As I've noted before, Mitt Romney has given some indications that he may be serious about doing something about America's trade mess. He's made tough statements about dealing with China which, if sincere, would not only put him beyond the other major Republican candidates on trade, but also far beyond what the Obama administration is doing.
I've been watching Romney ever since for signs of whether he's sincere or not, and he just added a few more data points to the picture.
Here's what he's just said in an op-ed in the Washington Post, one that has the fingerprints of known China hawk Glenn Hubbard, a Romney advisor, all over it:
Free trade has the demonstrated ability to make the people of both trading nations more prosperous.
That's boilerplate. But then things get interesting:
But for free enterprise and free trade to work their magic, laws and rules that guide the participants are essential to prevent distortions and abuses...
Actually doing something about China's cheating makes some people nervous. Not doing something makes me nervous. We are warned that we might precipitate a trade war. Really? China is selling us $273 billion per year more than America is selling China -- why would it possibly want a trade war?...
I'm glad I'm not the only person who's about as afraid of starting a trade war as Ronald Reagan was of starting WWIII by proposing Star Wars! He continues:
If I am fortunate enough to be elected president, I will work to fundamentally alter our economic relationship with China. As I describe in my economic plan, I will begin on Day One by designating China as the currency manipulator it is.
Aha! I wrote previously about how currency manipulation is heating up as an issue and what difference it could make. Then comes the real nub:
More important, I will take a holistic approach to addressing all of China's abuses. That includes unilateral actions such as increased enforcement of U.S. trade laws, punitive measures targeting products and industries that rely on misappropriations of our intellectual property, reciprocity in government procurement, and countervailing duties against currency manipulation. It also includes multilateral actions to block technology transfers into China and to create a trading bloc open only for nations genuinely committed to free trade.
What Romney is basically doing is giving China one last chance to behave, and if speaking softly doesn't work, he's threatening a variety of big sticks.
The interesting thing is that he's dressing it all up as an heroic attempt to save free trade -- by, if necessary, resorting to such blatantly, indisputably, protectionist measures as "countervailing duties." (I'm not being dogmatic here. The Cato Institute, the Wall Street Journal, and the other usual suspects agree with me about this definition, and, incidentally, they all hate Romney -- which should tell us something.)
And Romney is threatening to set up an "authentic free traders club" of nations and keep China out of it. This is tough stuff, with multi-hundred-billion-dollar consequences.
It's also a brilliant stroke of rhetoric, given that there just isn't the time to explain to Republican voters that free trade really doesn't work and is a mistaken ideal, period. (Romney probably on some level believes in it, anyway.) But it's really a formula for defending not free trade, but managed trade at a zero tariff, which is not the same thing at all.
This is, in fact, quite possibly a Republican candidate spelling out the end of free trade.
"Free" trade, which is what America (though few other nations) practices now, means opening our borders (with trivial exceptions) and letting the chips fall where they may. It's the international application of the old laissez faire economic ideology of the robber-baron era. It assumes that if foreign nations aren't wise enough to reciprocate by opening their markets to us, we shouldn't care. We should live free whether anyone else does or not.
Managed trade at a zero tariff is another thing entirely. This position basically says that free trade is a wonderful system, with all these economic benefits, but it's only good for us if other nations reciprocate. It's not laissez faire at all, because there are rules. It's a vision of capitalism as a game where we need to take our marbles and go home if the other side won't play fair.
"Fair" trade has traditionally been a left-wing concept in this country, centered on things like environmental and labor standards. Here we have the right-wing version. (Frankly, I'd prefer a non-ethical concept like reciprocity when dealing with foreigners who don't and won't share our values, but the implication is the same.)
Free trade only with nations that reciprocate was, broadly speaking, what we had during the Cold War. Of course, we cut a certain amount of slack to foreign nations we wished to rebuild economically to prevent them from going communist -- a loophole Japan got very greedy about exploiting long after its sell-by date -- but broadly speaking, Western Europe and the rest of the developed world toed the line. Other nations were either non-industrialized and thus not a competitive threat to us, or they were outside our trade bloc because they were communist (China, Eastern Europe, the Soviet Union) or socialist (India). It's no accident that for most of this era, we ran trade deficits that were either zero or tiny by contemporary standards.
What I hope Romney understands is that, if elected, his bluff well may get called. Probably not by the velvet-gloved mercantilists in Tokyo and Berlin, who will coolly assess his seriousness and fold their cards if convinced of it, but by Beijing. I could be wrong, but I have the impression that their dependence on their trade surplus with the U.S., plus their rising sense of their own power, will push them towards a confrontation rather than a negotiated settlement.
At the very least, there is the paradox that in order to avoid a conflict, the next president (whoever he or she is) must be willing to risk one. America will therefore need credible and well-worked-out contingency plans to impose a tariff on China and function, if need be, as a tariff-protected economy for a few years at least.
Teddy Roosevelt's America was, of course, a tariff-protected economy. So maybe the whole "speak softly and carry a big stick" thing will work after all.
