Shadow Government

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On free trade and foreign policy, Paul Ryan has it right

In the wake of Rep. Paul Ryan’s selection as the Republican vice presidential nominee, there has been intense interest in his views and experience. Some of this has produced long profiles, rich in detail, that mostly save their editorializing until the very end, as with Ryan Lizza’s well-timed piece in the New Yorker. Lizza focused ...

Matt Sullivan/Getty Images
Matt Sullivan/Getty Images
Matt Sullivan/Getty Images

In the wake of Rep. Paul Ryan's selection as the Republican vice presidential nominee, there has been intense interest in his views and experience. Some of this has produced long profiles, rich in detail, that mostly save their editorializing until the very end, as with Ryan Lizza's well-timed piece in the New Yorker. Lizza focused heavily on Rep. Ryan's free market philosophy and his extensive work on fiscal reform.

Other pieces have gone after Rep. Ryan's foreign policy credentials, sometimes neglecting the importance of his grasp of economic matters. My view may be affected by my upbringing as an economist, but this seems an odd critique at a time when economic concerns and globalization are at the forefront of international discourse. From this perspective, Rep. Ryan is well equipped to lead on these issues.

While I have advised both the McCain and Romney campaigns, my only personal connection to Rep. Ryan (aside from a common Southern Wisconsin origin) came when I had the privilege to testify before the House Ways and Means Committee on U.S. economic policy toward China. The questions and comments from Rep. Ryan at those hearings were at least as astute as those from any other member of Ways and Means, or any that I received at House Foreign Affairs hearings on the same topic. Rep. Ryan's intelligence, studious approach, and grasp of economic principles serve him very well in this arena.

In the wake of Rep. Paul Ryan’s selection as the Republican vice presidential nominee, there has been intense interest in his views and experience. Some of this has produced long profiles, rich in detail, that mostly save their editorializing until the very end, as with Ryan Lizza’s well-timed piece in the New Yorker. Lizza focused heavily on Rep. Ryan’s free market philosophy and his extensive work on fiscal reform.

Other pieces have gone after Rep. Ryan’s foreign policy credentials, sometimes neglecting the importance of his grasp of economic matters. My view may be affected by my upbringing as an economist, but this seems an odd critique at a time when economic concerns and globalization are at the forefront of international discourse. From this perspective, Rep. Ryan is well equipped to lead on these issues.

While I have advised both the McCain and Romney campaigns, my only personal connection to Rep. Ryan (aside from a common Southern Wisconsin origin) came when I had the privilege to testify before the House Ways and Means Committee on U.S. economic policy toward China. The questions and comments from Rep. Ryan at those hearings were at least as astute as those from any other member of Ways and Means, or any that I received at House Foreign Affairs hearings on the same topic. Rep. Ryan’s intelligence, studious approach, and grasp of economic principles serve him very well in this arena.

Nor can one argue that international economic issues constitute only a trivial part of our foreign policy. One measure of the relative importance of these issues is the extent to which they preoccupy our allies. Eurozone diplomats are obsessed right now with questions of fiscal reform and growth. European Union ambassadors and visiting ministers express great interest in tighter economic integration with the United States. Japan’s prime minister has risked fracturing his party to pursue membership in the Trans Pacific Partnership. The TPP itself was a Bush-era initiative revived by President Obama when he headed off to Asia in November 2009 and realized it would be hard to have a fruitful discussion with Asian leaders if he had no international commercial policy.

This all suggests that Rep. Ryan is well-positioned to take on some of our most difficult and important security issues. But what has he specifically done in this area, besides asking good questions? He has prominently supported the idea of a Middle East Free Trade Agreement, another Bush-era initiative, albeit one that has yet to be revived by the current administration. This support of MEFTA inspired a particularly strained critique of Ryan’s qualifications in these same (virtual) pages.

The critique argued MEFTA was based on the flawed premise that free trade agreements promote democracy and the rule of law. It claimed the persistence of autocratic regimes in the region is proof that the approach was a failure. Even if evidence suggests free trade is accompanied by democratization, the argument continued, we know that correlation does not imply causality. The critique concluded that Rep. Ryan’s principled stance in favor of free trade should be interpreted as "a willful aversion to nuance… that tells us a lot about Paul Ryan." The only evidence offered of aversion to nuance is Ryan’s positive take on the role of free trade in Colombia and Peru.

The lack of nuanced understanding here seems to be on the critic’s part. The piece implies that only a blind faith in the power of trade flows undergirds the claims of ‘rule of law’ and democratization benefits. In fact, high standards free trade agreements of the sort used by the United States and the European Union include specific provisions about legal process and transparency. They go well beyond mutual agreement to eliminate tariffs.

The particular example of Peru actually provides strong evidence in support of Rep. Ryan’s claim. The argument that we must look beyond simple correlations is well taken, of course, but it has been done in the Peruvian case. Just after the trade agreement between Peru and the United States came into force, I went to Lima to interview a range of influential Peruvians, including former negotiators, academics, and business leaders. They described the agreement’s rule of law benefits as one of the top reasons they sought the agreement and argued that its benefits extended well beyond expanded trade flows (Peru already had largely duty-free access to the U.S. market before the agreement ever came into force). The critique misses the extent to which FTAs with developing countries are about policy credibility and encouraging investment, rather than border barriers.

The argument that the persistence of illiberal regimes in the Middle East discredits MEFTA is particularly weak. First, Rep. Ryan and MEFTA proponents argued only that it was a "carrot" that would encourage reform. That’s not the same as claiming that it is a panacea that completely transforms any country it touches. Imagine if domestic programs were considered discredited any time they failed to cure social ills completely. Second, the author counts repression of dissent in Saudi Arabia against MEFTA, though he notes that the United States does not, in fact, have an FTA with Saudi Arabia. This further demonstrates the critique’s tenuous grasp of what FTAs actually do (equating them solely with ample trade flows or lower trade barriers).

Finally, the critique falls into the same trap that much of the trade and democracy literature does, treating democracy as a discrete variable, rather than a more continuous measure. The critique thus argues that Hong Kong, with abundant trade, is "far from democratic." But how far? And does anyone think Hong Kong would be allowed more democratic freedoms if it were not a major commercial hub?

Mainland China is not democratic by any stretch of the imagination, but excessively crude measures of democratic progress can indicate that no progress has been made since the Cultural Revolution. In fact, China’s integration into the world economy has been accompanied by substantially greater freedoms, even if the country has a long way to go. As I argued here, there is good reason to think that the linkage is causal.

It is hardly a surprise that there should be efforts to discredit a vice presidential candidate in a highly charged political season, but on free trade and foreign policy, Paul Ryan has it right.

 

 

Phil Levy is the chief economist at Flexport and a former senior economist for trade on the Council of Economic Advisers in the George W. Bush administration. Twitter: @philipilevy

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