Thursday, April 25, 2002
Sen. Fritz "cash-and-carry" Hollings (D-Disney) writes an op-ed piece in Thursday's New York Times that challenges Paul "Line 47" Krugman for inanity. In the article, entitled "The Delusion of Free Trade," Hollings argues for expansive economic isolationism that would fail to protect American jobs in the long run and would generate hostility abroad in the short run.
In their eagerness to move production offshore, the National Association of Manufacturers, the Chamber of Commerce and the National Federation of Independent Business all join in a chant of "free trade, fast track." The retailers who make a bigger profit on imported goods cry "free trade, fast track," and newspapers, who make money from retail advertising, editorialize for free trade. But these cries are not really for making trade free — they are for transferring power over trade to the executive branch and favored corporate interests. This should not be the way economic policy works in a democracy.
Oh my gosh! American manufacturers and retailers want to make a bigger (taxable) profit! No! Say it isn't so, Fritz!
There it is again -- the Bush administration is in the pocket of corporate interests. Hollings can see it clearly from Michael Eisner's pocket.
The Bush administration contends that trade agreements are passing us by because the president doesn't have fast track authority. This is baloney. During the 90's we entered into more than nearly 200 international commercial agreements without fast track, including the Caribbean Basin Initiative, and agreements with sub-Saharan Africa, Jordan and Vietnam.
A few minutes of research at the U.S. Trade Representative's Web site reveals that Hollings has intimate carnal knowledge with baloney. According to the site, the Caribbean Basin Initiative grew out of a 1983 agreement that was expanded in 2000. So, it was in effect in the 1990s, but it wasn't really "entered into" during the 90s. The agreement with sub-Saharan Africa was negotiated during the 90s, but OK'd by Congress in 2000. Fast track authority merely allows for speedier negotiations -- hence the name. As a reporter, I covered city government in Hoquiam, Wash., where 13 people (six wards with two representatives each plus the mayor) and found it to be painful to get anything done. Too many chefs spoil the soup.
Under Article 1, Section 8 of the Constitution it is not the president but Congress that shall "regulate commerce with foreign nations." But the fix is in. The fast track bill will be called in the Senate only when the White House knows it has the 60 votes necessary to invoke cloture. Debate will therefore be limited. No one will listen to it anyway because they'll know the vote is fixed. Fast track will be passed, and the United States will continue to lose business.
Well, Fritz, one of the basics of running a democratic government intelligently is only bringing something you want to a vote when you're sure you're going to win. Fritz, if debate wasn't limited, then you and your buddies would filibuster and it would never get voted on. Besides, according to your leader, Sen. Tom Daschle, controversial subjects like this require 60 votes -- so why should anyone bother if they've got less? As far as no one listening to the debate, you know that's a lie. You'll get quoted in the newspaper and whoever comes up with the best soundbite will be on the evening news. I'll get to the contention that the United States will lose business later.
This failure to protect American workers is of relatively recent vintage. Since American independence, controls on trade gave government a way to shelter industries from foreign competition so they could grow or restructure. Tariffs were also an important source of government revenue. (There was no income tax until 1913.) President Lincoln protected steel, President Franklin Roosevelt instituted protectionism for agriculture and President Eisenhower for oil. The industrial giant of America was built on careful protectionism.
And President Bush, in 2002, protected steel. Is Bush for workers or against? The president is a riddle wrapped in an enigma inside a Chinese fortune cookie.
Has Fritz noticed that the American economy has been booming since all of these horrible free trade agreements have been ratified? What does this tell us about protectionism vs. free trade?
This changed after World War II. We were the world's leading industrial power. Devastated countries in Europe and Asia were given aid, equipment and the expertise to rebuild — and the cold war was won. Fundamental to this victory was the American treatment of foreign trade as foreign aid. We set an example by opening up the American market. But our competition refused to follow suit. Instead, they protected their manufacturers.
And when the competition refused to follow suit we punished them with tariffs. This is the way the world works, though it is apparently tough for Fritz to comprehend from Eisner's pocket.
