October 10, 2007
Free Trade and the Republican Debate (John Feehery)
Something struck me as I watched the Republican debaters in Dearborn, Mich. No, it wasn’t the arrival of Fred Thompson to the dance. It wasn’t the strange inability of John McCain to hear Maria Bartiromo’s questions. It wasn’t the strange allure of Ron Paul’s neo-populist, neo-libertarian, neo-conspiracy-theory explanation of the carried-interest debate.
All of those points were notable. But to me, the most notable development was the drift of the Republican Party to protectionism.
I had witnessed the start of the protectionist movement during my time working in the House. It had become harder and harder to pass any trade bills over the last four years that I worked there. NAFTA was hard. CAFTA was a nightmare, costing the taxpayers untold numbers of bridges and other goodies. And even simple trade agreements, to places like Australia and Singapore, became harder to pull off.
Democrats have long been a protectionist party. They have argued that global trade hurts working Americans even in the face of historically low unemployment.
And now many Republicans are jumping to the protectionist side. In fact, a Wall Street Journal poll shows that six in 10 Republicans believe free trade has harmed the U.S. economy by reducing demand for domestic goods, wiping out American jobs and importing products that may be unsafe.
As John McCain and Rudy Giuliani gamely pointed out in the debate yesterday, erecting trade barriers could lead us to the days of Smoot-Hawley, better known as The Great Depression.
But this certainly isn’t where the voters are when it comes to the issue of trade. I was talking to a prominent Republican pundit the other day, and he told me that he was thinking of changing his mind on free trade.
The business community better take notice. Giant retailers (like Wal-Mart) better start paying attention. If the GOP joins the Democrats into protectionism, this nation will suffer.
Protectionist policies are really tax increases on consumers. When the government decides it will slap high duties on products coming in from overseas, it does two things. It brings more revenue into the government, so they can spend it on bigger government. And it increases the costs of those products, hurting consumers who rely on cheap prices to get by.
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An astute observation. It was almost as though because this was an "economic" debate that protectionism became a cover for "nativism" or a way to appeal to the xenophobic by asserting concern over the loss of jobs to foreigners. It isn't protectionist to decry the manipulation of currency by our trading partners. It is to try and keep their goods from coming in. The same day as the debate many western farmers expressed concern over the alien round ups and that there would be "food rotting in the fields" and food prices would go up. No one dared discuss the economic impact of immigration policy instead used "protectionism" to mask
and avoid the need to address fundamental immigration reform.
Protectionism is another form of "fence building" to exclude the rest of the world from participating in our economy and fencing us in from the global economy and its potential benefits.
Comment by H.R. Gross — October 10, 2007 @ 3:53 pm
After WWII the US economy enjoyed an unheard-of supremacy. As a result, the value-added component of the American production machine was rewarded at a historically unsustainable level. Also, a large portion of the rest of the world was either under socialism or in some other relatively unproductive state due to the war, colonial history, related lack of education and private property rights, etc. As the equalization of the competitive positions in many parts of the world, especially Asia, has occurred, this created an impression of America under assault by foreign economies. Certainly, an economy that's head and shoulders above every other economy creates a more tranquil environment for the work force, especially relative to the recent past and the rest of the world. People are notoriously bad for properly interpreting cause and effect, and they tend to blame globalization for the diminishment of tranquility in their lives. They also like to blame corporations, the CEOs and whoever else seems not to experience whatever calamities befall them.
Comment by Igor R. — October 10, 2007 @ 4:24 pm
The protectionism position in America is a simple exercise in math. America imports more than she exports, we can not seem to get foreign traders to come into compliance with the rules. None of this is helping the economy of America.
Consumers are getting crap from China, and worse, the American product (and consumer's choice) is gone, as is their job. On top of that Consumers are having to expand the FDA to check the Chinese goods, that Americans do not want, at any cost. However, the point was brought out by Pat Buchanan that once the Chinese goods are the monopoly, they will then raise their prices because consumers have no other option but Chinese goods, at that point.
Hunter brought out that during a war, we don't have enough factories to protect our humvees from IED's. How good is that for America?
