This is from Dani Rodrik’s blog, where Ricardo Hausmann made a guest appearance:

Dani has many complex and sophisticated arguments regarding his less than enthusiastic support for the Doha Round and his willingness to entertain the wisdom of a standstill. He argues in favor of Hillary Clinton’s position on this matter and against the view that if trade agreements do not go forward, they inevitably fall back.

This may be a tenable position for a trade theorist or for a trade policy wonk. However, suppose the question is the following: do you trust the motivations of this candidate or is the candidate just hiding behind plausible arguments to justify dangerous and wrongheaded policies? Is this candidate rationally worried about the welfare calculation Dani has in mind or is he/she just using our limited understanding of the relationship between trade policy and welfare to advance a different agenda? To ascertain these questions one is allowed to use not just the position of the candidate vis a vis the Doha Round, but instead her/his position on other policy issues as well.

Candidates have a clear opportunity to signal their type, as economists like to say, in their position vis a vis the free trade agreement with Colombia. Here is a country that is a triple frontline state. It is at the frontline in the devastating war against drug-trafficking, suffering most of the casualties both in human lives and in institutional damage. It is in the trenches in the war on terrorism, having to face the deadly and costly consequences of the kidnappings and drug-financed guerrillas. It is also in the frontline against the new totalitarian conception of society now espoused by neighboring Hugo Chavez and his floundering Socialism of the XXI Century.

The US has been aware of this predicament and, since the times of Bill Clinton, has been willing to assist the country with a few billion dollars in military and development support through the so-called Plan Colombia. Now the country has negotiated a free trade agreement with the US and has been able to gain a large support of domestic public opinion in its favor. But this agreement has not been approved by the US congress because of the opposition, among others, of Hillary Clinton.

The question is not whether the free trade agreement is good or bad for Colombia: that is the sovereign decision of Colombia and should not form part of Hillary’s decision. The question is what are the overall effects of Hillary’s position on the US, including its impact on employment and economic wellbeing of American citizens and the standing of the US as an ally in the many confrontations that this world posses to other countries.

It is difficult to see how Hillary comes out the way she does on this one. By the way, she also opposes a free trade agreement with neighboring Panama, a country of barely 3 million people, where the US ran its main industry, the canal, for almost a century.

A free trade agreement with the US is a much more limited offer than membership in the European Union. There are no fiscal transfers, no labor mobility, no monetary union, no acquis communautaire. In spite of its modesty, several democracies in the region have been willing to go for it. The fact that Hillary is unwilling to support a more integrated economic space in the Americas, which her husband espoused so much, makes it very clear to me that she may use Dani’s arguments as an excuse, but she does not share Dani’s goals.

The comments, and Ricardo’s responses, are worth reading too.

Scroll down to December 6 for my earlier take on this.

December 11th, 2007 in Uncategorised | Permalink