The Custom-House

What does Larry Summers think?

Larry Summers thinks that there is a powerful and persuasive case to be made for keeping the U.S. open to the world economy.  In fact he thinks protection is ultimately untenable. 

But he also thinks that growth in much of the developing world may hurt less skilled workers in developed economies - whether or not the developed economies turn inward and raise barriers to foreign goods and services. This creates a political problem that an open-economy policy needs to solve.

He laid this out in two Financial Times columns last spring.  In April, in America needs to make a new case for trade, he argued that there is a compelling case to be made that "the US is better off with than without trade agreements and that the world will be a richer, safer place with increasing economic integration." 

But...

Suppose Rangel Goes?

Charles Rangel.  Source: Bloomberg.

Charles Rangel (D-NY), the Chairman of the House Ways and Means Committee, faces an ethics challenge: Pelosi faces pressure to replace Rangel.  Pelosi says she won't take any steps until she sees an ethics committee report due by January 3.

Congressional support for trade took a hit in November

Trade didn't do too well in November's Congressional races, reports Brad Haynes Trade Deals Will Face More Critics in Congress:

Climate legislation and trade

Legislation to address greenhouse gas emissions is coming, and will have implications for trade.  Jeffrey Frankel of Harvard reviews the issues in a recent working paper (Global Environmental Policy and Global Trade Policy).  Here's the abstract, broken into short paragraphs:

Geithner and the task force on building support for trade

Obama has settled on Timonthy Geithner, President of the New York Fed, as his choice for Secretary of the Treasury. 

Geithner rose in the Clinton Treasury under Robert Rubin and Larry Summers, eventually serving as Undersecretary of the Treasury for International Affairs. 

In 2001, while he was a senior fellow in international economics at the Council on Foreign Relations (CFR), he served as director for a CFR task force on: Building Support for More Open Trade.  Geithner's Duputy in this project was Daniel R. Lucich.  Lucich had worked for Geithner at the Treasury as Deputy Assistant Secretary forTrade and Investment Policy.

Robert Rubin (Clinton Treasury Secretary) and Kenneth Duberstein (a former chief of Staff to President Reagan) chaired the task force.  Its other members included: Charlene Barshefsky (former Clinton USTR), I.M. Destler (Academic and Peterson Institute), Carla A. Hills (former Bush USTR), Lewis Kaden (at the time, a partner at the law firm of Davis Polk & Wardwell - moved to become Vice-Chairman at Citigroup in 2005), and Andrew Kohut (Director of the Pew Center for the People and the Press).

Geithner was the director for the task force, not one of its members, and not technically one of the authors of the report.  But he certainly played a role in composition, and his association with the project implies sympathy with it.

The task force made seven recommendations:

Geithner on building support for international economic integration

In January 2007, Timothy Geithner - Obama's choice for Treasury Secretary - spoke to a Council of Foreign Relations audience about: Developments in the Global Economy and Implications for the United State.

Among other issues, he took up the importance and difficulty of building political support for open economies:

Who wins from competitive subsidization?

Would a U.S. auto bailout trigger a world wide race to the subsidize auto production?  In the wake of the American discussions of an auto bailout, other countries are beginning to think about subsidizing their own industries  Jennifer M. Freedman reports for Bloomberg: American Hypocrisy in Auto Rescue Spurs Me-Too Trade Ire.

The U.S. kicked off the bailout war. Congress is trying to reach a compromise on giving automakers $25 billion they say they need to survive the next year, either by speeding up the use of funds already approved to develop more fuel-saving technologies and models or providing a new source of funds. President-elect Barack Obama supports helping the industry....

Now similar proposals are proliferating around the globe. ``When one of the major powers grants subsidies to a high- profile industry, the other is inevitably led to react by defending its own interests,'' said Pierre Kirch, a trade lawyer at Paul Hastings in Paris....

and

``The temptation may be greater now for member states to give subsidies that can result in their economic problems being exported to their neighbors, but that would only worsen the economic difficulties,'' Kroes said at a conference in Brussels.

Depending on the type of bailout we provide, we may see a WTO challenge.  But,

Any World Trade Organization complaints may open a Pandora's Box, bringing to a head a long-simmering dispute over policies that U.S.-based General Motors Corp., Ford Motor Co. and Chrysler LLC say unfairly aid rivals, including state- financed health-care and retirement benefits, and currency policies.

Hat tip to Simon Lester: More on Auto Trade Tensions.

What to do about the Russians?

The Russian state wields import bans, gas delivery stoppages, export restrictions, and unilateral revisions of trade agreements, with abandon.  It has no compunction about using state harrassment to wreck and expropriate foreign positions in ventures within Russia.  The E.U. depends heavily on Russian oil and gas, and Gazprom has large investments in E.U. gas companies and infrastucture.  That alone is cause for unease, given Russia's record of using its control over oil and gas for political purposes, but Russia refuses to provide opportunities for reciprocal E.U. access to the Russian gas market.

So Iana Dreyer and Brian Hindley ask: Russian Commercial Policies and the European Union - Can Russia be Anchored in a Legal International Economic Order?  It would be nice if companies and countries had some sort of legal recourse.

Forces shaping U.S. international economic policy

Bush came to office hoping to advance a vigorous free trade agenda, and "skeptical of activist IMF intervention in emerging market financial crises, foreign exchange market intervention, and multilateral development assistance." 

But Barry Eichengreen and Douglas Irwin argue that it ultimately pursued a foreign economic policy that was fundamentally similar to that of previous administrations: International Economic Policy: Was There a Bush Doctrine?

Orszag for OMB? Goolsbee for CEA? Lew for NEC?

Brad DeLong passes along the gossip: Nominee-Designate-Leekees.