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From: "Linda Muller" <[EMAIL PROTECTED]>
To: [EMAIL PROTECTED]
Date sent: Tue, 29 Jun 1999 08:26:30 -0700
Subject: [BRIGADE] Robbed and Raped by Free Trade
Send reply to: [EMAIL PROTECTED]
Dear Brigade,
"...openly protectionist views, such as those of commentator and
presidential candidate Patrick Buchanan, again are attractive to
a good
many in Congress. And the words of lobbyists such as Robert E.
Swift,
executive director of the Crafted With Pride in U.S.A. Council,
are
finding their way into legislators' remarks and newsletters.
Swift, a
leading defender of the battered garment workers, who have lost
700,000
jobs in the 1990s, says: "Although the U.S. openly practices
free trade,
what other nation does? Certainly no other nation practices free
trade!
Why, then, should the United States - and who is going to take
care of us
if the United States doesn't? If your house is about to be
robbed or your
wife is about to be raped, would you protect them? Our
manufacturing base
is being robbed and our industry is being raped...."
GO PAT GO!!!!!!!!!!!!!!
Linda
---------------------------------------------
Insight on the News
June 28, 1999
Big Trade Deficit Is Bleeding U.S.
by Charles Cerami
Treasury Secretary Robert Rubin, in a speech about the U.S.
trade deficit,
bluntly has told the International Monetary Fund, or IMF, "This
situation
cannot continue indefinitely.i Japan and Europe must boost
domestic
demand-led growth." The day before, talking to the more private
Group of
Seven finance ministers, he went into even more pointed detail
with a
warning that concluded: "The whole world's economy is depending
too much
on selling to the United States. If the other major nations want
to keep
protectionist forces here from gathering steam, they need to
make sure
their own economies get back to growth in order to take some of
the
pressure off our ballooning trade deficit."
It is serious business when words such as these are exchanged,
and it has
been mightily provoked. This year's U.S. red ink in trading with
the
outside world clearly will far exceed 1998's $169 billion,
already a
deeply worrisome figure. And Fred Bergsten, director of the
Institute for
International Economics, calls this "the biggest single threat
to our
economy, which could lead to a plunge in the dollar's value and
a big
sell-off in stocks and bonds." If Bergsten were a certified
protectionist
or an enemy of globalization, that might be a routine remark.
But coming
from a former U.S. Treasury official and well-known supporter of
free
trade, this is a wake-up call. "We know the dollar will fall at
some
point," he stresses, "because every time in history there have
been big
imbalances of this type, the fundamentals have always
prevailed."
The mounting excess of U.S. importing over the amounts we are able to
export, reaching new records with every report, are putting some $20
billion more into foreign hands each month. IMF projections show it could
amount to another third of a trillion dollars in 1999, added to the
already shocking figure from 1998. And no matter how sound a currency may
be, an excess supply is sure to cheapen it, to cause the foreign holders
to dump it at some point.
But although the G-7 officials seemed to respond to Rubin by commenting in
a joint statement about the need for "more balanced growth among our
countries to reduce external imbalances," the significant point is that
they gave no sign of knowing how to achieve that. After long badgering
Japan to make itself more of a market for the ailing countries of Asia,
Rubin lately also urged Europe to create more jobs so it could help the
United States absorb more of the world's overproduction. Japan already has
cut interest rates nearly to zero and mounted large public-spending
programs, and the new European Central Bank insists it has done its part
with a recent interest-rate cut.
The United States, meanwhile, is fearful that troubled areas are headed
for even slower business in the months ahead, sending still more products
into our market. It is clear that the statements of agreement are papering
over a great division among the capitals.
As a result, lots of forces are at work to make the United States retreat
from more than a half-century of freer-trade policy. Some are from
separate industries that press Congress to protect their interests; others
are from experts who look at the overall picture and warn that the
decades-long string of huge deficits is building a sharp backlash. The
effect of all these forces on the administration are reflected in
President Clinton's moves to protect the steel industry against a flood of
imports. They are even more broadly significant in Rubin's tougher talk.
But even if it wanted to pull back from the total commitment to more and
more free trade, the administration is trapped in a classic catch-22.
Robert Shapiro, undersecretary of commerce for economic affairs, says,
"This is a time when prosperous American consumers and businesses keep
buying while our customers abroad are struggling and buying less." On top
of the long string of deficits, in other words, there is now the
predictable situation in which one prosperous giant, the United States, is
a ready-made market for others who are pressing to sell their way out of
trouble.
