Monday, March 03, 2008

Obama and Clinton Really are Protectionists

In a debate not long ago, both Hillary Clinton and Barack Obama said that they would endorse pulling out of NAFTA if Canada and Mexico didn't renegotiate certain items like environmental protections. I think most people understand that this is just politics. They were debating in Ohio where a lot of people believe that NAFTA has cost Ohio jobs. Of course, pulling out of NAFTA would hurt Ohio since Canada and Mexico are that state's biggest export markets but Clinton and Obama couldn't say that. They're trying to get elected.

Then last week, Canadian television reported that Obama's campaign had contacted the Canadian Embassy to tell them not to take the anti NAFTA talk seriously - that it was just politics. Now all hell has broken loose. Some have accused Canada of interfering with the US election and the Obama campaign said they have had no contact with the Canadians. Unfortunately for Obama:

Key Obama economic advisor Austan Goolsbee discussed his candidate's policies with the Canadian consulate in Chicago, which wrote a report suggesting Obama's words on NAFTA were designed for a political audience and shouldn't be taken too seriously.

So now he's saying that the conversation was taken out of context and of course he means what he says. This would just be a tempest in a teapot but for one thing. Clinton and Obama are hardening their positions on trade in order to get elected and may be forced to actually follow through if one of them is elected.

I have said it before and I will say it again; the biggest threat to our economy is the protectionist sentiment that is becoming popular among politicians. Most of the Democratic Party is against free trade and there are enough stupid Republicans to join them and make a monumental mistake on trade. Our economy is in bad enough shape as it is; a trade war will push a slowdown into something far worse. Most economists agree that the Smoot Hawley trade restrictions of the 1930s turned a routine recession into a depression. A trade war now would be even worse because we depend on foreigners for not only consumer goods but capital. We cannot afford to screw this up.

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