Experts Say Trade Reform Key to Strong Economy

by James Parks, Oct 14, 2008

The Institute for America’s Future has launched a discussion to explore long-term solutions to the critical problems the nation faces. The campaign kicked off last month and will run an ad every week in the op-ed section of The New York Times demanding a debate worthy of our great nation. Join the discussion online at the Institute for America’s Future. 

When it comes to recent U.S. trade policy, the headline for the institute’s latest ad—“Even the Rope We’re Hanging Ourselves With Is Made in China”—pretty much says it all. Every day, the United States must borrow or sell off assets worth $2 billion to cover the nation’s trade deficit. To pay off such a huge debt—more than $700 billion a year, the equivalent of the Wall Street financial bailout—the United States turns to governments and banks in China, Japan and the oil-rich Middle Eastern countries. As the “rope” ad puts it: 

Other countries export goods, we export debt and jobs. One of five manufacturing jobs has been lost since 2000.  

Several experts weighed in with articles exploring trade and globalization as part of this week’s focus in the institute series, “Debate Worthy of a Great Nation in Trouble.”  

Among them, United Steelworkers (USW) President Leo Gerard lays the blame squarely on the shoulders of the Bush administration:

George W. Bush’s chickens have come home to roost, and they’re not pretty. With the full support of Arizona Sen. John McCain, who voted with him 90 percent of the time, eight years of the Bush-McCain philosophy have left us in a terrible mess. 

We have mortgaged not just our homes but our entire future to foreign governments that have made clear in recent days that they care not one wit for the concerns of America’s working families. The people with the leverage are now the Chinese, the Russians and the oil-producing countries, each of whom will want assurances that the debt they hold now and the new debt they will soon be buying are worth something.

It’s hard to believe our economy can produce enough to pay back our debt, when you look at what is happening in Michigan, one of our key manufacturing states, says Isaiah Poole, executive editor of Our Future. He cites a study by economist Charles McMillion on the eight-year depression in Michigan to point out the havoc our economic policies have had on real people.

Over the past eight years, sending jobs offshore in the automotive industry has led to the loss of 489,000 jobs in the state since 2000. Average annual compensation per job in the state has declined 33 percent, as manufacturing jobs have been replaced by lower-paying service jobs. The state has lost $8.6 billion of annual production to China. Poole quotes McMillion, who says:  

Michigan’s worsening eight-year depression, the weakest overall U.S. economy in 55 years, and the unprecedented mountain of unsustainable debt accumulated in recent years demand forceful and immediate measures on the scale of those undertaken in 1933. Continued failure of political leaders to address these urgent matters with appropriate industry and trade policy actions could have lasting consequences for Michigan, for the U.S. and for the world economy.

Author William Greider says the collapsing U.S. economy is a direct result of corporations chasing profits at the expense of the nation. In a reprise of a 2007 article from The Nation magazine, Greider features Ralph Gomory, a former senior vice president at IBM, and economist William Baumol who wrote that our trade policies have actually hurt the United States and will continue to do so until we fundamentally change our view of what trade is.

The problem, they say, is that instead of investing in America’s workers, more companies are using modern technology overseas and paying less for labor and then importing products and services back into the United States. Says Gomory: 

We’re making it person-to-person competition, which it never was before and which we cannot win. Because their people will be paid a third, a quarter, of what our people are paid. And it’s unreasonable to think you can educate our people so well that they can produce four times as much in the United States. 

If nothing changes in how globalization currently works, America’s workers increasingly will be exposed to downward pressure on incomes and living standards, he says.  

The solution is right in front of us, Gerard says:  

If anything good can come out of this awful mess, we must begin by clearly and unequivocally recognizing the absolute bankruptcy of the Bush-McCain approach.  

Government must take the lead in revitalizing the economy that Wall Street speculators have almost destroyed. We need to once and for all to bury the philosophy that worships only business, free markets, deregulation and free trade, and replace it with an economic program that restores the balance of power between workers and business, rebuilds the middle class and curbs corporate excesses.

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