The Public Policy/Free Trade's Costs
Harrigan, Anthony
THE PUBLIC POLICY FREE TRADE'S COSTS by Anthony Harrigan In 1843, on the eve of England's repeal of the Corn Laws, the great conservative Benjamin Disraeli reminded his countrymen that "Free...
...Indeed our barriers are so insignificant that our country is the most attractive market in the world, the primary target of global trade offensives...
...It also suggests that the measures that are taken need not be absolute, such as a total ban on imports or an old-style tariff system...
...it would simply serve notice to trading partners that the United States intends to be hard-nosed about its economic interests...
...But inside the cloisters of the free trade thinkers, these developments cause not a stir...
...Currently, America's five leading exports to Japan are corn, soybeans, wheat, cotton, and coal...
...William Hawkins of Radford University has said that "free traders seem quite content for the U.S...
...Typical is the invocation of the lessons of Smoot-Hawley...
...Such a policy would not hinder America's ability to sell goods abroad...
...Protection is not a rule...
...American companies, for their part, have only the most limited protection in a few industries and special areas such as defense production...
...True, Hoover's 1930 decision to boost duties to an all-time high crippled American international trade and deepened the Depression, but that was the effect of distorting a fair, open, and truly competitive market...
...For these liberals and conservatives and many others, free trade is no longer a matter of dispute...
...The reality is that nonmarket or socialized enterprises are the rule in much of the world...
...Steel production in Italy, Britain, and France is wholly state-owned or controlled...
...At what point do we become, officially, a colony of the Far East...
...Ultimately, however, the protectionist impulse arises from a very firm perception of what America's role and status in the world should be...
...companies and industries, American sub-free trade zones, government guidance, preferential purchasing, access to bank credit on special terms, and cartels to maximize their own advantage-all while calling for free trade on the part of the United States...
...Given the inequity of international trade conditions, the crudest cut of all from free-traders is that those industries seeking protection are made up of loser companies or government toadies...
...Readers in the nation's capital should have been struck last September 20 at how both the normally conservative Washington Times and its liberal counterpart the Washington Post angrily denounced President Reagan's tentative moves toward protectionism...
...We were a colony once before, and we threw the tea in the harbor...
...Sixty percent of the domestic market for computerized machine tools, and 38.7 percent of the home market for semi-conductors have disappeared...
...It has risen above the partisan fray and taken on the aura of a gospel truth that cannot be refuted even in the face of overwhelming evidence that the avalanche of unrestricted foreign imports is burying America's industrial sector...
...Writing in the New Republic, Bob Kuttner summed up the typical free-trader response as reading: "Recession has prompted a spate of jingoistic and self-defeating demands to fence out superior foreign goods...
...The same is true of South Korea, Taiwan, and Mexico...
...Foreign producers are government-owned...
...For Stephen Cohen of the University of California, the situation is "terrifying": the whole range, high tech, middle tech, low tech, no tech, ordinary products, exotic products, consumer goods, producer goods...
...They have glibly assured us, for example, that workers displaced by de-industrialization can be "retrained...
...Bidwell, executive vice-president of Chrysler, put the case very clearly when he dismissed the notion of America as "a country of people who serve hamburgers to each other and silicon chips to the world...
...But retrained for whatr Is a Pittsburgh steelworker suitable human capital for a Silicon Valley computer plant...
...The ugly mood spawned by these changes has resulted in street protests against the institutions of the affluent, confirming what Philip Caldwell has said about the implications for America "if its work force does nothing more than get up each morning to ply another's ego or press another's pants...
...Service industries often offer only low-paying jobs, such as those in fast-food operations...
...High-tech companies, by their nature, aren't employers of large numbers of workers...
...That free-traders would seek to apply that lesson to today demonstrates just how naive their conception of modern-day international trade is...
...Meanwhile, the British Steel Corporation has run up losses of $4 billion since 1979...
...Despite workers among the most productive in the world, and huge investments in the latest mining technology, 18 of America's largest 25 mines are idle, victim, in the words of Sen...
...The purists deny the need for action by slipping into the cliches and stock responses of economic theory, and claiming that vigorous American action to block foreign trade offensives would prompt terrible retaliation by Japan and other countries...
...A case in point is America's copper-mining industry...
...But how true is that if the hidden price of such a dependency on subsidized imports is, the destruction of American factories and the loss of industrial jobs...
...They seem blinded by economic dogma to the fact that the U.S...
...There, post-industrialism has meant the rise of a service economy supporting a "boutique-style culture...
...Brazil's steel industry is 77 percent government-owned...
...Speaking to the CEO Forum last April, B.E...
