An editorial in my local paper is a good example of how we trivialize our public discussion of globalization and trade policy.
The editorial follows this logic: Trade is good. All trade is good. More trade is better than less trade. Maximum possible trade! Anyone who disagrees is protectionist or resentful.
I can immediately correct one misunderstanding. Everyone I know is in favor of trade. I am 100 percent in favor of trade. The issue is not "trade." The issue is good trade policy, which raises my standard of living, or bad trade policy, which lowers it.
Similarly, I am in favor of capitalism. Even so, we can have real, significant, meaningful, legitimate debates about good rules for capitalism and bad rules for capitalism.
I am in favor of banks. We deserve serious policy debates about banking.
I am 100 percent in favor manufacturing. China's manufacturing capacity is prodigious. It grows on the misguided principle of maximum possible output. As a result, air pollution in China is legendary, causing 750,000 premature deaths per year. In America, we debated clean air and clean water. Our public health and living standards are better for that debate.
I am in favor of copper, iron ore and titanium. However, it is bad trade policy for international trade tribunals to compel El Salvador to expose their people to unsafe mining practices, threatening more than a third of their clean water. Maximum possible mining threatens public health and safety in El Salvador.
It is bad public policy for a trade tribunal to overturn Ecuador's $18 billion environmental penalties against Chevron, compelling the national courts to back down in the face of trade sanctions. Chevron has already damaged the environment, and been found guilty in court. Bad trade policy punishes Ecuador instead of Chevron.
These concerns are not new. Past trade negotiations identified them in writing, but dealt with them ineffectually.
For instance, when China entered the WTO in 2001, it signed an "accession agreement" with several conditions designed to make trade a two-way deal. China's national policies flagrantly violate those conditions. China openly manipulates its currency. China demands that U.S. companies transfer technology to Chinese domestic producers. Foreign companies are discouraged or prevented from selling to China's domestic consumers, and Chinese producers receive subsidies and incentives that drive our producers from the market.
Free speech, free press and labor standards are notoriously weak in China. China has a rich history and amazing culture. However, they lack the institutions of civil society for democratic debate about serious policy issues.
This harms workers and producers in America.
In our NAFTA and WTO debates, advocates of so-called free trade promised us a rising standard of living, balanced trade and millions of good new jobs. Instead, U.S. companies shifted 2.4 million jobs abroad, while eliminating 2.9 million jobs in America. Our cumulative trade deficit since NAFTA is over $7 trillion. Our economy is de-industrializing, and we are losing strategic opportunities to produce the next generations of products.
These are fundamental flaws in our trade policy that lower our standard of living -- well worth a serious public discussion. Nineteenth century "free trade" theory may work well in a textbook, but it has profound conceptual, economic, social, environmental, and political shortcomings in our real 21st century global economy.
Challenging bad policy is the way democracy works.
Both Barack Obama and Mitt Romney found fault with aspects of our trade policy (at least during election campaigns). Candidate Obama recognized the weaknesses in our trade theory, and promised better trade agreements all through the campaign. Candidate Romney says action on China's currency manipulation will be a top priority.
In at least one respect, our so-called free trade policy is fabulously successful. It's really about putting investor and business interests at the highest priority, while sweeping aside the environment, labor rights, human rights, public health and reasonable regulations. Investors go first; civil society comes after. Maximum possible trade! It's great for companies who move production to countries with low-wages and weak democracies.
Dave Johnson says this in plain language:
The business advantage China offers is not low wages -- it is that in China the people do not have a say, and here people have a say. When people have a say they say they want better pay, health care, retirement, vacations, sick pay, protections, worker safety, clean environment and taxes to support the country -- things like that -- the very things China offers to let our businesses escape from.So what China offers is that China is "business-friendly." Because people there do not have a say, so they can't ask for the things people should have.
When our newspapers and policy-makers trivialize globalization and dismiss legitimate public concerns as "resentment" or protectionism, they weaken our democracy.
The Trans-Pacific Partnership (TPP) is the Obama administration's signature trade agreement, which is being negotiated in total secret. Text was leaked recently, showing that TPP will be worse than the past agreements. A crummy deal, negotiated in secrecy is not saying much for democracy.
Popular disillusionment with so-called free trade is real. It is based on personal experience, rational analysis, and looking out the window.
Voters, workers, families and Main Street businesses sense serious problems with our domestic economy. Whatever those problems are, they are made worse by so-called free trade. We won't solve either unless we deal with both.