All of which leads Gordon Richards, economist at the National Association
of Manufacturers, or NAM, to say flatly: "I can't predict what our
government is going to do, but I can tell what would happen if it should
make any substantial protectionist moves at this time when the rest of the
world needs to sell more, not less. We would pinch off many of the
recoveries in places abroad and seriously aggravate their recessions,
which would, of course, impact our prosperity. Even in a weakened
condition, those trading partners could and would retaliate by buying even
less from us. So we might bring back that sense of global crisis that
gripped us last year."
Thus, to prevent a panic attack in dozens of countries, the administration
has to deny that it has any thought of turning away from free trade. It
even enlisted the prestigious Federal Reserve chairman, Alan Greenspan, to
speak out against protectionism as "unwise and surely self-defeating."
Significantly, however, his statement dwelled on the fact that free trade
enhances standards of living, without getting into the looming threat to
currency values and stock prices.
The problem is not just momentary, it is deep-rooted. Even before last
year, four decades of red-ink trade figures had convinced many believers
in open-handed trade policies that the hoped-for reciprocity from our
trading partners wasn't even visible on the horizon. Then came 1998 and
the collapse of most Asian economies.
As the White House request for fast-track authority to negotiate new trade
agreements with less congressional intrusion got into trouble on Capitol
Hill, some of the old voices still insisted that "protectionism" was the
enemy. But too many separate groups were involved to make that explanation
stick. In addition to labor lobbyists and other liberals, there also were
GOP legislators whose constituents were complaining about the ballooning
increase of imports, and there even were warnings by well-known Washington
economists who formerly had been eager for globalization and unfettered
trade. No single label fitted them all. The closest thing to a common
denominator was that they all realized the system wasn't balancing joy and
pain the way it was supposed to.
Last year also brought to light studies revealing that all the business
favors the United States handed out to developing nations weren't raising
living standards in those places as the experts had expected. Far from
improving wages and conditions for workers as the experts had
half-promised when trade treaties were made, their local governments and
entrepreneurs hadn't passed along benefits to the employees. That tends to
kill the longtime hope that those foreign workers would develop enough
affluence to buy more U.S. wares, nudging our trade numbers into better
balance.
And most of all, 1998 brought the Asian shock - the almost overnight
disappearance of booms that had become part of the effervescent world
economy. With Japan in the doldrums and Europe fighting double-digit
unemployment, what nation was going to be the "locomotive" that would
start to pull these countries out of the quagmire by buying more of their
goods? The United States, of course. Selling to the United States became
the only game in town.
This already is a major issue in Congress, where there is no neat division
into "protectionists" and "free traders." Even within the parties, there
is no clear demarcation. The great majority will admit that there is a
problem, but they divide on the causes and especially on the remedies.
Still, some observers see Congress divided into three distinct groups.
The ardent supporters of free trade insist on ignoring the deficits and
pushing ahead with the old policies. They are fighting a rear-guard
action. Their view that our current prosperity proves the merits of
internationalism is dealt a blow with each new report of another record
deficit in our trade balance or sign that American families simply are
using their credit cards to the max to buy great quantities of foreign
goods.
On the other side, openly protectionist views, such as those of
commentator and presidential candidate Patrick Buchanan, again are
attractive to a good many in Congress. And the words of lobbyists such as
Robert E. Swift, executive director of the Crafted With Pride in U.S.A.
Council, are finding their way into legislators' remarks and newsletters.
Swift, a leading defender of the battered garment workers, who have lost
700,000 jobs in the 1990s, says: "Although the U.S. openly practices free
trade, what other nation does? Certainly no other nation practices free
trade! Why, then, should the United States - and who is going to take care
of us if the United States doesn't? If your house is about to be robbed or
your wife is about to be raped, would you protect them? Our manufacturing
base is being robbed and our industry is being raped."
Meanwhile a new middle way is gaining ground, for it appears to wave a
smaller free-trade flag while setting up tougher conditions that might
impede the import flood. Headed by House Minority Leader Dick Gephardt of
Missouri and strongly supported by Democratic Rep. Barney Frank of
Massachusetts, House members who have been called "international new
dealers" say they are believers in a growing global market, but only if
the United States insists that foreign countries give their workers the
unrestricted right to unionize for better wages and working conditions.
"We must also demand real follow-through on the president's words about
attacking 'abusive child labor,' and we'll insist on far more care of the
environment in nations that want access to our markets," says Gephardt.
