Taylor, a Stanford economist, says he has been struck by the popular support for increased domestic oil production, citing "spontaneous enthusiasm for drilling to get some more production right now because it makes a difference in the marketplace." He also stressed it should be part of a basket of new energy alternatives, including nuclear power and biofuels. He spoke with CFR.org on the sidelines of the GOP convention in Minnesota.
There's a feeling of malaise out there about U.S. competitiveness globally. What would you outline as the biggest three issues involved in improving U.S. global competitiveness?
Number one is to deal with the very high tax rate we're imposing on U.S. firms, which really penalizes them from creating jobs in the United States compared to other countries. The second thing is that in international trade, we need more trade agreements to reduce the barriers that U.S. firms face when they export to other countries. For example, our free trade agreement with Colombia would reduce the tariffs that U.S. firms face when they try to export to Colombia. Third, in the overall financial markets we need to find ways to deal with the crisis that we're in, which has affected the United States and Europe, and [introduce] some good financial reforms that prevent us from running into the financial difficulties that we're facing now.
Members of the McCain campaign have pointed out that trade has boosted this economy. However, it's becoming a tough sell locally. How do you improve the way you can sell a trade agenda to the American people, especially in states like Ohio and Pennsylvania?
First of all, of course, emphasize that you can create jobs from exports, and second, recognize that some do lose their jobs because of competition. In those cases you have to find help for them, a social safety net, provide retraining. Right now our system of doing that is quite cumbersome and not very efficient. Senator McCain wants to reform the process by which we help people that are hurt by competition changes or changes in technology or changes where things are produced.
A third thing that doesn't get enough emphasis: Trade also provides benefits to low-income people because the things they buy with their money are cheaper as a result. There's a benefit to consumers which we should emphasize. But right now, especially in this economy, [the emphasis is on] jobs and making sure that we grow jobs, and that comes from trade and other things.
Another issue is energy costs. It seems like the $4-a-gallon gas has really fired up Americans. We're hearing "drill, drill, drill" here at the convention, although your campaign has also said a more balanced approach is needed. How do you deal with this issue of energy independence, which has been criticized by experts as a naïve notion?
It conveys a very important thing, that we're now sending $700 billion a year to purchase oil to governments that are not our friends. We need to reduce that and that means producing more here in the United States, and it also means finding alternatives like nuclear power, new kinds of fuels, biofuels, etc. Senator McCain has an all-of-the-above strategy, but in some sense [drilling is] the most immediate thing you can do now. That's why it's such a spontaneous reaction. This convention and everywhere else I've been with Sen. McCain [there is] spontaneous enthusiasm for drilling to get some more production right now because it makes a difference in the marketplace. So drilling, yes—and that's what people really have come behind Sen. McCain on so much and supported him on—but also the whole other range of things from nuclear to biofuels to conservation.
Sen. McCain if elected president could face a strong Democratic majority in Congress. How to deal with these two nettlesome issues with two parties at cross purposes?
Leadership on the international trade side is essential. Being able to walk across the aisle and work across the aisle is, of course, Senator McCain's forte for many years. But here it's international leadership. In other words, the international experience enables him to negotiate trade agreements that will be more beneficial to the United States. So when you think about how to get this done, the international diplomacy and experience he has in that; it's working across the aisle to emphasize that this is sometimes a win-win situation for the United States; and third, just to communicate that trade is a job creator, a benefit to the United States, a benefit to American workers. Those three things together is a strategy I think which will work.