Follow Ian Fletcher on Twitter: www.twitter.com/IanFletcher
If Romney ever became president, he'd be the best friend China and all the other global corporate powers that be could possibly want. That is his essence. Listening to his flipfloppy words is just a waste of time. Nothing that comes out of his mouth in public ever has or ever will have any value or integrity.
Romney cannot lead the country on the trade issue because of his history. When Romney led Bain, he frequently profited at the expense of the community. If he were President, how could he ask business leaders to do otherwise?
Reference: http://www.politicususa.com/en/romney-administration-economy
From a logical point of view it should be obvious that the current trade setup is not working for America - the free trade at any cost crowd had their last fig leaf taken away when the higher value jobs never appeared to make up for the manufacturing job losses.
Of course it takes a while for things to sink in for the general public.
On the bright side: the number of mega-yachts doubled in the last 12 years.
Reference: http://www.msnbc.msn.com/id/13345720/ns/business-cnbc_tv/#
The elites have created a smokescreen of peripheral issues to confuse the voters.
We need to be focused on those things that will benefit the majority of Americans first...
1. Private sector jobs. Start with infrastructure projects (restrict them to North American domociled, owned, and operated companies and workers that are US citizens.). Move on to cutting back work visas massively.
Require any company that relocates any worker's job outside the USA to pay full wages, benefits, and provide job retraining for 5 years.
2. Repeal of the SCOTUS Citizens United ruling. If you cannot vote, no legitimate voice in elections.
3. Bring at least 50% of our troops home.
This amounts to Billions per year that could help America instead of our so called allies.
4. Ban bank bailouts. Ban Federal fund recipients from trading federal securities, etc.
5. Enforce / strengthen anti-trust laws. Too big to fail = too big.
6. Use our domestic energy resources.
7. Build Thorium reactors for power/waste reduction.
8. Support residential solar energy use. Upgrade building codes. Tax credits for ground loop heat pumps, PV, solar hot water, etc.
9. Remove ALL federal price supports and subsidies for agricultural products including tobacco, ethanol from corn, sugar, and any crops produced for export.
10. Impose equalizing/punitive duties on imported goods that are subsidizing directly or indirectly by subsidies and/or lax labor, environmental, or quality standards.
Everything else you have there, I pretty much agree with.
Sooner or later even the bankers are going to realize that trade imbalances are unsustainable. When that happens the whole Free Trade thing goes south and we can start making some headway on rebuilding the US with productive capital instead of eviscerating the US with speculative capital.
There is a lot being bandied about by all of the Republicans regarding the need to end “job killing” regulations – at the EPA, at OSHA, even at DOL regarding the minimum wage. Maybe the REAL “job killing” regulations allow unfettered access to our markets while accepting all manner of restrictions on “theirs”.
Our “free trade” approach that caters to “cheaper” = “better”, or, if you prefer, “the bottom line is the bottom line”. We don’t care if it’s cheaper because of currency manipulation, child labor, or if the factory spews filth. We don’t even care if the factory is American owned and shifts billions in profits off-shore to avoid paying taxes.
We certainly don’t need another war, trade or otherwise, but there are some things we could do that would help the situation without resorting to “tit-for-tat” bickering.
Require that all goods sold in the US be grown or manufactured under the same environmental, worker safety and wage standards (hours, OT, etc, at the local prevailing rate, whatever that is) and then enforce those standards.
Factories are free to maim workers building goods that pollute their air and water all they like, they just can’t sell them in the US.
Yes, the smart politicians in the room know that this relationship with China is "NOT FREE TRADE" it's been a give away trade to China.
I hope you are right about Mitt, I am watching to see what he has to say as we get closer to the primaries.
If we do not start putting better international governance on the rules of the game, this second round of laissez faire economics could end badly like the first round.
As Mark Malloch Brown (The unfinished global revolution: the pursuit of a new international politics) glumly observes, "there is almost no sensible debate about how to manage a runaway world… when the global level has become largely a laissez-faire space that allows those who operate in it to choose which, if any, national jurisdiction they will subject themselves to on what issue".
Economics is largely supply and demand, as well as productivity. Rextrek does not understand that debt is further down the chain. The real loss that occurs with the trade deficit is the loss of productive capacity and jobs. The debt would be more of a problem if it was denominated in yuan (or gold). It's not as much of a problem because it is denominated in dollars. For the Chinese to convert their dollars would require the Chinese to spend them, which actually helps the trade deficit and U.S. employment. If possible, the U.S. would want to guide those purchases to U.S. production, rather than U.S. assets. For instance, foreign ownership in Hawaii is quite a topical conversation there. It is preferable that foreign ownership of U.S. based assets does not get out of hand.
And as I've commented before, what we learned from Obama is that what a candidate says or promises (and who works for him) during a campaign does not necessarily have the *remotest* connection to how he intends to actually govern. Instead, try to figure out where the candidate's money is coming from -- to the extent it is actually discernible (in time or ever) -- and then try to figure out what policies will benefit his most financially powerful contributors.
I like the substance of what Mr. Fletcher has written, but if it risks making the top 1% any less well off, I'm skeptical that Romney will follow up on it with effective, concrete action if elected.