...THE PUBLIC POLICY FREE TRADE'S COSTS by Anthony Harrigan In 1843, on the eve of England's repeal of the Corn Laws, the great conservative Benjamin Disraeli reminded his countrymen that "Free trade is not a rule...
...Japan's five leading exports to the United States are autos, trucks, video recorders, oil-well casings and motorcycles...
...Translate that into jobs and say roughly $50,000 in sales per job, that is two million direct jobs and another million, actually two million indirect jobs...
...The Japanese, for instance, protect their home markets while working on a national level to penetrate America's...
...Pete Domenici of New Mexico, "of the surge in imports...
...All that is needed are limits on foreign goods produced under conditions of nationalization, subsidization, or state guidance...
...to lose a major part of its industrial base as a natural result of a new global division of labor...
...The fact is that when it comes to considering the consequences of the "post-industrial" society, free traders haven't gone beyond their simple-minded economic calculus...
...The governments involved continue production in order to maintain employment-even when the market price falls below their costs...
...These demands emanate from overpaid workers, loser industries, and their political toadies...
...Textile and apparel imports have more than doubled since 1980...
...Retraining," in truth, is a euphemism for a massive shift to lower-paying jobs in the service economy, and the social costs of that move are evident...
...If the problem of unfair foreign trade is not addressed so that the displacement of industrial workers is ended, the United States could experience bitter political and social clashes by the 1988 elections...
...Why...
...Other countries have set up tariffs, quotas, administrative barriers, and testing requirements for American imports, while using state subsidiaries, targeting of U.S...
...Is this fair...
...They exempted their machine tool makers from anti-monopoly laws, imposed tariffs against the American petro-chemical, aluminum, and fertilizer industries, prohibited procurement of advanced American products such as satellites, and created both development and recession cartels...
...Remember Smoot-Hawley...
...Indeed, rising living standards are dependent on our industrial health, for the United States can't live on service industries and high tech alone, as some people foolishly believe...
...Protectionism will breed stagnation, retaliation, and worldwide depression...
...A colony is a place that ships out raw goods to a mother country, which ships back finished products...
...The fact is that on just about every ground the charges of those opposed to protection ring false...
...In fact, in many instances the opposite is true, and by denying any kind of aid free traders have crippled otherwise healthy and competitive companies...
...In short, an alternative trade policy would be based on bilateral agreements with other nations, with the national interest as the yardstick for negotiation...
...Today in America, as our most recent debate over imported steel quotas made abundantly clear, that truth has been long forgotten...
...Americans are producers as well as consumers...
...Free traders like to think that they have the best interests of Americans at heart, and their claim is that consumers can only benefit from the availability of cheaper, foreign goods...
...America has lost half a million jobs in the smokestack industries...
...Imports account for 70 percent of footwear sales in the United States...
...Then, warning of Japanese economic encroachment, he asked: Do we want to become a colony-again...
...Last year's increase represents 180,000 job opportunities lost for American workers...
...The atrophying of American industry certainly isn't of benefit to them...
...it is an expedient...
...In 1983 we had a trade deficit of $69.5 billion, up almost 100 percent from 1982 and, according to Economic Data Resources, expected to hit $170 billion by 1990...
...It's strictly a no-win situation for the United States, as the trade deficit figures attest...
...With our trade deficit soaring, and the prospect of a truly de-industrialized America looming, these are questions we should all be asking.e should all be asking...
...it is an expedient...
...we are running a trade deficit now of over $100 billion a year...
...The Wall Street Journal has written of the "widening polarization" between lunchpail and briefcase classes in Pittsburgh, the former steel capital where thousands of steelworkers have lost their jobs in the past five years...
...Is this justified...
...Sixteen years ago we had a $5 billion trade surplus...
...Japanese numerically controlled machining centers gained a 70 percent market share in 1983...
...It's fine to have a prosperous class of "yuppies," but Americans can't live by boutiques alone...
...These enterprises draw on state resources that aren't available to American firms, and so they have a comparative advantage in the production of their goods...
...This is strange indeed, for many free traders are devoted to a strong America and are among our most patriotic citizens...
...In today's world, many foreign productive enterprises that seek to trade with the United States are owned by their governments...
...And so it goes in every industry...
...Is it time to throw some cameras in the harbor...
...industrial base is the foundation of America's military strength and authority in the world...
...The chairman of the Phelps Dodge Corporation recently noted that "these governments are sheltered from the adverse impact of those low prices by concessionary loans from the IMF and other multinational financial institutions, such as the World Bank-institutions whose largest source of funding is the American taxpayer," which suggests that erecting some sort of trade barrier to protect the copper industry would have very little to do with distortion of the free market and a lot to do with fairness and our own national interest...
Vol. 18 • February 1985 • No. 2
