Center for American Progress, China, currency manipulation, Democrats, exports, growth, Hillary Clinton, Im-Politic, imports, Japan, Jobs, Larry Summers, net exports, Trade, Trade Deficits, Trans-Pacific Partnership
If the Washington media buzz is right, and the new report from the Center for American Progress (CAP) on helping the middle class is a preview of Hillary Clinton’s presidential campaign pitch on the economy (as well as of her economics brain trust), then the Democratic front-runner will be running against the trade record of the Democratic incumbent president she served. Moreover, if Ms. Clinton uses the report’s trade proposals, she’ll have the apparent endorsement of President Obama’s top economic advisor early in his first term, Larry Summers.
Although you wouldn’t know it from the press coverage (see these New York Times and Washington Post accounts for examples), the Center’s report stakes out trade positions that not only differ significantly from the president’s, but from those of even much of the Democratic party, especially its so-called business-friendly centrist wing.
The two biggest departures: First, the report identifies boosting U.S. “net exports” as a top trade policy priority. That may sound like the height of common sense, but it would be a first for an American administration since the Nixon era. The little word “net” is the key. It makes clear that the CAP report has endorsed at least narrowing the trade deficit.
Talk of boosting exports has long been common in American political rhetoric. Mr. Obama, for example, has continually spoken of doubling U.S. exports over a five-year stretch. But such recommendations (and the president won’t come close to achieving even this sorely inadequate goal) invariably ignore a fundamental teaching of economics: Increasing U.S. overseas sales per se does nothing to ensure that trade flows are strengthening economic growth (and therefore job creation) unless these exports improve the trade balance. In this case, since American deficits are so great, the phrasing is a sign that the Democratic party establishment is in principle calling for some import reduction.
The second major departure from the trade policy status quo is the report’s call for including “enforceable disciplines against currency manipulation” in trade agreements signed by the United States. This step, of course, is exactly what the Obama administration has opposed so far in its efforts to negotiate a Trans-Pacific Partnership (TPP) – whose first round of members would include long-time manipulators like Japan, and which would be hard-pressed over time to exclude champion manipulator China.
In fact, logically anyway, the CAP report’s call for strong currency measures in trade deals is a call for moving unilaterally against China right now – another action that has been adamantly opposed by the president despite broad and bipartisan Congressional support.
Ms. Clinton, of course, served as Secretary of State while Mr. Obama was pursuing a currency manipulation-less TPP and resisting calls for sanctioning China. But so did the co-chairman of the commission that produced the CAP report: Mr. Summers – who was the president’s first head of the White House National Economic Council, and who, as one of Bill Clinton’s leading economic gurus, helped lead the charge for many of the nation’s most destructive trade deals.
Not that the CAP report is perfect on trade, or even close. In particular, it seems to think that the TPP would be just fine provided it also ensured more transparency from state-owned enterprises. Since such organizations are so prominent in the economies of so many prospective TPP signatories, and since so many of these countries have never viewed such transparency as a virtue, this assumption is naive in the extreme.
But if the study can lengthen the odds against TPP’s passage, and help turn Ms. Clinton into something of a trade realist during her expected presidential run (it’s happened before!) it will rightly be seen as a constructive and urgently needed landmark in American public policy.