Free trade has been a bedrock policy of the United States under both Republican and Democratic administrations for nearly three quarters of a century. But both Barack Obama and Mitt Romney have spoken about trade in remarkably ambivalent terms over the course of the presidential campaign.
On the one hand, both candidates have talked about getting tough with U.S. trading partners and especially with China, which Romney has repeatedly promised to label a currency manipulator on his first day in office (currency manipulation is the practice of governments intervening in global currency markets to buy dollars in an effort to push the value of the dollar up and the value of their own currency down, thereby making their exports less expensive in foreign markets and their imports more expensive for their own citizens). Under international rules, labeling China a currency manipulator (which it clearly is) would lead to a formal call for the International Monetary Fund to convene formal consultations on the matter between China and the United States. But it would not trigger any specific retaliatory measure. Indeed, since consultations have already taken place in various forums, it's not clear that Romney's pledge would achieve any concrete result at all.
Although Obama has eschewed formal action on the currency issue, he has also adopted an aggressive posture, taking action against Chinese producers on anti-dumping and countervailing duty cases involving steel, solar panels, and tires and establishing a trade law enforcement body aimed at actively seeking out unfair trade and prosecuting it. This is a far tougher stance than either the Bill Clinton or George W. Bush administrations took.
Yet for all the tough talk and action, both candidates remain quite conventional with regard to trade. After taking a hard line on China, Romney always follows up by calling for the negotiation of more traditional free trade agreements, especially in Latin America. Obama continually promotes his program to double exports and, like Romney, champions free trade deals -- particularly the Trans-Pacific Partnership now under negotiation, which the Obama administration promotes as a "21st-century" trade agreement.
None of these deals represents a material departure from the path U.S. trade policy has taken over the past 65 years. All the agreements attempt to lower tariffs, import quotas, and other formal trade restrictions. They also seek to protect intellectual property, reduce export subsidies, and ensure that foreign participants in a nation's economy are treated more like domestic participants in terms of regulatory rulings, labor arrangements, the right of establishment, and opportunities for investment.
What they don't do is deal with the main drivers of the chronic market distortions, trade imbalances, and capital flows that were behind the Great Global Economic Recession and Crisis of the past five years. For starters, these agreements don't address currency issues at all -- and not even Mitt Romney is proposing that they should. Yet currency misalignment is a much more important factor in trade flows than the tariff and intellectual property issues that always dominate trade talks. These so-called free trade agreements don't tackle the investment incentives and subsidies that are often used to induce the outsourcing and offshoring of jobs, or the informal administrative guidance and pressure that many countries use to intimidate global corporations into transferring investment, technology, production, and intellectual property away from their home countries. All of these factors are much more important determinants of global trade, capital, production, and investment flows than the key items normally negotiated in conventional free trade agreements.