We have supercomuters "clouds" that should be able to figure out how the trade is going from day to day. It is rediculous to enter into trade agreements and never enforce the rules and just watch our supremacy disappear.
The common folks believe that either the treaty was a bad deal for America to start with,
or government is not enforcing the rules that would allow competition.
Anyone who believes that American Taxpayers can survive and assimilate a tidal wave of 20 Million illegal immigrants has no common sense. Again, the common folks are sensitive on the issue of providing free healthcare, schools, tuition for illegals because taxpayers can barely afford that for their own family. Further, to absorb an unskilled population heading towards retirement, the right to social security and medicare is troublesome. As taxpaying citizens, we resent that our own children (who are currently paying into those benefits), will not be assured of partaking of those benefits at their own retirement.
One thing is certain, a country so dependent on others for goods and services and high skilled workers, is not in a good position to retain hegemony.
Free trade sounds great in theory, people who are making money are making lots of money. However, the middle class continues to shrink and lose.
Our own government provided incentives for off shore businesses and so now they need to adjust the weights. And why did it take so long to make the fairness adjustments? Business has to function in real time, and government should be able to do more to control budgets, and make changes along the way when the data are demonstrative of a change of postiion.
We need to look at NAFTA, CAFTA because we HAFTA.
Comment by Cheryl O — October 10, 2007 @ 11:41 pm
"But this certainly isn’t where the voters are when it comes to the issue of trade. I was talking to a prominent Republican pundit…" - Is this the best source you can site as "the voters"? Rolling my eyes!
Debt..debt..debt! The loss of American industry, manufacturing & production infrastructure is the single most damaging factor plaguing our economy today. Under Bush corporate America is like a junkie living high on the "heroin" of tax breaks and windfall profits. But, where is the meaningful job creation? Jobs based on a living wage that enable a family to afford oh, say healthcare? Where is the reinvestment by corporate America back into our Nation? Simply put, corporate America is NOT reinvesting its capital back into America but is continuing to outsource and invest in, well, you know where!
What's needed is a carrot and stick approach! You want tax breaks? Sure. For each tax-break buck you get, you have to spend one in America. And it has to be spent on factories, on industry, on manufacturing. Say, maybe, a couple of new oil refineries. Or, producing "green" goods (extra tax breaks for that). The ONLY way America is going to reduce its foreign debt and reduce the stranglehold from those countries who hold our treasury notes is the re-emergence of American manufacturing and industry. It's time to start insourcing!
Comment by JerryG — October 11, 2007 @ 12:59 pm
John, until the advocates of free trade develop a coherent position that addresses the following points head on, populism will rise.
-Is "free trade" with countries that have centralized control a net positive. If so, exactly why and how does having that control affect the argument that "if they want to sell to us below cost, so much the better for the consumers"? What are all the difference between that situation and the old-style Adam Smith division of labor arguments? Are requirements like having to transfer industrial know-how to the local hosts tolerable in their net affect, all things considered?
-Is hollowing out of the industrial base a non-issue? Is its effect on the ability to maintain military production under all circumstances being properly considered and how will things play out if China become belligerent? What are the costs incurred by R&D efforts as a result of not having nearby manufacturing base? Is it proper to consider such costs for policy reasons?
-Should countries that repeatedly violate common norms , such as protection of the intellectual property, be allowed to continue? If yes, why, and if not, why not? What can and should be done?
Comment by Igor R. — October 11, 2007 @ 2:08 pm
I hear so much complaining from people who have ignorantly taken the protectionism side in the free trade debate and argue that we are giving away U.S. jobs and hurting the economy. The negative effects of protectionism should be quite obvious by now. Adam Smith had it figured out in the 1770s, so why are we still not able to educate the general public enough about economics to understand that free trade GOOD. There are so many biases today formed by the general voting public that have been formed without being educated about the issues. It seems to me that it's easier to comprehend the protectionist's standpoint rather than the pro-free trade standpoint because it's easier for people to see things like a local appliance store going out of business than it is to measure the total increase in consumer surplus from a Wal-Mart being built in their community. My point is simply that people need to be better informed, especially when voting on things that will change the nation for everyone.
Comment by Jeff Chancelor — October 15, 2007 @ 9:44 pm