Press Releases

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April 15, 2008
TRADE BRIEFING PAPER

Race to the Bottom? The Presidential Candidates’ Positions on Trade
by Sallie James

In a new Trade Briefing Paper, the Cato Institute's Sallie James examines the voting records and campaign pledges of the presidential candidates and finds that John McCain’s policies on free trade would be most beneficial to the U.S. economy. Based on campaign rhetoric and trade voting records, “voters could expect a President McCain who promotes freer trade and cuts in market-distorting subsides, and a president Clinton or a President Obama who views free trade between voluntary actors as something to be restrained,” writes James.

A faltering economy has made trade policy a salient topic during the 2008 presidential elections. Clinton and Obama especially have exploited news that the economy is slowing, linking it to what they see as faulty policies of the Bush administration, and implying that more government management of trade flows will reverse this trend.

James concludes: “Far from just a rhetorical device, proposals to increase restrictions on trade—or even to suspend further liberalization—are economically worrying. After all, tariffs do not create wealth; they are merely a device for protecting special interests by restricting consumers’ choices.”

The study can be found at http://www.freetrade.org/pubs/briefs/tbp-027es.html.

March 31, 2008
FREE TRADE BULLETIN

Worried about a Recession? Don’t Blame Free Trade
by Daniel Griswold

WASHINGTON--Contrary to political rhetoric, free trade does not cause economic downturns, but in fact it has helped ensure that recessions are “mercifully shorter, shallower, and less frequent” than in past decades, according to a Free Trade Bulletin released by the Cato Institute today.

Increased foreign trade and investment has helped bring about what economists call “The Great Moderation.” A trend that began to appear in the mid-1980s, The Great Moderation has seen recessions become milder and less frequent. The Cato study finds that the U.S. economy was in recession 21 percent of the time from 1945 through 1982 compared to 5 percent in the more globalized era since then. This decreased volatility has not come at the expense of overall growth. Annual real GDP growth has been the same over the past 25 years that have experienced The Great Moderation as the 25 previous years that did not.

The author, Daniel Griswold, concludes: “For the U.S. economy as a whole, the era of globalization has brought healthy long-term growth and a moderation of the business cycle. Expansions are longer if less spectacular than in eras past, and downturns are mercifully shorter, shallower, and less frequent. Moderation of the business cycle in recent decades is something to be thankful for, and expanding trade and globalization deserve a share of the credit.”

This paper can be found here.

March 14, 2008
FREE TRADE BULLETIN

No Need to Panic about Foreign Sovereign Investment
by Daniel Ikenson

"Sovereign Wealth Fund" investment, like all foreign investment, benefits the U.S. economy in myriad ways. Accordingly, it should be treated like all foreign investment: welcomed, but also subject to laws and regulations that could block proposed deals that are found to pose risks to U.S. national security, finds a new Cato Institute report.

Daniel Ikenson, associate director of Cato's Center for Trade Policy Studies writes, “Whether controlling or passive, direct or portfolio, sovereign or private, foreign investment in the United States should be welcomed with the presumption that it will be mutually beneficial. Its presence reduces the cost of capital to businesses and the cost of credit to consumers...”

Ikenson acknowledges that SWFs present unique concerns, but none that warrant categorical prohibitions, or new laws or regulations.

The study, titled "Nothing to Fear But Fearmongers Themselves: A Look at the Sovereign Wealth Fund Debate," points out that despite recent growth in their number and size, at $3 trillion, aggregate SWF assets constitute only "a tiny sliver of the $190 trillion stock of global financial assets or the $62 trillion managed by private institutional investors." Further, despite projected absolute growth in SWF assets, growth in overall global asset values will ensure that SWFs remain a very small percentage of the total.

For a PDF version of the new Free Trade Bulletin No. 33 please click here.

February 15, 2008 Media Contact: (202) 789-5200 New Cato web feature offers access and analysis of key trade votes

WASHINGTON -- The Cato Institute's Center for Trade Policy Studies launched a powerful new interactive web feature this week that allows users to access and analyze the trade voting record of any member of Congress spanning more than a decade.

The new feature reveals how members have voted on 81 major trade votes cast in the House and 62 in the Senate. The votes begin with the North American Free Trade Agreement (NAFTA) in 1993 through the U.S.- Peru FTA at the end of 2007. Other major votes include the Uruguay Round Agreements Act, Permanent Normal Trade Relations with China, subsidies and protection for U.S. farm commodities, the Cuban trade embargo, and various bilateral and regional free trade agreements.

"With trade such a hot issue on the campaign trail, users can examine how members of Congress have actually voted on issues affecting the freedom of Americans to trade and invest in the global economy," said Daniel Griswold, director of the trade center. "The new web site offers a fun and transparent way to find out who really understands and supports free trade. It also shows where and how the two major parties differ on important trade issues."

According to the web site, Republican presidential candidate Sen. John McCain of Arizona has voted against higher trade barriers on 88 percent of votes since 1993, and against trade-distorting subsidies on 80 percent, placing him in the category of "Free Trader." Democratic candidate Sen. Hillary Rodham Clinton of New York has voted against trade barriers on 31 percent of her votes and against trade subsidies on 14 percent during her Senate career, while rival Sen. Barack Obama has opposed barriers on 36 percent of his votes and subsidies on 0 percent.

