• Tuesday, November 24, 2009
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Obama, Trade, and the Goolsbee Affair

One of Sen. Hillary Clinton’s victories yesterday came in Ohio, a state that has lost many thousands of manufacturing jobs during the last 30 years. The North American Free Trade Agreement is widely hated among parts of the Democratic base there, and in the final days of the Ohio campaign, Mrs. Clinton and Sen. Barack Obama traded arguments about who could be trusted to oppose NAFTA-style trade pacts in the future.

To make her case, Mrs. Clinton pointed an accusing finger at one of Mr. Obama’s most prominent scholarly advisers: Austan Goolsbee, a professor of economics at the University of Chicago. At issue is an informal meeting that Mr. Goolsbee held with officials at the Canadian consulate in Chicago. According to a memo described by the Associated Press on Monday, Mr. Goolsbee told the Canadians that Mr. Obama’s anti-NAFTA rhetoric is “political positioning” that does not necessarily herald any major U.S. policy changes. But Mr. Goolsbee told the Associated Press that the Canadian official who wrote the memo had misinterpreted his remarks, and that it was “completely crazy” to suggest that Mr. Obama would make policy promises that he had no intention of acting on.

Mrs. Clinton’s campaign ran radio ads in Ohio that cited the Canadian-consulate meeting. Today’s Washington Post quotes an Ohio state representative as saying, “I can tell you: In Dayton, Warren, Youngstown, Cleveland, that hurt Obama.”

The 38-year-old Mr. Goolsbee is well regarded among scholars but is not known for having a particular ideological orientation. His role in Mr. Obama’s campaign has given rise to a small cottage industry of punditry about whether Obama’s economic framework is better described as centrist or as progressive. (One new entry, which probably appeared too late for Mrs. Clinton’s campaign to criticize in Ohio: On Monday, Jagdish Bhagwati, a professor of economics at Columbia University and a prominent advocate of liberalized trade, published an essay in the Financial Times that praised Mr. Goolsbee as “a valuable source of free-trade advice over almost a decade.”)

Mrs. Clinton’s spouse, of course, pushed hard for NAFTA’s passage in 1993. Mrs. Clinton has made a variety of not-always-consistent statements about the agreement over the years, which a Newsday columnist tried to parse last week.

So what precisely was said at the Canadian consulate? It’s impossible to know. But tea-leaf-readers might look at a January forum at the New America Foundation that featured Mr. Goolsbee alongside economic advisers to Mrs. Clinton, John Edwards, and Sen. John McCain. Late in the session, an audience member asked about trade policy. (The exchange begins at 1:15:20 in the video below.)

Mrs. Clinton’s proxy, Gary Gensler, answered first. He said that Mrs. Clinton advocates “smart trade,” but believes “we should look at every trade agreement that we’ve entered into – and for years she’s felt this – look at every trade agreement we’ve entered into and just make sure that it’s working for America.”

Enforceable labor and environmental rules should be included in trade agreements, Mr. Gensler continued. The United States should “assess where we are in all these trade agreements three years after they’re entered into, and every five years thereafter.”

Mr. Goolsbee, for his part, gave a long answer that included fewer concrete proposals than Mr. Gensler’s:

I’m an economist. Nobody’s ever going to be more in favor of open markets and free trade than the economists. And so then, you would presume that I would say, Oh, we should be for everything that has the words “free trade agreement” in it. All I will tell you is this: I do believe – there is nobody more in favor of open markets than me. That said, if you look at the free trade agreement – if you have never read a free trade agreement, I encourage you to go read it. Because it is as close to the economists’ case for free trade as our tax code is to the economists’ case for the ideal tax system. If you look at these 900-page agreements, there are two pages of what every economist would say: Yeah, that’s great, they’re lowering tariff barriers. And it’s 898 pages of loopholes. It looks just like the tax code: “Protect this company, and make sure that they’re getting their money, and these investor protections.” I think that the case for open markets is different from What do you think about this, that, or the 146 trade agreements that were signed in the 1990s? Obama has been trying to get us away from what I call the false choice – that either you’re for every single thing that the administration has done, or else you’re a protectionist and you’re against America’s role in the international economy. Neither of those are true. There are perfectly grounded things oriented around opening markets and expanding our presence in the world, that I think we can have pretty general consensus on. And I agree with Gary: One thing that we can have general consensus on is, If a country signs an agreement with the United States that says they’re going to do A, B, and C, that they should do it. And if they don’t do, we should pursue the means, in the WTO or otherwise, that make sure that everybody abides by the agreements they sign. So it strikes me that there is common ground there.

Late last year, The Chronicle looked at the pleasures and pitfalls of serving as a scholarly adviser to a presidential candidate.