting its products. And if enough consumers join the boycott, then maybe, just maybe, Chevron will wise up.
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Life’s two certainties (being sold out by the Swiss may be one of them)
As yesterday’s New York Times reports. Lost in the universal focus on the credit crisis, we have seen a somewhat troubling change taking place in Switzerland’s longtime bank secrecy laws.
Switzerland’s tax authorities, under pressure from a growing United States investigation into the Swiss bank giant UBS, are expected to hand over confidential data on wealthy American clients of UBS to the Justice Department, two people briefed on the matter said Tuesday.
The move would represent a significant shift in Switzerland’s banking secrecy laws, whose tradition dates to the Middle Ages.
Swiss neutrality (which is irritable to some) and stability has enabled its banking sector to become a source of prosperity for the nation. Reasonable exceptions to their secrecy laws for actual criminal activity should be allowed, but forcing banks to share private information on its clients merely for ’suspicion’ of tax evasion (something often disputable due to folks scrounging through the complicated tax code to reduce liability) seems quite dangerous. Especially since Swiss tax law has a different view of tax evasion than the U.S.
Swiss law makes disclosure of client data or names a crime unless the Swiss authorities think that the client has committed a serious crime, like money laundering or tax fraud. Unlike in the United States, Switzerland does not consider tax evasion to be a crime, though both countries have largely similar definitions of tax fraud.
And the Swiss are capitulating! In direct contradiction to their own legal view of tax evasion. Even though some may argue that this is moot because the U.S. does not consider a financial transaction as something beholden to privacy rights, the Swiss do–and besides, the U.S. view is wrong. A person’s financial records should be considered as sacred as their medical records.
Every citizen should maintain a healthy distrust of its government, after all, we have seen federal bureaucracies used to abuse the rights of citizens in many ways by many different regimes. If the government has the power to search through someone’s private financial dealings in another country solely on suspicion, where does our right to privacy stand? In terms of what constitutes law-breaking in one country as opposed to another, can the U.S. impose its view of a crime on another sovereign nation? Here, the U.S. Justice Department wants to see foreign bank records of thousands for the suspicion of committing an act NOT considered a crime in the country in which those records are held (I know, it happens).
Under pressure in recent months from the Justice Department, Switzerland’s justice ministry, taxing authority and banking regulator have adopted the view that some American clients of UBS may have committed tax fraud.
Note what this says, “Under pressure…[from the DOJ],” Swiss officials “have adopted the view…” that sees, contrary to their own law, these folks as criminals–because the DOJ ’suspects’ that they are.
So where does this lead? If the DOJ can pressure a foreign authority into ignoring its own legal views, where does this leave the U.S. on other issues, namely environmental and other laws that seek to usurp national sovereignty (there are a few)? What’s worse, under U.S. tax law, a U.S. citizen can still be taxed on income he earns outside of its borders and cannot renounce his citizenship solely to avoid taxes (how they’d find out who knows)–which is in my opinion just wrong–leaving you with the IRS and DOJ chasing down every red cent of your money they feel entitled to. Add to that some of the invasive banking provisions of the PATRIOT Act, and you have further intrusion into people’s lives and business by a government that knows no boundary. This is not a “pro-rich” or pro-tax cheat view, but a pro-civil rights and sovereignty view.
-GH
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A note from Fred Smith on the battle for free trade
Some thoughts on why our side is losing in its efforts to promote and defend free trade:
- From the time of the GATT onward, the primary approach to trade liberalization has been based on mercantilistic arguments. What will another nation sacrifice to gain the right to benefit our consumers? That approach — always based on real-politics - not intellectual considerations arguably worked in a world where rent-seeking was limited, where the trade negotiation entity (the GATT) was weak, when the focus was on global arrangements rather than regionals or bilaterals, and when trade had not become the tool to advance “social justice” in the world. None of those conditions any longer exist. Isn’t it time to rethink whether it might not be politically possible to advance free trade as unilaterally beneficial to the citizens of each country? That is, is it not conceivable that efforts to strengthen the consumerist forces around the world might not prove an offset to the producer and utopian pressures to see trade as a means of advancing special interest agendas?
- I note that when an attempt was made to appeal directly to the European consumers (”Do you know how much more you’re paying for food?”) by US negotiators some time ago, the EU politicians went berserk, suggesting that they (at least) viewed this strategy as politically possible.
- The willingness of governments around the world to allow trade policy to become the instrument for all social agendas leaves little hope for advancing economic liberalization. If we must wait for agreement by environmentalists, human rights activists, labor groups,. women and religious groups, pro-democracy advocates and so forth, there is little scope for agreement on what is already a very complex process.
- Moreover, the mercantilist bias of trade negotiations has allowed protectionists to seize the moral high ground. We care about economics; they care about justice. “Fair” trade coffee ‘Yes!’ - Free trade coffee, ‘No!’
- That failure reflects, of course, in part the dominance of the NGO movement by coercive utopians but there are also a growing array of economic liberal NGOs around the world and these have not yet been effectively organized or mobilized both to challenge the domestic producer groups, nor to retake the moral high ground in the global debate. Even some of the traditional NGOs are becoming aware of the risks attendant on their fellow NGOs antipathy to trade.
- This suggests the possibility that a group promoting greater trade freedom might play a critical role in seeking to organize a ‘Grand Alliance’ of economic liberal NGOs (especially from the developing world) and pro-trade economic interests from the developing world. The counter-alliance - anti-trade NGOs (the Lori Wallachs of the world) and anti-trade economic interests ( Lou Dobbs and the sugar sector) already exist and provide the model for creating our own Holy Alliance. -Fred
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