from Campaign 2008

Obama Economic Adviser Says Reform Trade Policy, Diversify Energy Choices

A top economic adviser to Sen. Barack Obama describes his views on how to harness globalization and energy diversification to improve U.S. fortunes.

September 5, 2008

To help readers better understand the nuances of foreign policy, CFR staff writers and Consulting Editor Bernard Gwertzman conduct in-depth interviews with a wide range of international experts, as well as newsmakers.

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Austan Goolsbee, a top economic advisor to Sen. Barack Obama (D-IL), says the Democratic presidential nominee is wrongly portrayed by Republicans as favoring protectionism. Goolsbee, an economics professor at the University of Chicago, says Obama is a trade supporter, but wants to improve U.S. trade policy to address the "great many people who have been left out of the bounty of opening of markets." Goolsbee also warned against a reliance on new domestic drilling, backed loudly at the GOP convention, as inadequate to addressing the country’s energy needs. "The United States is not Saudi Arabia, and we can’t solve the problem that way," he said in an interview with on the sidelines of the Republican convention.

Some in the Republican Party would argue that free trade is holding off a U.S. recession, and criticize Sen. Barack Obama (D-IL) for his opposition to free trade agreements (FTAs) with South Korea and Colombia. What do you say to those who view trade as a lifeline for the U.S. economy?

It’s true that exports have been a relatively bright spot in an otherwise pretty bleak picture over the last twelve months. But I would point out that the bright spot is not bright enough to erase the problems facing manufacturing. The United States is obviously, given how large it is, much less dependent on international trade than any of the other major economies. And so the most important thing facing manufacturing industries in the United States is how the U.S. economy is doing. Now on trade, the Bush administration—now followed by the McCain campaign—has been pushing a false choice in which they say either you’re going to back everything that they call a free trade agreement, no matter how many loopholes are in it, no matter whether it addresses the basic concerns of people who have been left out in the opening of markets and globalization, or else you’re a Smoot-Hawley protectionist [the Smoot-Hawley Tariff Act of 1930 raised U.S. tariffs to record levels]. It’s completely inaccurate.

Obama’s position has been extremely consistent over the many years that I’ve known him. If you go back and look at his book, or if you look at what he’s saying now, it’s the same, and that is, trade is not bad. Trade is good. And the opening up of markets and access to the fast-growing markets of the world is one of the key ways that many of our industries have grown.

At the same time, if we are not mindful of the great many people who have been left out of the bounty of opening of markets, all the political will and favor of globalization is going to dry up. You’re not helping globalization if you subscribe to the Bush view that we ought to try to jam through trade agreements by a 50-49 margin by pulling out the stops and giving pork to whoever needs it in order to get them to vote for it. That strategy is dried up.

So Obama’s approach has been, we ought to put labor and environmental standards—enforceable, the basic standards from the ILO [International Labor Organization] and regarding the environment, into the core of our agreements, and that we should work as much as possible to remove the loopholes and special interests, because if you look at these free trade agreements, they’re a thousand pages long and 980 pages of that are giveaways to individual companies and monopolies, and very little of it looks like the economist’s case for free trade.

And more broadly, to promote globalization we have to build a new consensus, and that consensus has to be built around making sure that America is ready to compete, that we can’t build a moat around the country, and so we shouldn’t try to. But we should invest in the capabilities of our own industries and we should be mindful of the concerns of the people who have been left out—that we can look after the health of workers, and still be pro-market. It’s in the interest of developing countries too. I don’t think there’s any contradiction in that.

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Republicans have been calling for increased domestic drilling as part of the solution to U.S. energy and economic problems. What is your response to the focus on domestic drilling and to the larger question of energy independence?

Look, you don’t need a PhD in petroleum engineering to figure out that the United States consumes 25 percent of the world’s oil and has 3 percent of the world’s reserves. You can’t drill your way out of this problem. I mean, it’s like you’re getting bills that you can’t pay, and you’re saying, "Oh, well, I’m going to scrounge through the cushions and see what coins I can find down in my couch to try to pay them." The United States is not Saudi Arabia, and we can’t solve the problem that way.

Further, drilling, by all expert accounts, is going to take many years before any additional oil would come on the market. That’s why the two things that we need to do are, work on energy efficiency and reducing our consumption, which is what we’ve done in the last month. People have been changing their habits. And that’s what reduced the price of energy. And two, we need to finally start making a real energy policy for the long run which weans us from our addiction on oil. That means investing—in the Obama plan it’s $150 billion over ten years—in the research and development and deployment of alternative and renewable energies, alternative fuels, and things of that nature. While doing that, we can generate up to five million green jobs.

You mentioned nuclear energy. Sen. John McCain (R-AZ) has said he’s going to build forty-five new nuclear plants by 2030. Where does Obama come down on nuclear energy?

Obama recognizes we’ve got to have a portfolio of all kinds of energy, especially in the short run—that consumers need relief. He’s for nuclear [conditioned on sorting out] how we dispose of, safely, the toxic nuclear waste. Building forty-five nuclear plants and shipping all of the toxic nuclear waste to within an hour of greater Las Vegas [to the proposed waste facility at Yucca Mountain, Nevada], in his view, that’s not going to work. So it’s clear we’ve got to put the research in to figure out a safe way to do the disposal.

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