Five Reasons Jagdish Bhagwati Thinks Obama is Better on Trade Than Clinton

Obama’s free-trade credentials top Clinton’s (Financial Times, March 3).  His explanation about the differences in trade orientation of the UAW, Teamsters, and Service Employees International is especially interesting:

First, Mrs Clinton, in an infamous interview with the Financial Times, responded to a question on support for the Doha round with the need for a pause, whereas Mr Obama has not done so. Second, whereas Mr Obama’s economist is Austan Goolsbee, a brilliant Massachusetts Institute of Technology PhD at Chicago Business School and a valuable source of free-trade advice over almost a decade, Mrs Clinton’s campaign boasts of no professional economist of high repute. Instead, her trade advisers are reputed to be largely from the pro-union, anti-globalisation Economic Policy Institute and the AFL-CIO union federation.

Third, Mr Obama’s main union support comes from the Service Employees International Union and the Teamsters, neither of which is protectionist: the SEIU’s membership is in the non-traded sector and, except on the issue of Mexican trucks coming into the US, Teamsters do well as trade expands. By contrast, Mrs Clinton’s support comes heavily from the AFL-CIO, which holds strong anti-trade views. This matters because the IOUs you sign during campaigns provide a straitjacket that can restrict your policy options.

Fourth, while Mr Obama’s anti-Nafta rhetoric is disturbingly protectionist, as is Mrs Clinton’s, remember that this is also strategic. If both are anti-Nafta in the campaign now, her opposition is reinforced because she carries the burden of having supported her husband in backing it.

Fifth, Mr Obama has smartly seized John Kerry’s proposal to remove the incentive to invest abroad and has gone further by proposing that those who invest at home will be given a tax incentive. It is dubious that this proposal will survive challenges from existing bilateral and World Trade Organisation agreements, or can achieve much when other countries can do the same. It is exactly the sort of policy that a constituency fearful of losing jobs demands but, by meeting that demand, President Obama would be left free to abandon the anti-trade rhetoric and embrace the multilateral free trade that has served the American and the world interest so well.