Dr Andrew Glencross ~ andrew.glencross@eui.eu

American Foreign Economic Policy

Government and Politics of the USAHillary Term, Lecture 27

Hillary Term Essay

• Submit essay online via www.turnitin.com and hard copy to Jane Suiter - Deadline: 5pm, Monday 10th of March (Hillary term wk 10)

• Choose 1 of 3 titles; strict 2,000 word limit (excluding bibliography)– “In practice, Congress functions not as a unified institution, but as a

collection of semi-autonomous committees that seldom act in unison“. Discuss this view, and explain your response.

– What are the consequences of pluralism and federalism for the policy-making process in the US? Evaluate these consequences with reference to at least two policy areas.

– Discuss the role played by money in US Presidential elections. Elaborate your response in the context of attempts at campaign finance reform since the 1970s and the 2008 Presidential election.

• Details on course website - http://uspoliticstcd.pbwiki.com/Course-assessment

Required reading…– MHW chap. 16– Singh chap. 15Additional resources…

• Kenneth Dam, The Rules of the Global Game: A New Look at US International Economic Policy-Making (PL-417-659)

• Stuart Eizenstat and Marney Cheek, ‘Ending the Trade War in Washington: Saving the Trade Agenda by Protecting Workers’, Foreign Affairs, May/June 2007

Readings for today

• America’s Special Place in the Global Economy• Current Issues in American Foreign Economic

Policy• The Protectionist Temptation• Interest Groups and Protectionism• Foreign Economic Policy and the 2008 Election• Roundup of latest developments in 2008 race

Agenda

Definitions

• Free Trade: ‘national prosperity is advanced by the unfettered exchange of goods and services with other states. This is achieved by removing restrictions on trade’

• Mercantilism: ‘national prosperity is advanced by achieving a trade surplus – by doing more exporting than importing. This is achieved by state subsidies to exporting industries, and restrictions on imports, such as tariffs, quotas, and import-impeding regulation’

America’s Special Place in the Global Economy

• International Trade: 25% of global economy, biggest importer, a leading exporter, pursues aggressive free trade agenda e.g. bilateral trade agreements with emerging countries

• Financial Flows: US attracts most foreign direct investment, free trade also means free capital movement

• Economic Institutions: WTO, IMF

Current Issues in Foreign Economic Policy

• Energy supply

• Climate Change

• Foreign dependency

The Protectionist Temptation

• US most open economy in world, foreign economic policy is based on free trade for mutual prosperity and assumption that economic interdependence and growth promotes peace

• Benefits of free trade for US estimated to be $9000 per household since 1945, cheaper imports means more purchasing power

• But there are several reasons why US policy-makers contemplate protectionist measures

The Protectionist Temptation

• To protect jobs, especially low-skilled manufacturing jobs

• To protect consumers from unsafe imports

• For national security, to prevent rivals acquiring sensitive technology or strategic assets

• To use trade to effect change in other governments’ public policy

Interest Groups and Protectionism

• McCain – voted for NAFTA, calls himself "the biggest free marketer and free trader that you will ever see“, proposes market trading scheme for reducing carbon emissions, would overhaul unemployment insurance to make it into retraining and relocation scheme

• Clinton – voted for NAFTA but now wants it reformed, wants free trade treaties to include provisions on labour and environmental standards, voted to ratify Kyoto, more open criticism of Chinese human rights practices, update Trade Adjustment Assistance to include service jobs

• Obama – wants to “fix” NAFTA, update Trade Adjustment Assistance, only sign up to free trade treaties if include labour and environmental standards, says US has to be toughter negotiator with China especially on currency, work on multilateral solution for climate change

Foreign Economic Policy and the 2008 Election

Interest Groups and Protectionism

• 2002 steel tariffs – came on back of spate of bankruptcies in US steel firms, job losses sensitive in certain swing states for mid-term elections, Bush introduced temporary tariffs to counter what was said to be illegal dumping

• Result was criticism from free trade republicans and EU threat of retaliatory tariffs, WTO declared tariffs illegal and Bush backed down but only after more pressure by EU

• 2007 glossy paper – US investigation finds Chinese paper companies subsidised for export, so US imposes countervailing duties

• Drop in the ocean – glossy paper imports from China worth 225 million a year out of 250 bill trade deficit

The Bush Administration and Protectionism

• Scandal – NY Times alleges affair between McCain and lobbyist prior to 2000 campaign; controversy over interceding on behalf of a broadcaster over sale of a TV station

• Revealed that Republicans raised more money in Florida than Dems reversing trend of current campaign

• Huckabee’s persistence – now seen as positioning for future presidential campaigns, keeps referring to Reagan’s unsuccessful 1976 run

Latest developments in 2008 race

Republicans

• On a Roll – Obama on 11 straight primary wins by double-digit margins, eroding Clinton voter base with working class, women and hispanic communities, accused of plagiarizing speech

• Jumping Ship – survey revealed that two dozen superdelegates pledged to Clinton have switched to Obama

• A Farewell Address? In debate with Obama made a remark about “whatever happens”, Bill Clinton says Hillary campaign has to win Texas and Ohio to continue

• Baracklash? Increasing number of commentators dwelling on Obama campaign as almost personality cult or new form of populism, worrying about what the substance is and what he stands for

• Nader factor?

Latest developments in 2008 race

Democrats