Clinton has seemed to shift toward this approach. In his State of the
Union address - in which upbeat tones had to be the only sound amid an
impeachment trial - he inserted some spin which, while sounding positive,
actually was an early hint that his own position was shifting. He talked
about "finding common ground" on trade that "has divided us too long." And
he talked about the "rights of workers" and the environment - points that
increasingly had been demanded by critics of our trade policies but always
were rebuffed before.
The mostly liberal proponents of this emphasis on workers' rights believe
that it would make a genuine humanitarian difference, while also helping
U.S. firms by forcing higher costs on their competitors in other
countries. There have been attempts for years to make U.S. negotiators put
such conditions into our trade treaties. But the attempt never was very
intensive on anybody's part, the follow-through almost was nonexistent and
the results have been zero.
The new emphasis on these aspects of our foreign trade presumably would
involve more follow-up, and perhaps the executive branch would be forced
to report to Congress on how well the promises were being kept. While the
number of members committed to this approach is not yet clear, the fact
that the administration has been backed into working along the same line
gives it a good chance of mounting a viable effort.
Even the apparently lost cause of giving the president fast-track
authority could become a possibility if it commits him to negotiate for a
reduction of our trade deficit rather than more of the old giveaway
approach. But this could be a hard sell because the congressional distrust
of Clinton colors everything. For example, the administration's current
trade negotiations with China are far less ham-fisted than Congress thinks
the situation calls for. Many members wonder why we can't virtually
dictate terms to a country that is fattening off a trade deficit with us
to the tune of some $60 billion annually.
Looking back at how the situation has been handled, objective observers
with no single industry's ax to grind tell Insight it is not only our
trade policies that have been to blame for the massive deficits. They
insist that the policies have been undercut by poor policing of deals
after they are made. Greg Mastel of the nonpartisan Economic Strategy
Institute says, "We have been very bad at enforcing agreements. There are
probably hundreds of cases of countries not complying, but unless an
industry has the time and money to document and pursue a complaint, it
doesn't get done."
Enforcing the quota limitations on some imported products, for example,
depends on the Market Access and Compliance unit in the Commerce
Department. Because of budget cutting, its staff has been chopped by a
third during the 1990s. As an example of how well this has paid off for
foreign competitors, the policing of imports from Japan formerly was
believed to require a minimum of 21 employees. That was trimmed to just
eight. As a result, it is admitted openly that quotas set by treaty have
been repeatedly and grossly exceeded. No one even dares to estimate how
many millions of dollars worth of Japanese products have been admitted to
the U.S. market over the limits. The government has saved millions of
dollars in salaries but permitted hundreds of millions worth of illicit
imports to come in, costing an uncounted number of American workers their
jobs and the U.S. Treasury a great deal of tax income from U.S. companies
that might have supplied those products instead of the Japanese.
That is only the Japanese example. The Chinese case will appear to be a
misprint, but this is a fact: Only three employees are specializing in the
review of imports from a country that will account for some $60 billion of
the U.S. trade deficit this year.
Few of the observers that Insight has talked with see the "third way" that
Gephardt and Frank are pushing as a cure for a problem as big as the
United States now faces. If it had been started years ago, it might have
made some difference by now. But they doubt that even the toughest
pressure on other countries could change their labor costs and product
prices enough to cure them of relying on dangerously high sales into our
market. Moreover, its effects would take years to show up - nothing that
would pinch off the present danger from this huge dollar glut overseas.
Regrettably, one other positive note also has a long-term ring to it. NAM
economist Richards points out that the present bulge in our trade deficit
should shrink when our prosperity settles back to a more normal economic
performance. "Nobody seems to look back and see how our deficit declined
in two fairly recent periods when our economic cycle was in transition -
around 1980 and 1991," he says. "Even if we don't undergo a serious
setback but manage a soft landing at sustainable growth and stock-market
levels, it should bring the deficit way down, provided that our main
trading partners have good growth at that time."
Meanwhile, there will be heated debate in Congress and aggressive
tightrope-walking by the administration to appear responsive to
special-interest groups while avoiding any protectionist signals that
might shake foreign stock markets. None of this will subdue the high fever
of a global economy with a very serious international ailment. No matter
what great levels the stock markets here and abroad may enjoy, the world
is in day-to-day danger when so many countries can't afford to buy enough
of what they produce - and so depend on the United States as their "market
of last resort."
----------- end -------------------
Help Pat and the Brigade in our Battle for the White House...
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