Mitt Romney, even more than many Republicans, is a passionate free-trader. He has made the expansion of global trade a key element of his program to create 12 million jobs, and he’s hammered away at President Obama for allegedly being less of free-trader than he is and being far more beholden to union-inspired protectionism than President Clinton was. But perhaps Romney’s most revelatory comments on the workings of the international economy came in a TV interview in June, when he declared he wanted to stay completely clear of the eurozone’s troubles, even though that transatlantic crisis has been lapping at the front steps of the White House for two years. “I surely don’t believe that we should expose our national balance sheet to the vagaries of what’s going to be happening in Europe,” Romney told CBS.
“Our national balance sheet.” You don’t hear that kind of language out of presidents very often, and Romney’s comment played right into the Obama campaign’s characterization of him as a heartless baron of Wall Street. The GOP nominee seemed to be saying not just that he has no interest in bailing out Europe—the usual topic of discussion on this side of the pond—but that he also doesn’t think it’s even safe to invest in Europe. It was hard to avoid the conclusion (and the Obama campaign hasn’t) that Romney was saying the sort of thing he might have said 15 years ago around the boardroom table: Let’s avoid “exposure” in what is clearly a bad deal, my fellow men of Bain—er, my fellow Americans—and let the eurozoners go down together. Our “balance sheet” will be fine.
Asked in September whether Romney meant what he said and still holds this view, Oren Cass, his domestic-policy director, told National Journal that he did. “Governor Romney does not believe that American taxpayers should have to pay for a problem that European political leaders can solve on their own.”
Obama has avoided a euro bailout, and, in fact, his views on global trade are not very different from Romney’s. But the issue is a little more complex than Romney has made out, which is one reason Treasury Secretary Timothy Geithner and his deputy, Lael Brainard, have tried to keep a hand in the talks over the euro’s fate. The president of the United States oversees a globalized economy, not merely a national balance sheet. Like it or not, the economy’s health is intimately bound up with Europe’s similarly globalized economy in multifarious ways. According to a report by Citigroup last year, the correlation between U.S. quarterly growth in gross domestic product and that of the largest European economies has risen to 70 percent in the past decade. Economists such as Nouriel Roubini and Mohamed el-Erian warn that a eurozone disintegration would lead to another global recession, dragging the U.S. back down after its worst downturn in 60 years as measured in terms of sustained unemployment. The failure of the eurozone could also begin a process of political disintegration that could badly harm America’s many-layered relationship with Europe, one that includes coordinated action by NATO in Afghanistan and against Libya; sanctions against Iran; and a (somewhat) united front against terrorists.
Romney understands all these issues quite well, Cass says; more than that, he has plans to develop a bold new vision inspired by President Reagan’s handling of free trade in the 1980s, when he negotiated tough tariffs against the cheating Japanese for subsidizing private industry. Romney wants to create a “Reagan Economic Zone” of like-minded free-trading nations. (Ironically, considering that he often accuses Obama of wanting to turn the U.S. into Europe, Romney wants to make the European Union nations a central part of the new zone.) This zone would seek to isolate China and other countries that, inspired by Beijing’s ability to get away with currency manipulation or intellectual property theft, may be emulating such practices—Brazil, India, and Russia, among others. The idea builds on the Trans-Pacific Partnership that the Obama administration is pursuing (which, the Romney camp notes, was started by President George W. Bush) and would expand on the World Trade Organization’s already-robust dispute-settlement mechanisms with tougher penalties for violations of intellectual-property rights.
Obama, by contrast, has undercut the case for freer trade by subsidizing or blundering into outright ownership of industry (such as autos and green energy) and worse, Cass says. “He’s offered zero proposals, frameworks, concepts, a vision, or anything in terms of what role he sees trade playing in actually strengthening this economy.”
Beyond that, Romney insists he would be tougher than others, even many of his fellow Republicans, in insisting on reciprocal trade practices and punishing those (read China) that don’t play by the rules. “When nations cheat in trade, there will be unmistakable consequences,” Romney warned in his acceptance speech in Tampa.
This article appears in the September 15, 2012 edition of National Journal Magazine.