My biggest concern about having Democrats in complete control is their opposition to trade which is driven by their loyalty to the unions. The one thing we can’t afford right now is a decline in trade. That’s one of the main things that turned the recession of 1930 into the Great Depression. Hoover’s signing of the Smoot Hawley tariff act was the signal to other countries to retaliate. World trade shrank dramatically and the recession turned into something entirely different.
Now, with Obama talking about writing NAFTA and Congress rejecting free trade deals with Columbia and Korea, other countries are getting the message that we aren’t interested in trade (via IBD):
Our No. 1 trading partner, Canada, isn’t stupid. When Obama threatened last February to rewrite the North American Free Trade Agreement on his own terms, our northern ally started looking abroad to other markets.
They found a big one in Europe, which seems to have few hang-ups about increasing exports and signing free-trade treaties. Last Friday, Canada and the European Union held the first talks toward an eventual free trade agreement between the two.
When this goes through, $27 billion in new trade is expected by 2014, according to a joint EU-Canada study. Canada will add an extra 0.8% to its GDP and see income gains of $11.1 billion from the new jobs and higher salaries coming in from Europe.
Columbia isn’t waiting around for Congress either:
Colombia is also preparing to sign a free-trade deal with Europe, as its own free-trade accord with the U.S. languishes after House Speaker Nancy Pelosi blocked it in Congress last April.
U.S. allies are wise to seek other partners no matter what the U.S. climate — the U.S. downturn no doubt plays a role too. But it started with noises out of the U.S. about pulling up the drawbridge.
This is dangerous stuff. Trade is the only thing that has kept the US economy growing over the last year. Why would we want to limit something that is so beneficial?