The Return of Austan Goolsbee

Last February, University of Chicago Economics Professor Austan Goolsbee got caught in the cross-fire of the Democratic primaries as Clinton and Obama ran as far as they could from NAFTA and other free trade agreements. Just a few days after Obama declared in a national debate he would "renegotiate NAFTA," Goolsbee, an Obama policy advisor, allegedly told the Canadians Obama's words were “more reflective of political maneuvering than policy.” (I wrote about it here). After that, Goolsbee receded from the limelight, and Obama appointed a new economic adviser, Jason Furman. But now, Goolsbee is back. He recently appeared on Fox TV and Charlie Ross, and he authored an op-ed in the Wall Street Journal defending Obama's tax policies.

I can't help but wonder (and hope) whether Goolsbee's re-emergence signals trade will once again take center stage in the 2008 election? And if so, will Obama's shift towards the middle continue (I wrote about Obama's "backtracking" on trade policy here)? I certainly hope so. In a recent interview, Goolsbee's had this to say on the question of why trade seems to have taken a back seat lately:

Q: Why has the campaign gone quiet on trade issues?

A: The biggest issue by far is taxes, alternative energy, health care and then if there's a fourth, it's probably issues with housing, the credit crunch and how to get the economy moving again. You might be putting excess importance on just trade. It's falling into the Republican trap to say that this involves trade agreements. It is more critical for us to address our fundamentals than arguing about whether we should sign a free trade agreement with Panama. That is an issue of symbolic importance.

As for whether Obama's views on NAFTA were moving toward the middle, Goolsbee seems to have learned his lesson well--the response was much more equivocal:

Q: Why does Obama want to amend NAFTA?

A: NAFTA's many things. It's a thousand pages long, it's riddled with loopholes. There are parts of it that are good. So his view from the outset is not that we should abolish NAFTA but that we should put environmental and labor agreements into the core of the agreement. NAFTA is not a state-of-the-art treaty. The most vocal proponents vastly overstated what it would do … rebuild manufacturing in the U.S., reduce illegal Immigration. If you're not going to open up the dialogue to all sides and take into account the people left out, you're not going to do any favors to the cause of open markets.

It seems reports of Obama's pro-NAFTA transformation (or at least rescission of his anti-NAFTA stance) have been greatly exaggerated?

Is Obama "Backtracking" on NAFTA?

"I will make sure that we renegotiate [NAFTA]"
--Barack Obama (Feb. 26, 2008)

The Talking Heads are buzzing over a Fortune magazine interview with Barack Obama. What's all the excitement about? During the democratic primaries, Obama famously called North American Free Trade Agreement "devastating" and "a big mistake," and he promised to renegotiate the agreement. But in the Fortune interview, Obama allegedly said "Sometimes during campaigns the rhetoric gets overheated and amplified . . . Politicians are always guilty of that, and I don't exempt myself."

So is the presumptive Democratic nominee backtracking on his anti-NAFTA stance? You would think so from the hue and cry coming from the left. The Nation immediately published a story proclaiming "Obama Goes Soft on Free Trade." Columnist John Nichols wrote "All that is required is that Barack Obama campaign as a critic of the North American Free Trade Agreement and other deals that have battered workers, farmers, communities and the environment ... Unfortunately, [Obama], who sent so many smart signals on trade issues when he was competing with Hillary Clinton . . . appears to now be backtracking toward the insider territory occupied by McCain."

I'm not sure how a comment that politicians sometimes indulge in hyperbole (big surprise!) somehow translates into a wholesale rethinking of trade policy, but if it is true that Obama is backtracking I for one would applaud the move. In an op-ed published a few months ago, I noted Obama's (and Clinton's) I-hate-NAFTA-more rhetoric is dangerous. It is dangerous for precisely this reason. Once a candidate flirts with the radical edge of the anti-free trade camp, it is really hard to come back to the middle path without being accused of "backtracking."

