Friday, November 7, 2008

Obama on Trade...well, OFF, Trade!

At least off with the current state of the multi-lateral negotiations and off with NAFTA (North American Free Trade Agreement). Remember the bad, bad words he said about NAFTA during the campaign and how he would pull out of the regional trade deal, if Mexico and China do not implement and enforce labour and environmental laws? Then, his economic policy advisor, Gooselbee, made it seem as if "Obama was just being 'political'". Well, we knew he was being political and it's an issue, the rest of the world took very seriously--politically speaking!

Without a doubt, aside from the EU, the US is the foremost trading partner in the world. They are the 'free-trade' people- Washington consensus and all. However, they are increasingly turning into the types of people, GASP, 'protectionists', who argued that free-trade was bad news and are caterwauling about the unfair practices of China and the EU, in a most stentorian manner.

Ohh.....Krugman and Wade were right?

Perhaps they were!

However, what would an Obama do about such imbalances? Or, what CAN he do about such imbalances?

For starters and in regards to NAFTA, Mexico and Canada should be forced to put in place labour and environmental standards. Not primarily because it affects free trade, but because its the right thing to do. If the US, wants to be continually looked at the standard bearing nation for all good and pristine, it must enforce those standards on anyone wishing to trade with it, by use of all of its diplomatic might, just to say "it matters, darnit!". And, in fact, "people" and "the environment", matter!

But, in the event of it blocking trade, the economics of it is, is that poor labour standards and lack of standardized wages and work hours, increase profit from production. Increased profit and the power to increase workers and hence production, leads countries to produce a massive amount of goods at a very cheap price- take for example the Asian textile market, where seamstresses are paid as little as $5.00 USD a week. It works out, in effect, to cheaper goods being produced, well below their true market value. Even if these goods can be produced in a developed market for a fair wage, developed countries ask for higher wages, shorter work hours and more general compensation and benefits; i.e. bigger pensions, health care and child care- the economic benefits for producing and exporting from countries like Mexico, is obvious. More workers at a cheaper price.

In turn, countries, like Mexico who abuse workers, especially in regards to Mexican steel and exports of steel to the USA, "dump" goods on markets like the USA, in an attempt to push out domestic producers and corner the market. I don't think any country wants to lose their comparative or competitive advantage, if they don't have to. However, international labour standards should apply. Then, let it run..... even steven's!

Same thing, almost, for environmental standards. No carbon emission quota's for factories, no solid waste management guidelines and so on and so forth. Lowers overall cost and gives a producer, "unfair" international profit margins and advantages to produce more goods.

What should Obama and his Mama, do?
Obama, just simply has to say to Mexico, in particular, quit it or we cut you off. Period. They will back down as Mexico, would collapse like Cuba- economically speaking.

As for Canada, he can work out a better, more diplomatic bi-lateral deal as Canadians, are always willing to cow-tow to American interests. In fact, there can be allot of deals on the table, in regards to Canada, just to make it appear friendly. For starters, it can facilitate more Canadian work permits. Secondly, he can work on stronger collaboration on the financial services sector and in the fisheries sector. All of which, Canada would jump to enforce "stricter" labour and environmental standards as a trade off. The subaltern nature of the Canadians, can be counted on at every turn. Must be the French in them! I keed...I keed!!!

What about the Multi-lateral System, Youri!?!?!
But, what about the MLS? Obama's meddling may exacerbate the issues in the MLS and WTO, even further. Bush was very compliant with free-trade. Obama, just may kill the Doha Round, DEAD! Obama would be blamed and I think, he would enjoy being blamed for killing the rest of what is left of Doha-- ab ovo, we will go! The unions would like that and so would American farmers!

Truth is Obama hates the China-US trade imbalance. He finds the low Chinese currency to be a boon to global fairness. The emerging markets were not given as much as a mention in any campaign stump-- which may work against them, as it will with Mexico and NAFTA. The EU, would be punished because of their consistent use of the WTO dispute settlement mechanism against the US and in turn, turning countries against the US--Europe, was the first and foremost region, the US tried to assist, post world war. How things change in a few decades!

On the bright side, poorer countries, may seek aid and a new bi-literalism, between the US and countries and regions, may explode. Why not? The EU has been doing it-- the recent EPA force feeding, is the type of thing the EU is looking for. How gauche!!! Since the WTO can't get a deal done, we will get it done ourselves-- they make up at least 50% of the WTO's most wealthiest nations, in any event. In fact, the world has become a 'noodle bowl' post Uruguay Round and not just Asia.

As we speak, and just to make sure its about politics, Obama backs a bi-lateral deal with Peru, but hates the deal with Columbia and Panama--Bush's projects! No doubt, they will be restructured, with little or no "real" changes in them, as many incoming governments do-- alter what they see in place from the former or whats left in limbo, just to say they did something beneficial to their country. And, then, go back to same old, same old!


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