04 February 2009

It's Not Free Trade If You Can't Say No

A showdown looms between the President and Democratic Senators over a provision in the Senate version of the stimulus bill. Spearheaded by Senator Dorgan of North Dakota, the Democrats are pushing a "Buy American" amendment that would require all projects authorized by the stimulus to use American-made products rather than imports. The President joins numerous Republicans and free-trade think tanks in arguing that such a provision would violate international trade agreements, despite Dorgan's denials. MSNBC cites one such think tank's argument that any job creation resulting from the amendment would be outweighed by jobs lost due to likely retaliation from countries that import U.S. products.

There is nothing new about such a debate. Some of the earliest political disputes in our history were over trade and tariffs. There have always been people who benefit from protectionism and others who benefit from free trade. After the Civil War, Republicans defined themselves as the protectionist party while Democrats defended free trade. Trade was probably the most important issue in party politics in the last part of the 19th century. It arises as an issue in countries with developing economies, and those with declining economies.

We've reached a point in global history, however, when no country can have such a debate in isolation. No modern economy, it seems, can sustain itself entirely through selling to a domestic market. Businesses must export to flourish, or even survive. Economists disparage the concept of autarky or economic self-sufficiency as a primitive or insane idea, something you might see in North Korea but not in a free nation. Historians warn about resorting to protectionism during recessions. They invoke the Smoot-Hawley Tariff of 1930 as the death blow following the crash of 1929 that cinched the Great Depression's grip on this country. Already by then, apparently, the world had grown so interdependent that no nation could act to protect its own workers without the result looking like a Jenga game with the wrong piece removed.

Intellectuals defend this order of things by appealing to the rights of consumers over the rights of workers. A citizen has the right to buy the best or cheapest product rather than the local product, they argue. The consumer has no duty to keep his neighbor employed. Patriotism or solidarity must yield to the dictates of each person's pocketbook or his freedom of choice. Consumerism perpetuates the competitive world order; the consumer has no choice without competition, after all. Yet consumer freedom has its limits. The consumer can't opt out of international trade for patriotic reasons. He can't choose to limit his choices. That would be against international law.

But people must work to live. That's still true everywhere, and everyone acknowledges that people who aren't workers first soon cease to be consumers. China trembles at each new unemployment report from Washington, and so does every other export-driven economy. Even countries that are net importers must have jobs. The international community can't let any country lose the competition for trade so completely that everyone else loses that country as a market. That's interdependence, and international trade law should reflect it. During a recession, the necessity of creating jobs for people so they can afford to live should override any ideal of competition that requires losers to suffer. If the rest of the world objects to one country promoting domestic manufactures and excluding imports for the sake of job creation, then other countries should agree to receive exports from that country so its people can make the money they need to purchase imports from the rest of the world. The global marketplace should not be a site of competition for existence itself. Every nation is "too big to fail" if it comes to that. Nations should be willing to compromise their economic interests to acknowledge that fact. If that means accommodating America's need to rebuild its manufacturing sector, it should at least be considered. If it also means Americans' compromising some of their principles to conform with global standards, so be it as well. If the debate in this country doesn't go beyond the usual shibboleths of "free trade" and "protectionism," neither the country nor the world will get anywhere.


Anonymous said...

Then the obvious answer is that profit must be sacrificed so that Free Trade can endure and people can have jobs. At least from a patriotic point of view, that is the answer. But since those who insist most heavily on globalizing the world's economy only see individual governments as an impediment to their "initiative", they most certainly won't do the patriotic thing. As always, they will do what is best for themselves in the short term.

Samuel Wilson said...

Part of the problem with free-trade ideology is that it no longer has much to do with economic competition among nations. I don't think Adam Smith envisioned the international mobility of capital, or a scenario in which countries out-"compete" the U.S. not because they make things better than American industries, but because American industries have moved to those countries in order to make things cheaper than they can at home. Under current economic orthodoxy it's taboo to say that the jobs capitalists take to other countries belong to the U.S., but if people must work to live, then someone must have an obligation to create jobs. Since conservatives and libertarians dislike the idea of government creating jobs, they should insist on American entrepreneurs fulfill this obligation before people figure out other ways to provide for themselves.

Anonymous said...

Or maybe we should ship the conservatives and libertarians overseas and the rest of us socialize.