I had always found Obama's claim that he would renegotiate NAFTA suspect. Having been involved in a number of trade deals while I was at the Office of the U.S. Trade Representative, I know first-hand that negotiating an agreement as complex as NAFTA is no easy task. There are constituencies from all possible sides: those who want us to get greater concessions from our partners so they can export more goods; those who want fewer restrictions so they can import more goods; those who want an agreement vastly different from what's on the table; those who want no agreement at all; and those who just want to be ornery. And what about our trading partners--do you think maybe they might have a thing or two they would like to renegotiate if the opportunity arose? Satisfying those competing interests is next to impossible, and once you finally get a deal that everyone can sign on to (even if no one is optimally happy), you don't go opening up the same can of worms again.

Besides, Obama has never styled himself a true anti-free trade crusader. He has on a number of occasions noted there are both costs and benefits to free trade. Even in the language I quoted above, Obama did not call for a wholesale dismantling of NAFTA but rather advocated that "we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced."

Both Obama and economic advisor Austan Goolsbee were ridiculed in the press when Goolsbee went to the Canadians shortly after the Cleveland debate to reassure them that his boss' rhetoric was "more reflective of political maneuvering than policy." Perhaps I am a cynic, but I was surprised that so many failed to make a distinction between political speeches and trade policy. Trade policy is a dirty job of political maneuvering, horse trading, and rejoicing in incremental achievements. But like planting seeds in a vegetable garden, the end result of all that dirty work is lots of edible goodies, which are mostly good for you (although they are sometimes bitter).

If Candidate Obama is doing a bit of shuffling in order to return to middle ground, all I can say is "Shuffle on!"

(Cross-posted at Trade Voices.Com)

NAFTA: Take Two

I had originally planned a discussion of the treatment of oil and water under the WTO, but after watching news reports today I cannot resist one more post on NAFTA. The story of the day is that one of Sen. Barack Obama’s top advisors, Professor Austan D. Goolsbee (below right) of the University of Chicago (photo credit), met with Canadian diplomats to reassure them Obama’s stand on NAFTA was “more reflective of political maneuvering than policy.” Goolsbee is reputed to have said Obama’s language “should be viewed as more about political positioning than a clear articulation of policy plans.” Hmmm. So, let me get this straight . . . we are not walking away from NAFTA after all? Did anyone actually believe we would? I have never considered myself a NAFTA cheerleader. As those who read my previous posts know, I have both a philosophical and economic preference for multilateral agreements. (In fact, we are currently in the midst of a multilateral round of negotiations right now—the Doha Development Round—although you wouldn’t know it given the singular lack of media coverage of the Round). But I find it hard to remain silent in the face of the careless and hyperbolic discussion on trade I see occurring in public discourse. Can we all just agree the debate on NAFTA was fought and won back in 1994? We entered the agreement fully aware it would have some impact on our economy, but the impact would be relatively minor. And that is exactly what happened. When I say “minor,” I do not mean to dismiss the thousands of families who have lost their livelihoods in the wake of NAFTA. But NAFTA does not exist in a vacuum, we are signatories to a host of multilateral and regional agreements. Will we bow out of those as well? Job losses occur for many reasons—including technological innovation. Producers of horse carriages experienced large-scale displacement when the automobile became widely-available, but no one would suggest a return to the horse-and-carriage regime. The job losses from NAFTA can and should be addressed. We should be exploring the candidates’ proposals on job creation, their support of innovation, and tax incentives—all of these contribute to the creation of new possibilities for displaced workers.
Moreover, NAFTA is not just about job losses, we have also gained a great deal. Mexico and Canada are now the United States’ top trading partners, and consumers, workers, entrepreneurs, the Tax Man, we all benefit from that relationship. Are we prepared to give up those gains? What the NAFTA debate has shown in stark relief is that the benefits and harms of the agreement are not evenly distributed. Border states like Texas benefit from NAFTA—in terms of exports, jobs and investment to list just a few examples. Other states, like Ohio, suffer the harm of job losses. We need a real plan to balance the benefits/detriments equation. It is a discussion that cannot be achieved through snippets, accusations and sound bites. We have done an abysmal job of creating a place for the candidates to relate their true position—in all of its nuance, caveats and uncertainties. Perhaps a Mexican government official put it best when he said “we are convinced that what North America needs is more integration and not less integration. North America needs to look to the future and not return to the past.”