Let’s assume that Wall Street Journal edit page staffers published Robert Zoellick’s new op-ed on U.S. trade policy because they truly consider him an expert on the subject — rather than because they’re reflexively enthusiastic about any call for trade expansion, and lately about endorsements of President Obama’s proposed new trade agreements . Even giving the paper this benefit of the doubt, the Zoellick article – co-authored with a Congressman on the House Ways and Means Trade Subcommittee – still doesn’t deserve to be taken seriously.
Journal editors no doubt impute trade expertise to Zoellick because he served as U.S. Trade Representative from February, 2001 to January, 2005. This does mean that Zoellick was involved in important trade negotiations like those over the World Trade Organization’s Doha Round and the Central America Free Trade Agreement. His position also meant that Zoellick dealt with subjects like trade relations with China that didn’t involve specific new agreements. So what was his record?
During his tenure as USTR, the U.S. trade deficit on an inflation-adjusted basis grew from $508.7 billion annualized in the first quarter of 2001 to $774.1 billion in the first quarter of 2005, according to the Commerce Department’s tables on real gross domestic product and its composition. That’s an increase of more than 52 percent. And since the trade deficit’s growth subtracts from the economy’s growth, this means that under Zoellick, trade slowed that decade’s expansion – and surely its job creation. As always, moreover, this trade toll was exacted overwhelmingly on the private sector, which is America’s best hope for healthy growth.
Speaking of healthy growth, moreover, the ballooning trade deficit also piled more debt onto the economy. Combined with the jump in federal budget deficits under the Bush administration in which Zoellick served, and the (then) historically loose monetary policies pursued by the Federal Reserve, this new indebtedness helped trigger the financial crisis. Yes, you should hold the applause.
It should also make you wonder what Zoellick and his co-author are talking about when they claim that American trade expansion is needed to encourage a shift, not only in the United States, but around the world, “from extraordinary governmental spending and zero-interest-rate monetary policies to growth led by the private sector.” On his watch, trade expansion produced exactly the opposite result.
But is it fair to blame Zoellick for all the trade-related damage suffered by the economy? After all, lots of the country’s trade is in oil, which has next to nothing to do with agreements or any other aspects of trade policy. Nonetheless, Zoellick’s record looks even worse according to this measure. The share of U.S. trade flows strongly influenced by trade policy is nicely tracked by the data on the non-oil goods balance. Under Zoellick, the inflation-adjusted deficit here rose from $69.83 billion (non-annualized) in the first quarter of 2001 to $132.53 billion in the first quarter of 2005. That’s a much bigger increase of just under 90 percent (i.e., a near doubling). And again, nearly all of the growth-related and broader economic damage was inflicted in the private sector.
Trusting Zoellick’s judgment on trade, then, seems tantamount to trusting Redskins owner Dan Snyder’s judgment on building a football team. Hopefully, Congress is smart enough to see his endorsement of the trade agenda being pursued by President Obama and the Hill’s Republican leaders as a kiss of death.