Follow Stan Sorscher on Twitter: www.twitter.com/sorscher
http://discovermagazine.com/2011/apr/18-made-in-china-our-toxic-imported-air-pollution/article_view?b_start:int=1&-C
Made in China: Our Toxic, Imported Air Pollution | Pollution | DISCOVER Magazine
http://www.noaanews.noaa.gov/stories2010/20100120_ozone.html
National Oceanic and Atmospheric Administration - Study Links Springtime Ozone Increases Above Western North America to Emissions Abroad
"Springtime ozone levels above western North America are rising primarily due to air flowing eastward from the Pacific Ocean, a trend that is largest when the air originates in Asia. These increases in ozone could make it more difficult for the United States to meet Clean Air Act standards for ozone pollution at ground level, according to a new international study. Published online today in the journal Nature, the study analyzed large sets of ozone data captured since 1984.
“In springtime, pollution from across the hemisphere, not nearby sources, contributes to the ozone increases above western North America,” said lead author Owen R. Cooper, Ph.D., of the NOAA-funded Cooperative Institute for Research in Environmental Sciences at the University of Colorado at Boulder. “When air is transported from a broad region of south and east Asia, the trend is largest...”
The sooner China transitions to renewable energy, the better for Planet Earth.
http://www.scdigest.com/ontarget/11-08-31-1_China_Flexes_Rare_Earth_Muscle.php?cid=4899
Global REE prices will stabilize as new producers come online, labor prices in China will continue to increase, and inflation will reduce the impact of currency manipulation; but how exactly is an American competitor supposed to compete with a company that has almost no overhead aside from the materials that go into the product (which too are often heavily subsidized). This is why the American solar industry was hit so hard in the past few years. You'd think with such obvious manipulation intermatrix products would also be hit with tariffs to encourage real "free market" principles.
Absent any real balancing mechanism, such as provided by a true gold standard of a century ago, the dollar-as-reserve-currency makes truly beneficial free trade impossible - the imbalances from the dollar-system feed into the credit bubbles that are wrecking the global economy.
The pollution that China is notorious for is the result (mostly) of coal power plants. The biggest benefit to businesses investing in China is the large labour pool and a massive infrastructure to support transportation and commerce, something USA and other countries have failed to do.
You are correct, however, in your first statement. Look out below, Africa.
To summarize your article: ‘I Say Trade Is Good and That Capitalism Is Good But What I Really Mean Is Trade Is Bad and Capitalism Bad When It Threatens My Living Standard And The Living Standards Of My Like-Minded Special Interest Compatriots.
A few points:
(a) Yeah China is producing a lot, and yeah it’s pollution is legion…as as ours when we also made the transition from a mostly agrarian society to an industrialized society. So your point is that now that we have made to a post-modern industrialized society…other countries should not have that avenue to grow? More importantly, yeah pollution is bad…but on a per capita basis and in absolute terms, America dominates in creating pollution…and when you consider that much of China’s products are for the American economy, what has really happened is that we have outsourced the pollution for the products we consume…America is ultimately the polluter, not China.
(b) Yeah. They signed the WTO and yeah there are some teething problems, but we signed it and also manipulate our market access through ridiculous NTB’s, etc. Our currency is not much better with quantitative easing simply currency manipulation. Despite that, the RMB has been gaining in value and continues to gain in value to the point where the fundamentals do not support it going much lower relative to the USD. This horse does not have legs.
I am disappointed in the protectionist policy that you are advocating. As advocated by, Frederic Bastiat, 4 days before his death, ‘Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.’.
In this case he is right, it is the consumers standard of living not you and your henchman that are important. Cheaper goods that THEY want should be the priority not more expensive goods that you force them to buy.
‘The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.’--Milton Friedman
Kai
If by zombie economy, you mean one directed by conumers instead of special interests who capture government....then I prefer zombie economie...one that does not force me to buy expeneive American cars simply becuase so high-school drop out in Michigan needs a job that pays 70K a year.
Kai
but as one of my favorite Republicans once stated,
‘Cowardice asks the question: is it safe? Expediency asks the question: is it political? Vanity asks the question: is it popular? But conscience asks the question: is it right? And there comes a time when one must take a position that is neither safe, nor political, nor popular – but one must take it simply because it is right.’— Martin Luther King, Jr.
And that is why I keep at it....because I am right.
Kai
You rightly ask, ‘So, looking out for my employees is selfish needs? Interesting.’
Yes! Correct! When ‘looking out for your employees’ comes at the expense of single-mothers and retirees that have to eat dog food because you have increased their cost of living through tariffs in order to ensure that you and your henchmen can live high on the hog and have a better standard of living through protected markets….well then yeah….selfish.
Kai