07 November 2008

Bi-Lateral Free Trade Agreement Follow-Up

I don't think there's any doubt that Rahm Emmanuel aka "Ari Gold" is a partisan Democrat--he just happens to be one of the few partisan Democrats willing to buck the influence of unions and promote free trade. That doesn't give him a pass, but it does give him the benefit of the doubt on an issue that is a big deal to me: Free Trade.

A bunch of you emailed me in response to Dan K.'s comments and I appreciate the emails. They've been very illuminating. I'll post a couple of them below but can't post everything you've collectively sent. Don't be mad if yours doesn't get posted, it's because many of you wrote very similar comments.

Ryan D.*
I liked Dan K's comment about FTAs and how they can undermine global efforts.

A note should be made, however: many realists argue that FTAs are better for America because in bilateral agreements, the big country can push the little country for better terms. In other words, lately a lot of big countries have been seeking bilateral or small regional agreements simply because they can get favorable terms.

So to true economic liberals, as Dan K appears to be, FTAs are often perceived as a problem. But for foreign policy realists, FTAs may make more sense.
And Branden B.
Dan is right on bi-lateral FTA's. That may seem obvious given his credentials, but we both know that there are a lot of nuts out there with great credentials. I forget how all the math works, but I remember solving the bi-lateral fta models in Econ 257 and being surprised. His position is absolutely correct. Strong support for all-inclusive trade agreements (Doha, WTO) and opposition to bi-laterals. The bi-laterals might have a few political benefits so they are not altogether detestable, but for a free trader like yourself they are not what you are looking for.
I have just a couple of points to make in response. I don't necessarily disagree, I just think there may be more things to add to the equation.

In the case of the United States, the ag lobby is powerful (I know firsthand) and has been effective at maintaining the various price supports in place. This lobby probably explains, in part, some of the difficulties the US has had at the WTO generally and with Doha in particular.

However, according to my reading of the various Doha reports, the US seemed fairly reasonable willing to compromise. Lacking movement there, it's understandable that they would move to bi-lateral agreements where, as Branden B. and Ryan D. noted above, they could effectively out negotiate the little guy.

To the extent that these types of agreements hinder accomplishing a comprehensive FTA that moves us closer to global efficiency, that's a problem, obviously. But, as both Ryan D. and Branden B. and even Dan K. noted, there are 'political benefits' to be had from these bi-lateral agreements.

In the case of Colombia, there are economic benefits in the tens of billions of dollars in increased, free flowing trade. And we ought not dismiss the strategic benefits of bolstering our relationship with a key ally--especially when that ally is on the frontline of the fight against the drug trade and a help in countering an increasingly belligerent Chavez-ruled Venezuela.

On South Korea, I'm not quite as clear on the details. But Dan K. has spent a number of years examining the many factors at play there, so I'll gladly defer to him. I think it's fair to say that the argument could be made for bolstering a key ally in that region as well--especially if an agreement with South Korea is just a precursor to a multi-lateral Pacific Rim FTA I've heard about.

All of this brings me back to Nafta. Where does that, tri-lateral, agreement fit into the overall discussion of free trade. Everything I've read suggests that it is an unmitigated success. Has it, too, been damaging to efforts to adopt a world-wide FTA? I don't know.

Clearly, political reality plays a role in every one of these scenarios. I've said many times that if I had ultimate power, one of the first things I would do would be to eliminate barriers to trade worldwide--that I think it is the single act that could to the most good for the most people.

But I'm also not so naive that I would make the perfect enemy of the good. That may be what we're looking at with these bi-lateral FTAs, but I don't know. I'm open to persuasion on this point.

Let's bring this home, again: Dan K. chided me about Obama's anti-Nafta primary rhetoric. I hope he's right. I hope it was just that--rhetoric--and not a commitment to actually seek an massive re-write of the agreement. He has, as Dan K. & Ryan D. have said, surrounded himself with people who support free trade. But as both of you know, that's no guarantee.

Indeed, Democrats willingness (and narrow defeat in this Congress) to pass "card check" legislation, effectively destroying secret ballot unionization, signals a disturbing amount of willingness to bend to the demands of their union supporters. No less a leftist than George McGovern (George McGovern!) opposed this legislation.

Let me put it this way: If Obama is willing to go along with that type of legislation, I don't think free trade is the sacred cow many of you believe. Even if he does, initially, protect Nafta and support free trade, resurgent unions in the US, as a result of this new legislation, would have even more clout than they do today and could exert significant pressure on The One.

It might take one of his much hoped for miracles to resist them.

*Ryan D. blogs at Pendulum Politics.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.