Hilary Goes Wobbly on Trade

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Presidential hopeful Hilary Clinton is uncertain whether the Doha round should be revived. “I agree with Paul Samuelson, the very famous economist, who has recently spoken and written about how comparative advantage, as it is classically understood, may not be a good description of the 21st Century economy in which we find ourselves”, she reportedly said over the weekend. Invoking labour and environmental standards as well, she said her administration would review all US trade agreements, including NAFTA (signed by husband Bill, in 1993). Nobel Laureate Samuelson created a storm with his 2004 Journal of Economic Perspectives paper when he said that the growth of trade with the emerging economies (including China and India) could reduce US welfare. Jagdish Bhagwati has counter-attacked US protectionists who, he says, have hijacked Samuelson’s argument for their own ends, noting that Samuelson didn’t say the US should use protectionism to respond to the new giants’ rise. Good to see that US politicians take their economists seriously as the presidential race heats up.

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2 Responses to “Hilary Goes Wobbly on Trade”

  1. James Scott Says:

    Part of the reason for this is of course that while the US economy has been growing quite strongly over the last 8 years many people are not feeling the benefits of that growth. Inflation rates are high enough that the median income in real terms is actually declining. This is particularly true for those on lower wages due to higher inflation in basic necessities like food and transport. Meanwhile, the number of jobs that offer health insurance continues to decline. All of this means that most Americans are feeling the economic pinch, as it were. Hilary Clinton is tapping into that and, as so often in any country, the easiest things to blame for such things are foreigners, globalisation and unfair trade practices.

  2. Tony Addison Says:

    Dani Rodrik has said before that the countries that do best out of trade (and globalization more broadly) are those that have effective safety nets (‘social protection’) to handle the inevitable adjustment costs — and minimize domestic fall out. That’s why big government often goes alongside openness to trade. Hence, the success of the Nordic region, and their companies which are big global players (think: Nokia, Kone, and Volvo) that grew out of small economies (Finland is only 5 million people, the size of many of the mid-western states in the US). America’s traditional wariness of the European welfare state model could now be a barrier to maintaining its success in global trade.

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