Monday, October 20, 2008

Obama's Talk of Protectionism Already Driving Canada Away

Is it possible for a President to have made a bad policy decision before he takes office? The Wall Street Journal has a editorial that suggest that the answer to that question is indeed yes--and Obama has already done it.
Barack Obama's promise to unilaterally rewrite the North American Free Trade Agreement if Canada and Mexico won't go along with his ideas on labor and the environment has not gone unnoticed in Ottawa. If Canadians are going to have a tougher time selling their goods and services south of the border, who can blame them for looking east -- across the Atlantic to Europe.

Prime Minister Stephen Harper and President Nicolas Sarkozy of France signed an agreement Friday to begin negotiations for a free trade pact between Canada and the European Union. A Canada-EU study released last week outlines the joint economic benefits of such a partnership, with two-way trade estimated to increase 22.9% by 2014.

The proposed partnership goes a lot further than Nafta. In addition to allowing free trade in goods and services, it would harmonize regulations, open up the air-travel market, and boost opportunities in government-procurement. Most important, it would free the labor market so that skilled workers could move easily back and forth across the Atlantic.

The free-labor point is key. As recently as half a century ago, Canadians and Americans were pretty much free to work in either country without the visa restrictions that apply today. Under the proposed Canada-EU agreement, a computer geek from, say, the University of Waterloo -- one of whose alumni developed the BlackBerry -- would be able to take a job in Hamburg or Dublin if he wished; forget about Silicon Valley.
That last paragraph is indeed the important one. I've worked in the tech industry for a number of years. A large (and to people outside the area, surprising) number of programmers and the like are Canadians. They come to the U.S. to find a high-paying tech job, to complain about the lack of hockey coverage on TV, and--though this is the topic of another post--to get health care coverage that is more responsive than the nationalized health care in Canada. Making it hard for this group of people to come to American and find jobs would be a real hit to the productivity of tech industry in this country. I suppose that Obama thinks that it would mean more jobs for Americans but protectionist policies in the past just lead to escalation between countries and that is good for no one.

John at Powerline warns just how long-term the effects of such policies can be:
Under an Obama administration, the United States will be more protectionist than Europe. That's a recipe for economic decline. As with so many of Obama's policies, however, the full extent of the damage will not be evident until long after he leaves office.
Though Obama's plans perhaps do mesh with his other policies. In a NYTimes editorial, John Tierney questions Obama's plan to have the government pay to train 100,000 more engineers and scientists.
If the United States really has a critical shortage of scientists and engineers, why didn’t this year’s graduates get showered with lucrative job offers and signing bonuses?


The only “shortage” is of American-born scientists and engineers. But with so many talented foreigners competing for positions here in schools and laboratories, it’s entirely rational for American students to head into fields where their skills are in more demand — and harder to replace with foreign labor.
Perhaps the thought is that if you make it harder for foreign labor to come to the U.S. you'll create job opportunities for Americans that you have artificially forced into the market.

This combination of policies shows a shocking lack of understanding about how free markets work. Most large tech companies (and non-tech companies, for that matter) are highly international entities. If protectionist policies make it difficult to operate in the U.S. they will simply shift operations to other countries. Unless of course Obama enacts more laws that make it hard for multinational companies to operate in the U.S. Just how far down the rabbit hole are we going to go?

Two weeks left in the election. It's not too late, America.

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