In the bigger sense, these two things are related. First, a week ago, I asked whether the president will keep his campaign promise about renegotating NAFTA. The answer seems to be "no":
The administration has no present plans to reopen negotiations on the North American Free Trade Agreement to add labor and environmental protections, as President Obama vowed to do during his campaign, the top trade official said on Monday.
“The president has said we will look at all of our options, but I think they can be addressed without having to reopen the agreement,” said the official, Ronald Kirk, the United States trade representative. It was perhaps the clearest indication yet of the administration’s thinking on whether to reopen the core agreement to add labor and environmental rules.
The reason being given is dumb and, frankly, disingenuous: that in the current economic environment, renegotiating NAFTA would discourage trade. That’s nonsense. The goal of renegotiating NAFTA was to strengthen labor and environmental provisions; for the record, I just want to reiterate that I think the whole model has to be trashed and that renegotiation cannot change the basic nature of these deals as agreements protecting capital and investment. But, from the narrow perspective of trying to "fix" NAFTA, sure, go ahead. But, the larger point is that trade levels today are being effected by the larger collapse of consumer spending and debt levels–neither of which is going to be improved by not renegotating NAFTA or hurt by renegotiating NAFTA. Indeed, you can argue, as I have, that so-called "Free trade" has depressed wage levels–which means people have less money to spend–and that improving labor provisions will raise wages and, in turn, help peoples’ pocketbooks.
Sen. Sherrod Brown of Ohio reacts, in a press release sent from his office:
“I’m disappointed. The president needs to understand there is strong opposition to more-of-the-same trade deals. There is pent-up demand for a new approach that starts with fixing what is not working, including NAFTA. I plan on working closely with President Obama and U.S. Trade Representative Kirk to fix this agreement and ensure the failed NAFTA model is not followed in future trade agreements. I hope it is as clear to President Obama as it is to Ohioans that our trade policy is not working and that it needs fixing.”
And on the general topic of bad news, the Financial Times Martin Wolf asks in an insightful column today whether the worst is over in the economic decline. His answer is nope:
Is the worst behind us? In a word, No. The rate of economic decline is decelerating. But it is too soon even to be sure of a turnround, let alone of a return to rapid growth. Yet more remote is elimination of excess capacity. Most remote of all is an end to deleveraging. Complacency is perilous. These are still early days.
As the Organisation for Economic Co-operation and Development noted in its recent Interim Economic Outlook, “the world economy is in the midst of its deepest and most synchronised recession in our lifetimes, caused by a global financial crisis and deepened by a collapse in world trade”. In the OECD area as a whole, output is forecast to contract by 4.3 per cent this year and 0.1 per cent in 2010, with unemployment rising to 9.9 per cent of the labour force next year. By the end of 2010, the “output gap” – a measure of excess capacity – is forecast to be 8 per cent, twice as large as in the recession of the early 1980s.
Sure, the current rate of decline is not as bad. But, do not be seduced by the temporary rally in the stock markets because there is a lot of muck and garbage out there. As Wolf points out, the IMF has just estimated that the financial sector losses will be 4.1 trillion (that’s TRILLION)–and he thinks the IMF’s next estimate will be higher. His conclusion:
The danger is that a turnround, however shallow, will convince the world things are soon going to be the way they were before. They will not be. It will merely show that collapse does not last for ever once substantial stimulus is applied. The brutal truth is that the financial system is still far from healthy, the deleveraging of the private sectors of highly indebted countries has not begun, the needed rebalancing of global demand has barely even started and, for all these reasons, a return to sustained, private-sector-led growth probably remains a long way in the future.
All this tells us is that we are in for a much longer, painful time–which means we will have a lot of time to fight for a new set of economic rules that change the game so we aren’t back here again down the road, wondering why we didn’t change the system when we had the chance.