As our competitors began to prosper, American managers were learning a different lesson from their experiences with overseas rebuilding. They learned that moving work overseas could save money. Labor costs in manufacture can be 30 percent of sales. A company that retains its executive offices in America but moves its production to a low-wage area could save as much as 20 percent in sales volume. Thus, a corporation with $500 million in sales could increase its pretax profits by $100 million. Accordingly, manufacture has been leaving the United States in droves. According to the Bureau of Labor Statistics, little South Carolina has lost 53,900 textile jobs since the free trade agreement with Mexico. Since the 1979 Tokyo Round agreements — in which fast-track authority took on its current form — America has lost more than four million manufacturing jobs, or 20 percent of our manufacturing work force.Giving fast-track authority to President Bush will only worsen this problem.
OK, moving work overseas increases profits. If profits are increased, according to our progressive tax system, then tax receipts will also increase. When we've got budget deficits, is this a bad thing?
Fritz says the textile industry in South Carolina has been hard-hit -- 53,900 jobs went poof since NAFTA went into effect in 1994. Wow...all those South Carolinians out of work -- or are they?
According to the South Carolina Employment Security Commission, the picture was a little different than that painted by Fritz.
The nonagricultural job count reached 1.9 million in 2000, with the addition of over 46,000 jobs. Industries posting healthy employment gains over the year were services (+17,300), trade (+9,000) and government (+8,000). Manufacturing employment rebounded in 2000, adding 2,700 jobs compared to a 2,800 decline in 1999. The main contributors to this increase were the automotive-related sectors, boosted by recent high-profile expansions announced by BMW and Robert Bosch Corporation.
South Carolina’s unemployment rate averaged 3.9% in 2000, down from 4.5% in 1999.
South Carolina continued to experience an increase in population, due to increased job growth and internal migration.
And the list goes on. Those textile jobs were turned into different kinds of jobs. And like the rest of the nation, South Carolina ultimately prospered.
Since the fall of the Berlin Wall, hundreds of millions of people have entered the world's workforce ready to accept a minimal standard of living. In contrast, America continues to protect or raise its standard of living with requirements for a minimum wage, Social Security, Medicare, Medicaid, safe workplaces and machinery, clean air and water, plant closing notice and unpaid parental leave. A plant can move to Mexico and find a workforce with none of these requirements and an average individual wage that is 11 percent of the American equivalent.
Actually, hundreds of millions of people have always been in the world's workforce ready to accept a minimal standard of living. For many poor countries, the only natural resource they have is their people. Since the start of the industrial revolution people have been paid a pittance for manual labor. Hollings truly does not understand even the basics of economics. Yes, a plant can be moved to Mexico and not have to pay all of those taxes. Of course, it also has much less-skilled workers with less education. It's not like Intel can move a computer processor design plant to Mexico.
While professional protestors at Berkeley have decried the pay that people who manufacture Nike shoes overseas receive, it is quite a livable wage in those countries -- but it's not in Bezerkely, so they protest.
Today, more than half of what we consume as a nation is imported, and we produce little to export. Recently I rode Acela, the fast train from Washington to New York that was made in Canada. Advanced technology, which was supposed to be the motor of domestic growth, is now imported. We have a deficit in the balance of trade in semiconductors, according to the International Trade Commission. My insurance policy is administered in Dublin, my light bill in Bangalore, India.
So, Hollings little anecdotes prove that he is right. So he rode a train imported from Canada. When he flies home to South Carolina from Washington, is Fritz flying in an Airbus or a Boeing?
This mantra of "free trade, fast track" must not keep us from seeing the drawbacks of simply allowing merchants and whoever is president determine the shape of our nation. We have done very well for more than two centuries with having substantial democratic control of commercial relations. There is every reason to continue with it.
There's the "Big Lie" -- businesses run the country.
What Hollings never seems to mention is, even with fast track authority, that the agreements Bush make do not automatically become law. The Congress must still approve them. And, as Hollings points out, it would take only 41 Senators to stop any unacceptable agreements. With 50 Democrats and 1 independent in the Senate -- we're guaranteed that there will be substantial "Democratic" control of commercial relations.
Years ago, Akio Morita of Sony admonished third world nations that they had to develop strong manufacturing sectors to become nation states. Turning to me, he said, "Senator, that world power that loses its manufacturing capacity will cease to be a world power."
Well, of course the head of Sony has to be correct -- just look at the Japanese economy -- the envy of the world.