THAT is the message the Democratic presidential candidates appear to have heard and adopted (as I believe we've mentioned here once or twice this week). It is a bad idea, to say the least. Not only because of the economic benefits of greater economic integration, but for geopolitical reasons as well. In the wake of Democratic statements on the trade deal, government leaders from Canada and Mexico expressed their deep displeasure at the rhetoric, and at the possibility that an American president would go back on his country's word and ignore the concerns of valuable trading partners, just to secure a few votes.

After the finger-wagging from America's northern and southern neighbours, Daniel Drezner wrote:

Democrats cannot simultaneously talk about improving America's standing abroad while acting like a belligerent unilateralist when it comes to trade policy.

At the

American Prospect

, Jordan Michael Smith had

this

If the U.S. pulls out of NAFTA, it's not at all clear it will be easy to renegotiate it with better labor and environmental standards, because Canada, to say nothing of Mexico, has its own set of concerns when it comes to trade. For instance, Canadians are furious about the softwood lumber dispute (I had to spend an entire month on it in grad school), and are just itching to clobber some Yankees over it.



As Canadian Prime Minister Stephen Harper said (warned?) yesterday, "If any American government chose to make the mistake of reopening that we would have some things we would want to talk about as well." And as Federal Trade Minister David Emerson said Wednesday, "Knowledgeable observers would have to take note of the fact that we are the largest supplier of energy to the U.S. and NAFTA has been the foundation for integrating the North American energy market."

to say:

The world is globalised, and an election in America does not make one's neighbours disappear, much as one might wish them to. Mr Drezner is correct to note that re-establishing respect for America's allies is a key plank of the Democratic electoral platform. It is awfully hard to square that with efforts to throw those allies' economic concerns out the window.

But perhaps we could avoid this discussion altogether. All the attention paid to a single tri-lateral trade agreement should remind us that trade agreements are a pretty subpar way to liberalise trade in the first place. That's the point made by Richard Baldwin at VoxEU today, who calls the tangle of overlapping and conflicting bi-lateral and regional trade agreements "the spaghetti bowl."

This tangle of trade deals is a bad way to organise world trade. The discrimination inherent in regionalism is already economically inefficient but its costs are rising rapidly as manufacturing becomes ever more internationalised. Stages of manufacturing that used to be performed in a single nation are now often geographically unbundled in an effort to boost efficiency. Supply chains spread across many borders. Unbundling, which accelerated since the 1990s, is the most important new element in the regionalism debate. It is the reason why business is pushing so many nations to ‘tame the tangle.’...



While the spaghetti bowl is a problem for firms in big nations, it is much more so for firms in poor nations. Rich nations have the resources and negotiating leverage to navigate the tangle’s worse effects. The governments of small and poor nations do not. The spaghetti bowl falls much harder on the heads of the world’s small and poor nations.

Economists often point out that trade can increase subsequent to a trade negotiation due to trade creation or trade diversion. Trade creation involves a wealth increasing redistribution of resources to low-cost producers. Trade diversion means that an alteration in trade barriers has artifically advantaged a higher cost producer within the agreement over a lower cost producer outside the agreement. Trade volume within the trade area increases, but overall efficiency is reduced.

Efficient allocation of resources, and the wealth that results, is one of the primary benefits of world trade. Liberalising via many tiny agreements distorts this process, and pits trading nations and trading blocs against each other. It also distracts from important goals, like the strengthening of healthy institutions worldwide, or the tackling of global environmental problems.

If the Democratic presidential candidates are seriously interested in an agenda of hope, they should focus on improving the lives of Americans through the cultivation of global prosperity. An excellent way to begin that process would be to throw American leadership behind efforts to liberalise trade and develop appropriate standards at a global level.