John Edwards, NAFTA and protectionism

Though I was about as likely to vote for Daffy Duck as vote for John Edwards, his recent comments regarding the need for restrictions on foreign trade just sealed the deal. John Edwards and economic common sense simply cannot be mentioned in the same sentence.

But, this blog wasn't written to trash John Edwards, so much as to consider the growing push for economic protection that supports such pronouncements. In 1992, shortly after the collapse of the Soviet Union, such talk would have been heresy. Freedom means something, and it doesn't include blocking consumer's ability to buy from whom they want. It particularly doesn't mean starving developing nation citizens on account of misplaced rich nation fear of job losses (if you look at American history, that is a truly ridiculous fear).

Riddle me this: Lopez Obrador, the candidate narrowly defeated by Felipe Calderon in Mexico's recent presidential elections, argued repeatedly that Mexico needed to renegotiate NAFTA. In his opinion, NAFTA had resulted in a loss of jobs to the United States. He wanted to put in place more labor-friendly restrictions of a sort that would sound very familiar to John Edwards.

Wait a second....job losses to the United States? Didn't John Edwards say we were losing jobs to Mexico? They can't both be right.

Politicians' ability to say the same thing on both sides of the border has little to do with whether or not NAFTA "works," and everything to do with the fact that every economic rule adjustment, however small, involves pain to someone. The net result of NAFTA has been a quadrupling of cross-border trade, or in other words, the creation of business which prior to NAFTA simply did not exist. That matters a lot more than whose "favor" the balance of trade currently leans (currently it leans towards Mexico, but in the past, it has leanded towards the United States).

NAFTA resulted in MORE business for both nations, a sum that dwarfed narrow calculations of a "balance of trade." People who benefited from the old protectionist structures, however, can face jobs losses, and that hurts. This creates opportunities for populist presidential candidates to lure people to their side irrespective of the economic data (which most people don't pay much attention to, anyway).

If Switzerland were to change its store opening hours to be more in line with the United States, that would harm the prospects of online grocers who benefit from stores that close at 6PM. Online grocers, therefore, could be expected to lobby against the rule changes, and political candidates might woo them by attacking "evil capitalists" who are trying to make people slave away long after 6pm (which has nothing to do with the decision to extend store hours, but is typical of the way a politician tends to spin an issue).

America is the richest nation in the world, bar none. Granted, from a size of the economy standpoint, China, a nation with 1.3 billion citizens to our 300 million, will eventually surpass us, but from a per capita standpoint, we will remain the richest for a VERY long time (3% average yearly growth rates on a 12 trillion economy yields LOTS of growth). If you distilled John Edwards claims to the essentials, he is saying that Americans are too weak to compete on a global stage. That would bother a lot more red-blooded Americans if current geopolitical events weren't making so many Americans nervous about their place in the world.

America CAN compete. We've had the most open trade borders of any nation in the world for most of our history, and that has merely served to enhance American competitiveness by making the companies who survive global competition truly competitive (and not just competitive in a local market due to state subsidy).

Truly competitive companies are capable of the kinds of innovation that makes America great, and have a market as big as the planet to which they can sell. Companies that are only competitive because politicians creates sinecures removed from the full rigors of international competition are usually confined to the local market, aren't sources of tremendous innovation, and don't generate the jobs that would make Americans feel safe. Safety comes from things like universal health care, or funds to help retrain workers affected by globalization. If only Mr. Edwards would confine himself to what really makes America safe safe rather than peddling fantasies that are likely to make us even less safe in future.

John Edwards and others like him (a group that includes "constitutionalist" Ron Paul, who I'd like to remind that in the much ballyhooed constitutionally-oriented small government of yore, trade barriers were practically non-existent, and foreign workers could come to this country, sans-passport, to live and work as long as they wanted...now THAT'S freedom) do America a disservice by selling bad policy pronouncements that appeal to America's baser instincts in their quest to become president of the United States.