Obama’s Cabinet: Commerce

In the conclusion to the series on Obama’s cabinet, Reason Foundation’s Shikha Dalmia considers the best and works picks for Secretary of Commerce and U.S. Trade Representative:

Trade is one of those issues that will signal whether President-elect Obama intends to position himself as a centrist, New Democrat or an old-style liberal. He sent mixed signals during the presidential campaign, initially striking a free trade posture, only to retreat after his labor backers expressed annoyance. He invoked the mantra of “fair trade over free trade,” which is code for protectionism. He blamed NAFTA for losses in the auto and other manufacturing industries – promising to renegotiate the treaty if elected president. But Austan Goolsbee, a University of Chicago economist and Obama adviser, told a Canadian delegation that Obama’s NAFTA comments were “political maneuvering” that don’t reflect his real views. An early test of what Obama’s views really are will come when a standing U.S. quota against Chinese textiles expires in January. If Obama wants to do the right thing – let the quota die – and set the proper tone for the rest of his presidency, he will need a Commerce Secretary and a trade representative capable of clearly articulating the case for free trade. And the two best people for those positions are: Grant Aldonas, a Senior Advisor at the Center for Strategic and International Studies who was Undersecretary of Commerce in the Bush administration, and Federal Express Founder and CEO Fred Smith. Aldonas, who advised the McCain campaign and would certainly be an unusual pick, has repeatedly argued against blaming outsourcing for job losses in the United States. He understands the role that trade can play in promoting democracy and freedom and has called for expanded trade in every part of the world, including the Middle East. “Trade is a cornerstone of democracy,” he has said. “While trade promotes the rule of law, it also promotes a free and stable government that protects the rights of individuals and institutions.” He was an early supporter of normalizing trade relations with China and backed its bid to enter the World Trade Organization. He would be particularly suited to leading the Commerce Department, given that he has already managed it and is intimately familiar with it. The department is charged with keeping track of goods entering and leaving the country. This produces an institutional tendency toward mercantilism – namely, encouraging exports and discouraging imports – that Aldonas understands and will be able to counter. Also good would be Smith. Ironically enough, he may be under consideration for energy secretary, a job for which he would be worrisome given his misguided support for energy independence. However, he is rock solid on trade issues. Evidently, he has not figured out that one cannot consistently advocate autarky with respect to energy markets while free trade with respect to everything else. Be that as it may, he has admirably advocated the equivalent of unilateral disarmament on trade – meaning that the United States should throw open its markets to foreign goods regardless of whether other countries open their markets to our goods. He calls U.S. agricultural subsidies immoral – because they keep Third World farmers poor by making their products uncompetitive in global markets while hurting U.S. consumers. Among the satisfactory picks would be Austan Goolsbee, and Jason Furman, also an Obama advisor. Both of them are pro-traders but favor expanded social insurance – more unemployment benefits, skills training – for “trade’s losers” or Americans who lose jobs to foreign competitors. Furman, director of the Hamilton Project, a centrist economic group, has expressed worries about the coming China-bashing, including a proposal asking Obama to slap a 27.5 percent tariff on Chinese goods because of a weak yuan – a good sign. Goolsbee expresses similar positions, although he favors using the WTO to aggressively enforce of the labor and environmental standards that countries have signed in trade agreements, something that can become a backdoor way of hobbling competitors. But, on balance, as columnist and author George Will notes: “He seems to be the sort of person – amiable, reasonable and empirical – you would want at the elbow of a Democratic president…” Completely disastrous would be Thea Lee, the Chief International Economist with the AFL-CIO. Dismissing the evidence before her eyes, she writes: “The logic of global capitalism as currently practiced is to drive down workers’ wages, weaken their bargaining power and strip away their social protections in both rich and poor countries, while simultaneously encouraging and celebrating the excesses of debt-driven consumerism.” Picking her-or any other representative of organized labor – would indicate that the Democratic Party has abandoned the legacy of free trade that Bill Clinton built.

Part one of the series, with picks for Treasury, Education and Transportation, is available here. Part two, with Dalmia’s picks for Secretary of State, Defense and Attorney General is here.