The Delusion of Free Trade
nytimes.com
April 25, 2002
By ERNEST F. HOLLINGS
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This failure to protect American workers is of relatively recent vintage. Since American independence, controls on trade gave government a way to shelter industries from foreign competition so they could grow or restructure. Tariffs were also an important source of government revenue. (There was no income tax until 1913.) President Lincoln protected steel, President Franklin Roosevelt instituted protectionism for agriculture and President Eisenhower for oil. The industrial giant of America was built on careful protectionism.
This changed after World War II. We were the world's leading industrial power. Devastated countries in Europe and Asia were given aid, equipment and the expertise to rebuild — and the cold war was won. Fundamental to this victory was the American treatment of foreign trade as foreign aid. We set an example by opening up the American market. But our competition refused to follow suit. Instead, they protected their manufacturers.
As our competitors began to prosper, American managers were learning a different lesson from their experiences with overseas rebuilding. They learned that moving work overseas could save money. Labor costs in manufacture can be 30 percent of sales. A company that retains its executive offices in America but moves its production to a low-wage area could save as much as 20 percent in sales volume. Thus, a corporation with $500 million in sales could increase its pretax profits by $100 million. Accordingly, manufacture has been leaving the United States in droves. According to the Bureau of Labor Statistics, little South Carolina has lost 53,900 textile jobs since the free trade agreement with Mexico. Since the 1979 Tokyo Round agreements — in which fast-track authority took on its current form — America has lost more than four million manufacturing jobs, or 20 percent of our manufacturing work force. Giving fast-track authority to President Bush will only worsen this problem.
Since the fall of the Berlin Wall, hundreds of millions of people have entered the world's workforce ready to accept a minimal standard of living. In contrast, America continues to protect or raise its standard of living with requirements for a minimum wage, Social Security, Medicare, Medicaid, safe workplaces and machinery, clean air and water, plant closing notice and unpaid parental leave. A plant can move to Mexico and find a workforce with none of these requirements and an average individual wage that is 11 percent of the American equivalent.
Today, more than half of what we consume as a nation is imported, and we produce little to export. Recently I rode Acela, the fast train from Washington to New York that was made in Canada. Advanced technology, which was supposed to be the motor of domestic growth, is now imported. We have a deficit in the balance of trade in semiconductors, according to the International Trade Commission. My insurance policy is administered in Dublin, my light bill in Bangalore, India. |