The new feature updates research that had previously been published in a series of Cato studies titled, "Free Trade, Free Markets," which analyzed congressional voting on trade in the 105th (1997-98) through 108th (2003-04) Congresses. Users can access the feature directly at the URL www.freetrade.org/congress or by visiting www.freetrade.org and clicking "Trade Vote Records."

February 7, 2008
FREE TRADE BULLETIN

A U.S.-Colombia Free Trade Agreement: Strengthening Democracy and Progress in Latin America
by Daniel Griswold and Juan Carlos Hidalgo

In a new Free Trade Bulletin, Daniel Griswold and Juan Carlos Hidalgo argue that Congress’s approval of the U.S.-Colombia free trade agreement is vital for supporting market democracy in the Andean region. “The free trade agreement with Colombia was designed to both strengthen civil society in Colombia and also to open economic opportunities for U.S. producers to sell to the country’s 44 million upwardly mobile, American-friendly consumers,” explain the authors.

The agreement has faced strong opposition from some Democrats who say it should not be signed until Colombia succeeds in tackling violence, including that directed toward union leaders. Organized labor in the United States, in particular the AFL-CIO, a key constituency of the Democratic Party, has made defeating the agreement a major political goal.

“Rejecting a free-trade agreement with Colombia because of lingering violence in that country would be an irresponsible mistake by Congress,” write the authors. Violence has fallen dramatically since President Uribe took office in 2002. It would also be unfair to the country that has seen great improvement in safety, security, and economic opportunity for Colombians thanks to Uribe’s policies.

The authors conclude: “Approving a free trade agreement with Colombia is about supporting a market democracy in a region where liberal values are under attack. It is about being a reliable partner in turbulent times. It is also about building long-lasting institutions for economic prosperity and democracy for millions of Colombians.”

For a PDF version of the new Free Trade Bulletin No. 32 please click here.

January 31, 2007
FREE TRADE BULLETIN

Food Fight
by Sallie James

In a new Free Trade Bulletin, the Cato Institute's Sallie James examines the forces behind recent surges in food prices and how the government can provide some relief to consumers. Drawing on the latest available figures, James shows that food prices are indeed rising faster than prices of other goods, and much faster than in the past. The U.S. government’s own actions are contributing to the surge in food prices.

Citing major international studies, James concludes that while international factors—drought in major agricultural exporting countries, changing global food consumption patterns, and higher fuel prices— go some way to explaining increased grocery bills, U.S. government action is adding to consumers’ woes. By encouraging the growth of corn-fueled ethanol, the federal government is adding to corn demand and therefore to higher prices for the grain. Other commodity prices rise, too, as land is diverted to growing corn. That in turn increases the cost of livestock products, as feed prices rise. As for trade policy, the Cato study notes that American consumers pay an implicit tax of $5 billion per year because of trade barriers that prevent cheaper imports of such commodities as rice, sugar and dairy products.

James concludes: "Instead of conflating the harm done to consumers from high global food prices, the federal government should abandon its protection of U.S. farmers and its pursuit of a misguided biofuels policy. Politicians especially keen to "stimulate" the economy by putting more money in the hands of consumers should start by reducing the taxes on imported dairy products, sugar, rice and ethanol."

For the full PDF version of the new Free Trade Bulletin No. 31 please click here.

January 30, 2008
Cato Scholar Comments on Rising Food Prices

Sallie James, trade policy analyst:

"The federal government should abandon its protection of U.S. farmers from competition and its pursuit of a misguided biofuels policy whose environmental benefits are spurious at best. Politicians especially keen to 'stimulate' the economy by putting more money in the hands of consumers should start by reducing the taxes on imported dairy products, sugar, rice, and ethanol."

January 28, 2008
Cato Institute Scholars Comment on Upcoming State of the Union Address

WASHINGTON – In anticipation of President Bush's State of the Union address tonight, Cato Institute scholars comment on trade.

Daniel Griswold, director of the Center for Trade Policy Studies:

"Like similar agreements, the U.S.-Colombia FTA would eliminate almost all tariffs on trade between the two countries. More than 80 percent of U.S. exports of consumer and industrial products to Colombia would become duty free on enactment, and remaining tariffs would be phased out over next 10 years. The U.S. International Trade Commission estimates the FTA would boost U.S. exports, including a range of agricultural products, by $1 billion a year.

"Beyond trade, the agreement would strengthen our ties to one of our best allies in Latin America. President Uribe has been a bulwark against Venezuelan President Hugo Chavez and against Chavez's plans to spread anti-American and anti-democratic socialism throughout the region. Rejecting the agreement would jeopardize our relationship with Colombia and undermine Uribe's credibility."

Sallie James, trade policy analyst:

"Mr. Bush is right to reaffirm the importance of open trade to the American economy, and to remind Congress of the dangers of protectionism. The Bush administration has been admirably consistent in its support for trade liberalizing agreements. With the rhetoric on the campaign trail taking an increasingly trade-skeptic tone, and time running out on the Doha round of global trade negotiations, Mr. Bush has an opportunity to promote a more positive, outward-looking agenda for the remainder of his term in office."