Friday, February 29, 2008

Concerns over Obama’s shift to left

Financial Times
Concerns over Obama’s shift to left
By Edward Luce in San Antonio, Texas

Published: February 28 2008 21:33 | Last updated: February 28 2008 21:33

Until a few weeks ago Barack Obama’s economic platform was the most centrist of the three Democratic contenders remaining after John Edwards, the flag-bearer of the left, dropped out in late January.

Since Super Tuesday on February 5, that has changed. Scenting, perhaps, the chance of settling the nomination next week (when Ohio, Texas, Rhode Island and Vermont go to the polls), Mr Obama has indulged in a bidding war with Hillary Clinton to see who can rail most strongly against globalisation.

Campaign veterans say much of the rhetoric can be discounted as classic primary season politicking that will be diluted when it comes to the general election. But sympathetic economists have expressed concern about proposals Mr Obama has unveiled in the past two weeks since campaigning began in earnest to woo the workers of Ohio.

Last week Mr Obama came out against “open trucking” with Mexico in which freight lorries would drive across the border instead of unloading on to American trucks. His new stance coincided with the endorsement of the Teamsters union, which is opposed to competition in road freight.

In addition to attacking the North American Free Trade Agreement, which Mr Obama says has cost the US “millions of jobs”, both candidates have alarmed America’s neighbours by threatening to opt out of Nafta.

“Threatening to repudiate international agreements would have serious foreign policy consequences which would undermine Mr Obama’s broader foreign policy goals,” says Susan Aaronson, professor at George Washington university and a former adviser to Bill Richardson, who dropped out of the race in January. “Some of this may be normal pandering for the primaries. But it has gone much further than expected.”

Mr Obama’s proposal to levy lower corporate tax on companies that reverse the offshoring of jobs has caused disquiet. “Patriot employers” was unveiled when Mr Obama had already become the favourite to secure the nomination. Some say it is unworkable.

“It just isn’t clear why the Obama campaign felt the need to bring this out now,” one Democratic economist says. “It might have political merits in the primaries but there are many more effective and less bureaucratic ways than this to incentivise the creation of new jobs.”

Mr Obama’s terminology has also raised eyebrows. “What he is effectively saying is that companies that offshore jobs are unpatriotic,” says Gary Hufbauer, senior fellow at the Peterson Institute of International Economics. “This is serious language.”

Tacking to the left on the economy would be vindicated in the eyes of many if Mr Obama won in either Ohio or Texas next Tuesday. But officials on John McCain’s Republican campaign believe Mr Obama has given them ammunition for the general election.

Mr McCain, whose core selling point is strength on national security, has been mocked for a self-confessed weak grasp of economics and for having suggested last month that spending cuts should be part of any fiscal stimulus package – a measure that would further depress growth.

But advisers to Mr McCain believe that Mr Obama would present a juicy target as nominee. “We see him as a classic liberal whose proposals come straight out of the 1970s,” says Douglas Holtz-Eakin, senior McCain adviser. “It is hard to understand his stance on trade. Access to the US market is a vital element of our foreign policy.”

Supporters of Mr Obama deny he is opposed to trade liberalisation and point to his recent vote in favour of the bilateral deal with Peru because it had agreed to incorporate labour and environmental standards. Critics say such arrangements could jeopardise Nafta.

Were he the Democratic nominee, one test of Mr Obama’s trade position could be the expiry in November of a deal that imposes quotas on China’s textile exports to the US. Mr McCain would recommend scrapping the quotas. Neither Mrs Clinton nor Mr Obama has expressed a view.

Another test would be on steel. “Would Mr Obama support shutting out Chinese steel imports where production didn’t conform to US carbon emissions standards?” Mr Hufbauer asks. “Ideas like this are in circulation. They sound good on the surface.”

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