Trade Back in the Headlines

May 21, 2010

After a brief hiatus, trade popped back into the headlines this week, on two accounts.

First, several of the races in this past Tuesday’s primaries and elections focused on trade, with the critics of the past failed model coming out winners with the public. For example, as Mike Elk notes:

Democrat Mark Critz ran on a much more progressive platform of job creation through trade reform. He blasted his Republican candidate for being in favor of tax loopholes that favor companies that outsource jobs, even as the Obama Administration just this week used a lobbyist memo to claim that outsourcing created jobs.”

Since being critical of our job-killing and wage-depressing failed trade policy has been a boon for Democrats in both 2008 and 2006 elections, it seems natural that President Obama would want to make good on his campaign commitment to renegotiate NAFTA. This was the reason for the second airing of trade issues this week: the visit of Mexican President Calderon to Washington DC. While his “war on drugs,” which has resulted in the deaths of over 23,000 people, garnered significant media attention, the 6.5 percent contraction in Mexico’s economy last year should be an equally troubling statistic in terms of its impacts on most Mexicans’ daily lives.

In March 2008, CEPR published a report, “The Economic Impact of a U.S. Slowdown on the Americas,” which analyzed how the coming U.S. recession would differentially impact different Latin American countries. Keeping in mind that this was before the extent of the global economic crisis had become apparent, our analysis projected a contraction in Mexican GDP of between 2.9 and 4.1 percent. The report concluded:

“The countries that will likely suffer most as the result of a reduction in U.S. imports are the same countries with which the United States has implemented “free trade” agreements in recent decades, including the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico, and the Dominican Republic-Central America Free Trade Agreement, DR-CAFTA, which includes the United States along with Guatemala, El Salvador, Costa Rica, Nicaragua, Honduras, and the Dominican Republic. Meanwhile, countries that are less dependent on the United States, or more reliant on domestic demand, will see smaller impacts of the U.S. recession on their exports and national GDP.”

Unfortunately, just prior to the visit, the Washington Post reported that “Mexico [is] not worried about Obama campaign pledge to renegotiate NAFTA,” noting that “there is no talk whatsoever about withdrawing from NAFTA or scrapping it and starting over.” This is an unfortunate situation, given the increasingly well-documented negative impacts of NAFTA on Mexico, exacerbated by the devastation wrought by the US-induced global economic recession.

While the Obama administration may be little-changed from his predecessor on trade, the national grassroots movement for a more balanced trade agenda has scored impressive victories: keeping the stale leftovers of the Bush trade agenda – proposed “Free Trade Agreements” with South Korea, Colombia, and Panama – as well as the Doha Round of WTO expansion negotiations – at bay. As well, a big fight is looming over the proposed Trans-Pacific Partnership, an Obama initiative which more closely resembles the Bush model than Obama’s own campaign promises. Now that a replacement for the failed model, the T.R.A.D.E Act, has 143 House co-sponsors, and with trade increasingly a winning wedge issue in elections, there are reasons to be sanguine about the potential for the public’s will to overcome executive branch entrenchment.

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