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January 19th, 2008

Election perspectives: economy and international trade

The economy is going to be an important issue in the 2008 elections, and international trade is a huge part of that.

But what is all the argument about? Why did Professor James Galbraith of the University of Texas think he needed to prove there are economists that support John Edwards? Are they really that rare?

There are basically two views on international trade. The first approach is usually referred to as free trade. An introductory economics textbook would tell you that barriers to trade are almost always harmful, and advocates of free trade generally agree. Most economists would probably say that this describes them, said William Darity, a Duke professor of economics.

Those who believe free trade is less than perfect are difficult to describe with one word, but the fashionable term is “protectionist.” They see big problems with the idea that all trade barriers are bad. In fact, Darity said, this is rarely true.

“It could be true [that trade barriers are bad], depending on the circumstances, but there are circumstances under which it could not be. You have to examine the impact of the policy in a case-by-case fashion,” he said.

Edwards generally sides with the protectionists. Since this goes against the views of most contemporary economists, he is often ridiculed for his “negative talk on trade,” as David Leonhardt of The New York Times put it.

The reason that Edwards’ economic proposals get such a bad rap is largely a misapplication of the principles of free trade, said Galbraith. Free trade works between states, for example, because there are common laws and institutions that are strongly enforced. Since this is rarely the case in international trade, it doesn’t make sense to expect pure free trade to work.

That pretty much opens to the door to a complete reconsideration of how we evaluate economic proposals. And among the presidential candidates, Galbraith said, he finds Edwards’ ideas the most developed and sensible – despite their tendency to offend the free trade instincts of economists.

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