British Prime Minister Gordon Brown is making the rounds in Washington, hawking his “global New Deal” to spur worldwide economic recovery. Yesterday at the White House, President Obama seemed receptive to the idea – as he and Brown dished about coordinated efforts to spend, lend and regulate away the economic downturn.
Well, here’s a tip for leaders on both sides of the Pond: The key to recovery isn’t less economic liberty, but more – namely, free trade.
Like most pols beholden to Big Labor, Obama doesn’t have a good record on trade. During the campaign, he dissed America’s strongest Latin American ally, saying he couldn’t support a trade agreement with Colombia. And his stimulus package has infuriated Europe and Canada with its “Buy American” provisions.
Protectionism may make the unions happy, but it’s not the way to restore the world’s prosperity – or America’s.
During this economic free-fall, trade is the silver lining: To the extent that the US economy grew last year over 2007, the single largest factor was exports. Estimates by some economists also show that if all the world’s remaining trade barriers were eliminated, annual incomes in the US could grow by $500 billion – about $4,500 more per household. Now that’s a stimulus.
And trade is the best chance to forestall economic and political collapse in poor regions like Africa and Latin America, where the downturn is felt the hardest.
In fact, the World Bank estimates that if all the world’s countries eliminated barriers to trade in just goods alone, global income would rise by nearly $290 billion a year. (A large chunk of those gains would go to the developing world.)
In other words, free trade creates jobs, boosts incomes and drives worldwide economic growth. Maybe that’s why Obama acknowledged during yesterday’s confab with Brown that “we should encourage trade.”
Encouragement is nice – but Obama needs to back up his words with actions.
A good start would be pressing Democrats in Congress to move America’s free-trade agreements with allies Colombia, South Korea and Panama. That would be better than any global “New Deal” – it would be a good deal for the world.