Tuesday, February 26, 2008

The sheer stupidity of the Democrats on free trade

Hillary Clinton and Barack Obama have lately been arguing over who is more anti-NAFTA. The argument is two-fold: NAFTA allegedly costs Americans jobs. Additionally, both have said they think the US should have gotten a "better deal" from Canada and Mexico.

Here is what Obama had to say:

We don't want to set off trade wars. What we want to make sure of is that our farmers are treated fairly,’ Obama said. ‘The problem in a lot of our trade agreements is that the administration tends to negotiate on behalf of multinational companies instead of workers and communities.

And Hillary:

Time-out for Trade. • Hillary has called for a trade "time out" from new trade agreements as President, and she will not enter into new trade agreements until her Administration has reviewed all existing agreements and designed a genuinely pro-American, pro-worker trade policy that is appropriate for the 21st Century.

Have they forgotten the central lesson of modern history? Freedom works. Open societies, with free trade, have prospered. Closed societies, with closed markets, have stagnated.

One of the great and enduring strengths of the United States has been its large and free domestic market. This freedom is enshrined in the Constitution:

The Congress shall have power . . . To regulate commerce with foreign nations, and among the several states . . .

Without this clause, it would be possible for Oregon to enact a law against software products from the state of Washington (Sorry, Microsoft). Or for Nevada to tax the importation of movies from California (Good-bye, Hollywood). Or for New Jersey to forbid the use of financial services from New York (So long, New York Stock Exchange). And so on.

It's not just the United States. Emerging from the devestation of the Second World War, Europe has made repeated moves towards free trade. It started with the European Coal and Steel Community, which protected free trade in coal and steel among West Germany, France, Italy, and the Benelux countries. From that humble beginning has grown the European Community, which promotes the free movement of people, goods, and services among 27 European countries. Ireland and Spain were

In the modern era, Singapore, China, and South Korea have all prospered through free trade. And all did so even before opening up their political systems.

Unfree economic policies have been tried. For example, in 1930, the United States ignored warnings from over 1,000 economists and enacted the Smoot-Hawley Tarriff Act, which was intended to protect American jobs by raising tariffs on 20,000 different imported goods to record levels. Other countries retaliated by raising their tariffs. Economists generally agree that this worsened the Great Depression.

Today, Germany and France, while enjoying political freedom and free trade, have generally unfree labor markets; for example, it can be difficult to fire workers. (German regulations are summarized here; French ones are described in numerous news articles; please let me know if you can find a more direct source.) Unsurprisingly, France and Germany also have two of the worst unemployment rates in Europe -- generally running around 8-9%.

On the central economic issue of our time, Hillary Clinton and Barack Obama are both just plain wrong.

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