Free trade and the US election

By John Mervin
Business reporter, BBC News, New York

President Bush has underlined the importance of free trade

It may be more than a year away, but Americans already think they know what the big issues of the 2008 presidential election will be.

On the thousands of web pages, acres of newsprint and hours of airtime already devoted to the long race to the White House, two subjects get most attention: how and when to end the war in Iraq and how healthcare should be paid for.

But another issue is gaining prominence, one which is of much greater significance to the rest of the world.

Indeed, it is one that could have profound implications for the global economy.

The issue is free trade.

President Bush devoted his most recent weekly radio address to lauding the benefit America gets from free trade deals.

"Millions of American jobs depend on exports," he said.

"More exports support better and higher-paying jobs - and to keep our economy expanding, we need to keep expanding trade."

Faltering idea?

Mr Bush's immediate priority is persuading Congress to approve his administration's latest free trade pacts with Colombia, Peru, Panama and South Korea.

But his remarks are also part of a more general debate that is unfolding in the US about whether free trade is in the country's interest at all.

America, it seems, is experiencing a revival of protectionism.

I believe that there is no such thing as free trade Brian O'Shaughnessy, head of Revere Copper

Almost all of the candidates vying to be the Democratic Party's presidential nominee next year have adopted stances that flatly contradict the current president's fondness for free trade deals.

Front-runner Hilary Clinton wants all free trade deals to be revised every five years, including those that were negotiated by her husband's administration.

John Edwards, currently placed third among the Democratic hopefuls, has gone so far as to question how committed Americans really are to global trade.

"Trade has become a bad word for working Americans," he recently declared.

That, of course, is campaign rhetoric designed to appeal to Democrat voters.

Voter worries

What of the Republicans? Surely they share their president's belief in the benefits of free trade? Perhaps not.

Ms Clinton has distanced herself from her husband free trade stance

A recent Wall Street Journal poll found 60% of Republican voters think free trade is bad for America.

In contrast to the Democrats and their close ties to the trade unions, the Republican Party has a long tradition of pushing the agenda of American business.

So if two-thirds of Republican voters do not think it is a good idea, then the cause of free trade could be in real trouble in the world's biggest economy.

Most economists have no doubt that the US has benefited hugely from the global reduction of tariffs and the removal of other trade barriers over the last two decades.

Many also argue that it would profit even more if the remaining barriers were to be taken down.

Economic boost

Gary Hufbauer at the Peterson Institute for International Economics in Washington devotes much of his research to measuring the impact of trade policy on the US economy.

He has calculated that if the US could negotiate free trade deals with all of its trading partners it would add between $450bn and $600bn (£220bn to £294bn) to the value of US output.

We cannot stop doing business with the rest of the world Rudy Giuliani, Republican candidate

Divide that across the population and global free trade could make every household in the country up to $5,300 (£2,600) richer each year.

If economists are so convinced of the benefits of free trade, why aren't American voters?

The answer, of course, is that those combined benefits are not necessarily felt by individuals.

Instead, what many Americans, including US business owners, notice is that trade with other countries can make them poorer.

Manufacturing woes

Take Brian O'Shaughnessy, head of Revere Copper, which makes copper products for industrial customers around the world.

Mr O'Shaughnessy's company was founded in 1801 and is, he says, the oldest manufacturer in the US.

But the grand heritage has not saved it from the problems that have ravaged the American manufacturing sector.

US manufacturers blame overseas rivals for job losses and profit falls

This year, one of Revere's two plants has closed and Mr O'Shaughnessy has had to lay off 85 workers.

He believes this was a direct result of US policies, which make it too easy for foreign competitors to sell their products in America at his expense.

"I believe that there is no such thing as free trade", Mr O'Shaughnessy said.

"I believe that trade must be rules-based and that the rules must be fair."

To him the free trade deals negotiated by the US government are patently unfair.

While they may have lowered tariffs, he is appalled by what he sees as foreign governments' use of other means to promote their industries at the expense of America's.

"The USA continues to negotiate free trade agreements without recognising how its trading partners simply bypass the tariff reduction measures by raising or initiating new taxes."

Given the experience of Mr O'Shaughnessy and many like him, it is little wonder that Democratic politicians are finding a sympathetic audience for their more protectionist message.

Big question

For the Republican candidates it represents a dilemma.

Do they abandon their party's proud tradition of supporting free trade, or do they risk seeming indifferent to the struggles of the businessmen and women for whom they have long presumed to speak?

Mr Giuliani has warned voters not to be short-sighted

For now, they are doggedly sticking to the position that tearing down the barriers to trade is always a good thing.

"We cannot stop doing business with the rest of the world," as leading candidate Rudy Giuliani stated in the recent Republican debate.

Yet in the same debate, weaker rival candidates sounded more sceptical notes about the benefits of trade.

So unfavourable were the comments that one candidate, Fred Thompson, said Ronald Reagan would be "spinning in his grave" to hear Republicans sounding protectionist.

And if the polls continue to show that a big majority of Republican voters think taking down trade barriers is bad for the country, it will be a very brave politician who does not tailor his position accordingly.

All of which raises the possibility that the next president of the US will be a lot less committed to free trade than either Presidents Bush or Clinton before them.

If that is the case, then a lot of the world's wealth could be riding on the political debates rumbling on in America.