While the antiwar rhetoric that fueled the early days of the Democratic presidential primaries has not gone away, attacks on President Bush’s dismal record of net job losses have now taken precedence.
Unfortunately, Rep. Dick Gephardt, the first to drop out of the race, was the only Democratic candidate with a record of opposing the “free trade” ideology, which is most responsible for the loss of 2.7 million manufacturing jobs in the United States and 300,000 “outsourced” service jobs since the 1997 global financial crisis. Frontrunner John Kerry, however, has voted for every bad trade agreement of the last decade, including NAFTA (1993), the creation of the WTO (1994), establishing permanent normal trade relations (PNTR) with China (2000), and the granting of “fast track” negotiating authority to President Bush (2002).
North Carolina Sen. John Edwards was better positioned to take on trade policy, since imports and the movement of factories overseas have devastated the southeastern states as much as they have the Midwest. Edwards, however, had also backed open trade with China and “fast track” for Bush.
Both Edwards and Kerry supported the alternative to the Foreign Sales Corporation (FSC) tax break for exporters offered by Reps. Phil Crane (R-IL) and Charles Rangel (D-NY), which would have given a ten-percent tax break to domestic manufacturing. Neither candidate, however, offered any rebuke to the WTO for declaring America’s duly enacted FSC legislation “illegal” or to the European Union for imposing sanctions on American exports under WTO auspices.
Both Kerry and Edwards have criticized China’s currency manipulation and failure to keep promises she made before the PNTR vote to open her market. However, as of this writing, neither is a cosponsor of S. 1586, a bill that would impose countervailing duties on Chinese goods to offset Beijing’s undervalued currency. S. 1586 has a dozen cosponsors, including Sens. Elizabeth Dole (R-NC) and Hillary Clinton (D-NY), which makes it the first major initiative that has garnered bipartisan mainstream support for the levying of tariffs.
Kerry has claimed that he “will fight to restore the jobs lost under Bush in the first 500 days of his administration.” He proposes to create jobs by offering a new manufacturing-jobs credit, investing in new energy-efficient industries, increasing research and development, giving tax incentives to help industries upgrade, and training workers for new opportunities. One of his more interesting ideas is to encourage students in high-tech fields to work in manufacturing by repaying a portion of their student loans. He would also reduce the costs of health insurance and pensions to employers, which are financial barriers to adding full-time positions.
Kerry’s program is clearly not enough to counteract the massive advantages that firms receive in other countries from poverty-level wages, lax safety and environmental regulations, government subsidies, and protected home markets. However, his emphasis on making U.S.-based firms more competitive opens the door to a fundamental shift in the terms of the debate. Though billed as an effort to put American firms on a “level playing field,” its success depends on giving such firms an advantage. Only then can they win the trade battle and keep (even bring back) production capacity and commercial jobs. It is decidedly not “free trade” with its trust in the not-so-invisible hand of corporate planners and indifference to the “market” outcomes they contrive.
The Bush administration has shown signs that it, too, understands the difference. The negative reaction to Bush economic advisor Gregory Mankiw’s claim that the outsourcing of jobs is just another aspect of “free trade” that has to be accepted seems to have set off alarm bells in the White House. A passive attitude on trade makes the President look weak and uncaring—attributes that defeated his father in 1992.
About a third of the voters in the Super Tuesday states said that the economy and jobs were the top issues in the election, far outpacing healthcare, taxes, and the war in Iraq. According to exit polls conducted for the Associated Press, about six in ten voters said they believed foreign trade was likely to take jobs away from their states, compared with only two in ten who said that trade would add jobs. These opinions were remarkably similar across the country, with 72 percent in Ohio, 60 percent in Connecticut, and 65 percent in Georgia saying trade costs jobs.
Secretary of Commerce Don Evans has been touting the administration’s plan to revive U.S. manufacturing by making it more competitive. Though he refers to the “level playing field” too often, he does express some concern for countering “unfair” foreign practices. Yet, unless some tangible progress is made, the administration is in big trouble. “Fair trade”—or “free trade”—is not enough to guarantee results. What is needed is advantageous trade.
In January, the Commerce Department issued its “comprehensive strategy to address the challenges to U.S. manufacturing.” The plan included many of the same themes Kerry has been using: reducing the burdens placed on American firms by regulations, litigation, taxes, healthcare, and expensive energy while promoting innovation, protecting intellectual-property rights, and increasing the role of government in research and development. The plan also called for a new assistant secretary of commerce for manufacturing and services, a President’s Manufacturing Council, and an Office of Industry Analysis, which could form the core of a strategic economic general staff for the international commercial battle.
The Clinton administration once proposed such a role for the National Economic Council but failed to follow through. The result has been a tripling of the trade deficit since 1997 and the loss of American jobs in fields targeted by foreign rivals.
Transnational corporations and foreign interests will lobby hard to prevent any policy changes that would curtail their further expansion into U.S. markets. In an election year, however, the American people have a chance to trump them at the polls. The most affluent and accessible market for U.S. industry is at home, where $1.3 trillion is annually lost to overseas production. Public pressure could force Bush and Kerry to bid up what they would do to give a home-field advantage to American firms and workers. Such a contest would make this the most important election in a generation.
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