President Obama turned around his sleepy, 1st debate loss last night. Being more aggressive. Romney was also again aggressive but seems to have lost the debate by most accounts. The win-loss determination generally depends first upon style and second about substance.
There were some substantive comments on trade agreements and China policy. Here are transcript excerpts from the second debate with my comments.
Romney: Number two, trade. I’ll crack down on China. President Bush didn’t. I’m also going to dramatically expand trade in Latin America. It’s been growing about 12 percent per year over a long period of time. I want to add more free trade agreements so we have more trade.
1. Good job for Romney bringing up the China issue… because it is the biggest trade issue we face. Obama has been too weak on China’s trade tactics. Period. Romney has, previously, said that China cheats – yes “cheats”, a strong and accurate word – via currency manipulation and intellectual property theft. Cautionary note: While he has said he will declare China a currency manipulator on “day one”, I had previously criticized him because the declaration has no legal remedy except “talking” with the Chinese about it. Bush and Obama have already done that. But Romney has also said he will consider duties and tariffs to neutralize the advantage. Actions matter, not words, but those words are welcome.
2. Bad job for Romney for wanting more trade agreements so we have “more trade”. ”Balanced trade” or “net exports” are the issue. More trade and more trade agreements are not the issue. The presumption that more trade agreements and more trade causes good economic results is simply – and mathematically – wrong. Clinton, Bush and Obama have pushed more trade agreements, have increased “two-way trade already. And the trade deficit destruction has been immense and growing. Balanced trade or net exports is the issue for growing our GDP, jobs and wealth.
Obama: When he talks about getting tough on China, keep in mind that Governor Romney invested in companies that were pioneers of outsourcing to China and is currently investing in countries — in — in companies that are building surveillance equipment for China to spy on its own folks. That’s — Governor, you’re the last person who’s going to get tough on China.
And what we’ve done when it comes to trade is not only sign three trade deals to open up new markets, but we’ve also set up a task force for trade that goes after anybody who is taking advantage of American workers or businesses and not creating a level playing field. We’ve brought twice as many cases against unfair trading practices than the previous administration, and we’ve won every single one that’s been decided.
When I said that we had to make sure that China was not flooding our domestic market with cheap tires, Governor Romney said I was being protectionist, that it wouldn’t be helpful to American workers. Well, in fact we saved a thousand jobs, and that’s the kind of tough trade actions that are required.
1. Obama brought up Romney’s aggressive investing/outsourcing in China via Bain. This is an effective personal attack, but not a policy rebuttal. Some of my colleagues say this line of attack is irrelevant to policy, but I think it is probably impactful because people/voters always have their “hypocracy antennae” up. When you are a candidate, you run on your biography and your accomplishments. Romney’s biography (and Obama’s) is fair game.
2. Obama bragged about signing three trade deals (Peru, Colombia, South Korea) which is true. Bush negotiated the deals, Obama campaigned on fixing trade agreements, then pushed those same deals. This shows the bipartisan idiocy in false cause and effect. I.e. that trade deals = more trade = economic benefits. The true cause and effect is that balance trade (climbing out of trade deficit) = economic benefits. Neither candidate has run on balanced trade. It is imperative that Washington change its thinking.
3. Obama’s enforcement through trade cases has been real. It is necessary and good, but insufficient. When unfairly and cheap and subsidized goods are flooding the U.S. in every sector, enforcing the trade laws as to cheap tires is a band aid. It is very much worth doing to help that industry and to establish legal precedent, but it is insufficient. Romney did, in his book “No Apology” criticize the tire enforcement case, saying “protectionism stifles productivity.” That was dumb and wrong to write.
Romney: Now, we’re going to have to make sure that as we trade with other nations, that they play by the rules, and China hasn’t. One of the reasons — or one of the ways they don’t play by the rules is artificially holding down the value of their currency, because if they put their currency down low, that means their prices on their goods are low. And that makes them advantageous in the marketplace. We lose sales, and manufacturers here in the U.S. making the same products can’t compete.
China has been a currency manipulator for years and years and years. And the president has a regular opportunity to — to label them as a — as a currency manipulator but refuses to do so. On day one, I will label China a currency manipulator, which will allow me as president to be able to put in place, if necessary, tariffs where I believe that they are taking unfair advantage of our manufacturers.
So we’re going to make sure the people we trade with around the world play by the rules.
1. Good for Romney on currency again, especially explaining why currency manipulation matters. Joe Voter doesn’t understand why it matters.
2. As to declaring China a currency manipulator, that is good also. He’s clear about it. And he lays the groundwork for tariffs “where necessary” against China. Putting the issue of neutralizing tariffs on the table during the campaign helps make progress towards rebutting the notion that tariffs to neutralize cheating are “protectionist”. But Romney has explicitly refused to support popular, pending legislation that would automatically allow tariffs (countervailing duties) for all currency manipulators… The Fair Currency Act of 2011 (HR 639). And his trade surrogate told CPA members in a meeting that he does not want to commit to countervailing duties because he wants to “keep his options open”. This reduces his credibility.
3. But Candidate Obama was a co-sponsor of the same currency bill and pledged to crack down on China currency manipulation. Obama simply broke that promise. To the detriment of our economy.
4. Regarding “China playing by the rules”… I have a problem with this framing. China playing by the rules is not enough. They can “cheat” and play by the rules because of their massively state-owned commercial enterprise system and because of their border taxes (value added taxes) that generate one-fifth of their national tax revenue. All of this is lawful under the WTO and trade rules. So (a) China is not, and may never be, a free trading nation… structurally; and (b) massive trade disadvantages can and do still exist, for reasons other than natural competitiveness, even when the rules are followed.
Obama: Now Governor Romney talked about China. As I already indicated, in the private sector, Governor Romney’s company invested in what were called pioneers of outsourcing. That’s not my phrase; that’s what reporters called it.
And as far as currency manipulation, the currency’s actually gone up 11 percent since I’ve been president because we have pushed them hard. And we’ve put unprecedented trade pressure on China. That’s why exports have significantly increased under my presidency. That’s going to help to create jobs here.
1. Regarding Romney’s/Bain’s outsourcing, I’ve already discussed it. Obama kept that fact front and center before the audience.
2. Obama’s assertion about China’s currency going up 11 percent is a misleading cop out. When traded on free market exchanges, the strong economies’ currency values rise – while weak economies’ currencies fall. China was growing 13% per year for quite a few years, while the U.S. economy was growing slowly or in a recession. China’s currency should have appreciated very strongly, but has not even come back to the level of 1994 when they were still a backward country. So Obama is wrong here.
3. Obama’s assertion about export growth is also misleading and wrong. Certainly exports have grown, but they grow every year. The issue, again, is balanced trade. Bush nearly doubled exports between 2002 and 2007, and the result was the biggest trade deficit in the history of the U.S. and the world.
CONCLUSION: Until Obama or Romney starts talking about balanced trade as a core imperative, they are merely competing for the position of least damaging to our economy.