Trade needs the Koch brothers, Corcoran,

Before we sink into a ritual lament over the U.S. president’s ignorance of the principles of free trade and his hijacking of our prime minister’s precious green-genderism agenda for this weekend’s G7 Summit, it’s worth pausing to reflect on Barack Obama’s mishandling of American trade policy.

In a 2012 column in the Financial Times, economist Jagdish Bhagwati, a veteran free-trade advocate and globalization defender, charged Obama with having “infamously killed the multilateral Doha Round” by instructing his representative at the World Trade Organization to be a “rejectionist” negotiator.

Bhagwati’s take on the former president’s trade misdemeanours deserves a moment of reflection and acknowledgment. For one thing, it highlights why the U.S. and the world desperately need the billionaire Koch brothers’ plan to launch a long-term campaign in defence of free trade, which they announced this week.

Bhagwati’s commentary, “Shame on you, Mr. Obama, for pandering on trade,” argued that Obama, by blocking the Doha Round, had failed to prevent a slide back into protectionism. As Bhagwati wrote:

He (Obama) compounded the folly by instead floating the Trans-Pacific Trade initiative that is conceived in a spirit of confronting China rather than promoting trade, and is also a cynical surrender to self-seeking Washington lobbies that would have made John Kenneth Galbraith blush.

Not content with these body blows to the world trading system, which his predecessors had built up over decades of US leadership, Mr Obama pulled off the remarkable feat of making things yet worse with his State of the Union address. In particular, he decried outsourcing: “We will not go back to an economy weakened by outsourcing.” He also celebrated manufacturers: “Tonight, I want to speak about an economy that’s built to last an economy built on manufacturing.” Both are costly fallacies that deserve no quarter from our leadership. They hurt the US economy; they also guarantee that the US will undermine further the world trading system.

Outsourcing is a bogeyman. The deception that Mr Obama buys into goes back to the populist commentator Lou Dobbs, who denounced the companies that bought components from abroad as Benedict Arnolds – the rogue who became a byword for treachery when he changed sides during the American war for independence.

Bhagwati was at it again this week, with Trump as his target. But not just Trump. In a recent interview with a German paper, the Indian-American economist also took on the European Union and Canada for their warmongering response to Trump’s tariff moves. Instead of Trudeau’s plan for “dollar-for-dollar” retaliatory tariffs on Kentucky bourbon and Florida oranges, Canada and the EU should be showing global free-trade leadership by lowering their tariffs and trade barriers.

Some German economists agreed. Dennis Snower, the president of the Kiel Institute for the World Economy, said “The EU should reduce its tariffs to the same extent in response to Trump’s punitive tariffs.”

Don’t expect much along those lines from the G7 leaders meeting this week in Charlevoix, Que. Around the world, but especially among the protectionist members of the G7 and G20, lip service is paid to the benefits of trade, fair trade, and mutually beneficial trade, but all countries engage in multiple forms of protectionism that are popular politically and seem immune to the arguments of economists from Bhagwati all the way back to Adam Smith.

The world, including Canada, should therefore welcome the operation now being launched by the Koch brothers’ political organization, described in a National Post report Wednesday, as “a multi-year, multi-million-dollar campaign” to stop the tariffs being imposed by the Trump administration. A good start would be to fly a banner over the façade of the Manoir Richelieu, the site of Friday’s summit meeting, reading “Real Free Trade!”

All nations employ protectionist measures that, even after decades of talk, they have failed to remove. Bilateral and regional deals nip at the edges of free trade but fail to break down barriers. A new report from Global Trade Alert on world steel markets documents a surge in protectionist measures by all countries over the last decade: subsidies, tariffs, increased tariffs, local procurement rules, quotas, investment controls and other “beggar-thy-neighbour policies.”

Not one of the G7 nations is a free trader in agriculture, one of the main reasons for the collapse of the Doha Round and the fact that the entire WTO multi-lateral system is now at risk. The OECD estimates that agricultural subsidies among its members are in the hundreds of billions — not to mention the tariffs on agricultural imports installed by Canada and the other G7 members.

Protecting manufacturing is still high on national agendas. In auto-making, aerospace and other sectors, G7 nations use subsidies, procurement rules and other schemes. Some say Canada should dump Mexico from NAFTA and forge a new bilateral auto pact with the U.S., forgetting to mention that the old auto pact came with tariffs and import quotas against foreign automakers.

And now new protectionist policies, including labour, gender and environmental trade barriers, are being promoted at the G7 and in regional trade deals such as the TransPacific Partnership (TPP).

Emailing from New York, Bhagwati tells me that while he’s an admirer of the Trudeaus, he is no fan of Canada’s trade strategy. He offers a comment that mirrors his 2012 assessment of Obama’s blunder over the Doha Round. The prime minister may think it was appropriate to press for environmental and labour protection at the TPP negotiations, but “it is nonsense to say that trade treaties/institutions are the place to pursue these issues,” Bhagwati says. Trudeau’s error, he adds, “has been to listen to my good friend, Chrystia Freeland, who is wrongheaded on the issues at hand.”

The Koch brothers should hire this guy.