Obama and Protectionism
It’s still anybody’s guess, after President Obama’s visit with the Canadians, whether Obama intends to be a protectionist or not. On the one hand, he talks of expanding trade; on the other, he’s still speaking about changing NAFTA:
Q Thank you, to both of you. I’ve got a question for both of you. Mr. President, on Tuesday you said that now is not the time to reopen NAFTA. But your aides said that you would be trying to convince our friends in Canada and in Mexico of the rightness of your position. So, first, did you convince our friends in Canada? And when is the right time to incorporate labor and environmental standards into the main body of NAFTA?
Second, for Prime Minister Harper. Mr. Prime Minister, is there a way for a “Buy American” provision to be compliant with the U.S. obligations under the World Trade Organization?
PRESIDENT OBAMA: Well, first of all, Jonathan, I’m not sure that was my exact quote. I always get a little nervous about responding to quotes without me actually seeing it. I think what I said was, is that now is a time where we’ve got to be very careful about any signals of protectionism, because, as the economy of the world contracts, I think there’s going to be a strong impulse on the part of constituencies in all countries to see if we — they can engage in “beggar thy neighbor” policies. And as obviously one of the largest economies in the world, it’s important for us to make sure that we are showing leadership in the belief that trade ultimately is beneficial to all countries.
Having said that, what I also indicated was that with a NAFTA agreement that has labor provisions and environmental provisions as side agreements, it strikes me if those side agreements mean anything then they might as well be incorporated into the main body of the agreement so that they can be effectively enforced. And I think it is important, whether we’re talking about our relationships with Canada or our relationships with Mexico, that all countries concerned are thinking about how workers are being treated and all countries concerned are thinking about environmental issues of the sort that Emmanuelle just raised earlier.
So, you know, I raised this issue with Prime Minister Harper. My hope is, is that as our advisors and staffs and economic teams work this through, that there’s a way of doing this that is not disruptive to the extraordinarily important trade relationships that exist between the United States and Canada.
Now you didn’t ask me about the “Buy American” provisions, but since it relates to our recovery package, let me just reiterate — and I said this very clearly before the bill was passed and before I signed it — that I think it was very important to make sure that any provisions that were there were consonant with our obligations under WTO and NAFTA.
And I think that is what we achieved. I recognize the concerns of Canada, given how significant trade with the United States is to the Canadian economy. I provided Prime Minister Harper an assurance that I want to grow trade and not contract it. And I don’t think that there was anything in the recovery package that is adverse to that goal.
Basically, we still don’t know the answer to the question posed during the campaign: is he paying lip service to a liberal pet cause, or does he mean it? ”Free trade” or “fair trade”? Right now, unfortunately, it seems more ‘fair’ then ‘free’…
[...] Informed Speculation wrote an interesting post today on Obama and ProtectionismHere’s a quick excerptIt’s still anybody’s guess, after President Obama’s visit with the Canadians, whether Obama intends to be a protectionist or not…. [...]
Is there a utilitarian argument in favor of protectionism? By utilitarian I mean in the sense that this approach maximizes the overall utility and good, as compared to other approaches. Haven’t protectionist actions of the past clearly demonstrated that they produce more harm than good over time, either from price increases caused by the restraints on trade or the reactionary protectionist actions of other nations?
Is there new evidence in favor of protectionism or is this talk nothing more than a ploy to gain political points with a certain subset of the American people, or something else entirely?
This guy is a smart lawyer. He knows better than this. It makes absolutely no difference legally if they are side agreements or in the main agreement.
So, when a smart guy makes an “error” like this, what is the appropriate conclusion?
Try this comment. The first paragraph is a recap of the theoretical argument for why free trade is always good. The rest is an explanation of why that argument sometimes fails. It is not an argument for protectionism; rather that there’s more at stake than just lowering trade barriers.
I am not a lawyer, let alone a smart one. But I would not be at all surprised if the enforcement mechanisms prescribed in the side agreements were different from (weaker than) those in the main treaty.
If, for the sake of argument, we decided that the enforcement provisions of the side agreements were too weak, and needed fixing, we could
a) Amend the side agreements to beef up the enforcement provisions.
b) Amend the main treaty to fold in the provisions of the side agreements, so that they would be covered by the (stronger) enforcement provisions of the main treaty.
I can imagine that there are arguments both ways. I don’t see why “b)” is a-priori stupid.
I’m no lawyer either, but I spend a considerable part of my work life on contractual agreements. There is usually a material difference between the “main” agreement and any side agreements. As Jacques notes, the segmentation of these things occurs for a reason, sometimes because of timing, more often because of scope. Even if the side agreements refer back to the main agreement, there can be superceding terms and it would be important to understand order of precedence between the two agreements.
Of course, the details of the agreements will tell the story. I see nothing overly smart, clever, or untoward in Obama’s comments. It could simply be that he has a high-level understanding of the respective agreements, rather than detailed knowledge, and so is speaking in a cautious way.
Did some research. As I suspected, to call them “side” agreements is misleading. They were supplemental agreements, negotiated later to address Congressional objections. They were entered into however, before NAFTA was ratified by the 3 countries. The reason for just not directly amending NAFTA was because the “fast track” authority had expired.
My point remains, (for what its worth, I am a lawyer), that the location of the agreements is meaningless. If the supplemental agreements are weak, they would be just as weak if written in the main agreement.
The question is who the rubes are that O is trying to fool, protectionists or non-protectionists.
Well, yes, that was part of my initial question because I don’t know anyone that seriously advocates protectionism, so I suspect his positioning is for some political purpose. Let’s not forget his campaign promise to blow-up the NAFTA agreement unless labor and environmental provisions he favors were written into the agreement.
Steve, alas, there are a great many on the left (and a few of the Buchanan-types on the right) who DO advocate protectionism, as absurd as it seems to people who understand economics…