Daniel Griswold, Cato Institute

1
What the November Elections Mean for U.S.
Leadership in the Global Economy

• Daniel Griswold, Cato Institute
• ASBA Conference
• Miami, Fla., September 30, 2008

2

• About the Cato Institute, Washington, D.C.

3
Trade and the Troubled U.S. Economy

• Current downturn Made in the U.S.A.
• Import growth down, trade deficit shrinking
• Trade accounts for only 3 of displaced workers
• The other 97? Blame technological change,
  internal competition, changing consumer tastes,
  and the business cycle

4
(No Transcript)
5
(No Transcript)
6
Trade and the Great Moderation
7
Trade and Recessions

• See 3/31/08 Cato study, Worried about a
  Recession? Dont Blame Free Trade
  
• Since 1983, economy has been in recession 5 of
  the time during 1945-83, economy in recession
  21.
  
• Yet annual economic growth rate about the same,
  3.3 percent.

8
A More Flexible and Diversified Economy

• Explanations better monetary policy, fewer
  shocks (better luck), or structural changes,
  including a more open economy
  
• Trade cylinder still pumping
• Exports up 13, foreign investment earnings up
  19 in 2007
  
• Booming exports for Caterpillar, Boeing, and
  Waterloo, Iowa.

9
Trade and the November Elections

• Where the candidates stand
• What trade means for the election
• What the election means for trade policy

10
John McCain on trade

• McCain voted for lower trade barriers on 35 of 40
  votes (88)
  
• He voted for NAFTA, Uruguay Round (WTO), China
  PNTR, DR-CAFTA and other FTAs
  
• He opposed Byrd amendment, 2002 and 2008 farm
  bills, Schumer-Graham China tariffs, ethanol
  subsidies
  
• Cuban embargo an exception

11
John McCain on trade

• Since WW II, the U.S. has been in the
  forefront of the fight for reduced barriers to
  trade. It has reaped the benefits of sustained
  growth in standards of living, an awesome display
  of innovation and technical advance, an explosion
  in the variety, quality and affordability of
  consumer goods, a rise in home ownership, and
  ascendancy to the position of worlds greatest
  economy.
• -- McCain advisor Douglas Holtz-Eakin

12
Barack Obama on trade

• Obama voted for lower trade barriers on 4 of 11
  votes (36)
  
• He voted against DR-CAFTA, and in favor of the
  Byrd amendment, 100 container screening by 2012,
  and China currency sanctions.
  
• He supported 2008 farm bill and opposes Colombia
  and South Korea FTAs.

13
Barack Obama on trade

• Obama said he will use the hammer of a potential
  opt-out to convince Canada and Mexico to insert
  labor and environmental standards into NAFTA.

14
Barack Obama on trade

• There is no doubt that globalization has brought
  significant benefits to American consumers. Its
  lowered prices on goods once considered luxuries,
  from big-screen TVs to peaches in winter, and
  increased the purchasing power of low-income
  Americans.

15
Barack Obama on trade

• Its helped keep inflation in check, boosted
  returns for the millions of Americans now
  invested in the stock market, provided new
  markets for U.S. goods and services, and allowed
  countries like China and India to dramatically
  reduce poverty, which over the long term makes
  for a more stable world.
• from The Audacity of Hope

16
Sarah Palin on trade

• No voting record
• International trade is important to Alaska. We
  are helping our economy and economies around the
  world through trade. Palin quote from a state
  web site
• Alaska exports to 100 countries
• China, Japan, and seafood

17
Joe Biden on trade

• Biden has voted in favor of lower trade barriers
  on 24 out of 48 votes (50)
  
• He voted in favor of China NTR and PNTR, NAFTA,
  Uruguay Round Agreements Act, 1996 Freedom to
  Farm Act, trade promotion authority in 1998, and
  Morocco and Australian FTAs.
• He against travel ban to Cuba and sugar
  subsidies
  
• But he voted for steel import quotas, 2002 and
  2008 farm bills, Byrd amendment, China currency
  tariffs, and 100 container screening.
  
• He voted against Chile, Singapore, Oman,
• and DR-Central American FTAs.

18
Catos free trade matrix
Free Trader
Isolationist
Opposes trade subsidies
?
Interventionist
Internationalist
Opposes trade barriers
19
Trade and the 2008 election

• Growing skepticism on trade would seem to favor
  Obama-Biden
  
• But criticism of trade does not sell well on a
  presidential level
  
• Past failures Mondale (1984), Dukakis (1988),
  Perot (1992), Kerry (2004)
  
• 2008 primaries

20
The 2008 Election and Trade

• Most likely outcome Legislative stalemate,
  diminished U.S. leadership
  
• Unlikely to see dramatic turn back to protection
• Presidential veto, Senate supermajority
• Momentum of global economy

21
For more information

• dgriswold_at_cato.org
• 202-789-5260
• www.freetrade.org
• www.freetrade.org/
• congress