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Trade Summit: Bad Trade Policies Could Create Global Depression |
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The latest figures for the U.S. trade deficit are in, and they’re bad. Again.
The Commerce Department reported today the nation’s trade deficit in May rose to $63.8 billion, from $63.3 billion in April. The U.S. trade deficit last year was a staggering $726 billion. More than a quarter of it—$202 billion—is with China.
The timing of the report coincided with a trade summit here in Washington, D.C., where more than 150 academics, business executives, union leaders and policy researchers discussed strategies to prevent the trade crisis from tripping a global economic downfall.
Sponsored by the AFL-CIO and the U.S. Business and Industry Council (USBIC), the summit highlighted how the combination of a soaring trade deficit and currency manipulation by countries such as China have created a crisis in the global economy that could pull the United States and the world into a 1930s-type depression—unless political leaders muster the courage to change the global trading rules.
Although the public is concerned about trade issues, political leaders don’t seem to have gotten the message yet, according to pollster Celinda Lake and author David Sirota. Lake, CEO of Lake Associates, found that more than half of Americans (53 percent) know someone who has been laid off and say outsourcing jobs is the main cause of the layoffs.
Lake points to an article in Foreign Affairs magazine by pollster Daniel Yankelovich, which asserts voter concern over trade is at the tipping point of becoming a major campaign issue. Yankelovich’s survey shows Americans are more concerned about the impact of outsourcing than they are about terrorism. Some 87 percent of Americans say they are concerned about jobs being outsourced, and 81 percent give the government bad marks for addressing outsourcing.
According to the survey, the only thing holding back voters from making trade a top issue is the belief by 52 percent of Americans that it is “unrealistic” to believe that government will do anything to change the situation.
That could change quickly, Sirota told summit participants. Each time a plant closes, it raises several issues related to trade policy’s impact on a community, such as pensions being slashed. Even immigration is a trade issue. In the debate over immigration, few people raise the point that since the North American Free Trade Agreement (NAFTA) went into effect more than a decade ago, 20 million more people have been driven into poverty in Mexico, fueling an increase in migration to the United States.
Sirota said these issues are ripe for a political party with courage to address:
The trade issue illustrates the disconnect between opinion makers and the real world. The [political] party that gets out in front of the issue in a way that deals with the problems of ordinary people will build a political majority for years to come.
Sirota is author of the best-selling book, Hostile Takeover: How Big Money and Corruption Conquered Our Government (available at The Union Shop Online).
Business advocate Kevin Kearns agrees. Speaking at the summit, Kearns, president of the USBIC, which represents 1,500 mainly smaller family-owned businesses, said:
Economic and business kingpins from Bill Gates and Warren Buffett to Alan Greenspan agree that deficits this high simply cannot be sustained. Leading Republicans and Democratic politicians also understand the dangers of these record deficits and the debts they fuel: a dollar crisis and a long, long deep downturn in a world economy heavily dependent on U.S. importing and consumption for its growth.
Kearns says recent trade agreements haven’t opened markets for U.S. manufacturers to export their products. Instead, they have encouraged corporations to move jobs offshore to take advantage of cheap labor and workforces that have few if any rights.
In fact, our nation’s trade policies have failed in almost every important dimension, AFL-CIO Secretary-Treasurer Richard Trumka told summit participants:
They have failed to create good jobs and healthy communities at home. They have failed to foster equitable, democratic, and sustainable development abroad. They have failed to safeguard our long-term national security interests. And they have utterly failed to ensure that American producers and workers are able to compete successfully in the global economy.
Failed trade deals such as NAFTA have contributed to the loss of almost 2.9 million manufacturing jobs since 2000 in the United States, 17 percent of the manufacturing workforce, and to the closing of more than 40,000 manufacturing establishments.
Doug Bartlett, CEO of Bartlett Manufacturing in Cary, Ill., attributes his company’s massive drop in revenue to unfair trade from foreign competitors, among other things. Bartlett, which manufactures printed circuit boards (PCBs), saw revenue decline from $20 million in 2000 to $8.5 million in 2005. Overall, annual sales for the entire PCB industry in the U.S. fell from about $10 billion in 2000 to $4.5 billion last year.
The first step to curing the crisis is halting the increase in the trade deficit by imposing a temporary across-the-board tariff increase, several experts said. Although a tariff certainly is not the entire solution, the lack of political leadership leaves business and workers few other choices, says Robert Blecker, a professor of economics at American University.
Blecker pointed out the Bush administration already has tools available under U.S. trade law and World Trade Organization (WTO) rules to impose emergency tariffs if there is a surge of imports or unfair trade practices. But so far, the White House has not acted, even though the WTO has ruled in 10 separate cases that China, for example, has competed unfairly by subsidizing its exports, violating intellectual property rights, and other means.
China’s government also manipulates its currency to keep its value artificially low, making its exports cheaper and imports more expensive. In addition, China’s government systematically denies workers’ basic rights and prevents them from exercising their internationally recognized rights.
In June, the AFL-CIO filed a petition with the U.S. Trade Representative, charging that China’s failure to protect worker rights is an unfair trade practice that costs U.S. jobs. The petition calls on President Bush to use his authority under U.S. law to impose sanctions against China or take other actions to remedy the situation.
Even if the Bush White House rejects this petition as it did a similar one two years ago, the federation will continue to make trade an issue in the upcoming election, Trumka said.
The AFL-CIO Executive Council in February called for a bold plan to address the trade crisis. Although there are many causes of the crisis, the council and numerous experts say the first steps to solving it must include not signing any more flawed trade agreements that encourage manufacturers to move offshore, enforcing current trade laws and imposing a temporary across-the-board tariff increase to turn around the record trade deficit.
Rep. Sherrod Brown (D-Ohio) told the summit the political terrain has shifted over the last dozen years and voters are beginning to understand the consequences of bad trade policies. He said politicians need to talk to workers about trade.
Brown, a strong advocate of fair trade policies that benefit everyone and a candidate for the U.S. Senate, says Democrats must talk to workers about the things they care about. If they don’t talk about trade and jobs, then the two main political parties sound alike, and voters will drift to other issues such as abortion and gay marriage.
Other speakers at the summit included Jodie Allen of the Pew Institute; Tom Buis, president of the National Farmers Union; Dimitri Papadimitriou, president of the Levy Economics Institute of Bard College; and author William Greider.
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