John McCain: Free Trade
Poster Boy in the White House?
Friday, September 12, 2008
|Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).|
Even in current era of the blogosphere, punditry that’s actually useful – as opposed to simple ranting – is nuanced. It at least acknowledges that reality is rarely black and white. It admits that there are usually two sides to every story. It recognizes that policymaking often requires balancing competing legitimate goals. (That’s why it’s hard.)
Unfortunately, nuance simply isn’t part of the record of Republican presidential nominee John McCain on economic globalization. Throughout his Congressional career and his presidential candidacy, his words and deeds on trade, manufacturing, investment, and related issues have been so unrelievedly dreadful across the board that they could easily be mistaken for propaganda by his opponents.
Worse, these problems go way beyond McCain’s proud support for every single outsourcing-focused trade deal served up since the North American Free Trade
Agreement. They also go way beyond his habit of mistaking free-market platitudes for sensible approaches to (a) overcoming specific, concrete challenges faced by American producers in often hostile global marketplaces, and (b) fixing the dangerous weaknesses pervading the world economy – thanks largely to the toxic mix of U.S. trade policy negligence and foreign mercantilism
When the picture of McCain’s globalization policies is rounded out by his enthusiasm for globalizing (read “outsourcing”) American defense procurement and undermining domestic defense producers, a genuinely appalling conclusion emerges: McCain’s dominant impulses in this sphere add up to nothing less than blanket opposition to realistic strategies for promoting the U.S. economy’s productive sectors – along with an equally powerful determination to ignore or actually coddle foreign predation.
In other words, the Arizona Senator’s bottom line on globalization’s challenges too often has not been blindly defending laissez-faire
. It’s been hanging his own country’s producers out to dry.
McCain, the professed free-market fundamentalist, war hero, and national security hardliner, along with his backers, would angrily reject this charge. But look at the facts, starting with his hissy fit about the Democrats’ proposal to renegotiate NAFTA. McCain apparently is so bent on defending every syllable in this 15-year old document, and so determined to vilify any and all domestic criticism as dangerous protectionism
, that he has overlooked realities of the global and hemispheric economies – realities that any responsible U.S. leader would seek to understand and address.
For example, right after NAFTA went into effect, Mexico’s incompetent macroeconomic policy plunged the country into bankruptcy and depression. Its wildly hyped and highly overrated consumer market for American products was virtually destroyed, and the bilateral terms of trade
and investment were radically changed by the resulting collapse of the peso. A decade and a half later, this debacle’s aftermath is still warping North American trade and investment flows to America’s detriment. What kind of troglodyte would insist that NAFTA be set in stone, much less turn this failed experiment into a political rallying cry?
Then there’s the little matter that NAFTA’s authors were completely blind-sided by the rise of China – and more generally by the entirely predictable inevitability that Asia’s export tigers would never accept Mexico squeezing them out of a U.S. market that’s vital to their prosperity.
The results of this preeminent NAFTA failure are obvious to all but the willfully ignorant. Mexico has been eclipsed by China in America’s market and corporate supply chains. As a result, its growth and job creation have woefully underperformed. More recently, its traditional strategy of postponing ruin and revolution by sending workers and narcotics northward is imploding thanks to the deflation of America’s own bubble economy and to the unprecedented aggressiveness of its dramatically enriched drug lords.
Among the biggest U.S. victims of this metastasizing crisis has been the southern rim of McCain’s home state of Arizona. Yet the Republican standard-bearer views NAFTA not only as an indisputable success, but also as a sacrosanct achievement whose critics are nothing less than blasphemers.
McCain’s view of the proposed free trade agreement with Korea is just as fanatical – and revealing. Here is a country whose stunning industrialization and modernization owe predominantly to Japanese-style protectionism. Industrial targeting, subsidization, predatory dumping
, and staunch opposition to foreign capital are all pervasive. Its economy is best seen as a single, gigantic trade barrier, and its mercantile strategy has been fueled not only by decades of robust growth, but by an unusually emotional strain of nationalism. Tens of thousands of protestors filled the streets of Seoul this spring for months when the government agreed to resume imports of perfectly safe U.S. beef, forcing the entire cabinet to offer its resignation.
Even the normally blinkered Bush administration recognized that the standard U.S. free trade agreement formula for opening foreign markets was completely inadequate for hard cases like Korea. Therefore, the text contains some new wrinkles for dispute settlement, although they still don’t cut the kimchi. The House Democrats are proposing a much better way, but the main point is that there’s a genuinely substantive problem here. (See “Congressional Leaders Break New Ground with Proposed Korea FTA Fixes,” June 29, 2007 at http://www.americaneconomicalert.org/view_art.asp?Prod_ID=2819.)
What has McCain been adding to the debate? So far, nothing – save reciting some context-less U.S. export statistics, and quickly changing the subject from economics to downright looney warnings about how American insistence on equitable trade could threaten the U.S. security relationship with South Korea. Someday maybe he’ll explain why any sane Korean would support this when a rupture would leave Seoul completely surrounded by present and possibly future enemies.
Other crackpot ideas about national security underlie McCain’s endorsement of the proposed U.S. free trade agreement with Colombia. “The stability of Colombia is more critical than ever,” McCain claims, “as others in the region seek to turn Latin America away from democracy and away from our country.” Rejecting the trade deal, he insists, “sends the wrong signals to friends and enemies alike in the hemisphere” – especially Venezuelan strongman Hugo Chavez, who he calls “a threat to America’s security in the region.”
Never specified, however, is why the greatest power on earth should fret about a dictator who is steadily impoverishing his own oil-rich country’s economy, who desperately needs to keep selling oil to the United States largely as a result, and who lacks anything remotely resembling a superpower patron.
Moreover, in August, all the master strategists supporting the Colombia outsourcing deal got the news that a second CAFTA U.S. trade partner, Honduras, had just joined the first, Nicaragua, as a member of Chavez’ new regional trade bloc. So much for trade deals winning reliable allies for America.
McCain has said little about the still moribund Doha Round of world trade talks, but he has made clear his priority: cutting the “massive subsidies
to American [agricultural] producers,” which he views as “a form of protectionism, helping already rich companies at the expense of people and nations in need.” Omnipresent foreign trade barriers, transparent free-riding by advanced developing countries, brazen legal over-reaching by the World Trade Organization – that is sponsoring the Doha Round and oversees dispute resolution in the global trade system – one never hears about these problems from John McCain.
In fact, portraying his own country, its trade policy critics, and its domestic producers as malign forces has become a major feature of McCain’s depiction of the world economy and its ills. To be sure, McCain talks about the need for “enforcement in both the letter and spirit of the trade agreements we ratify,” about “insisting” that “China trades fairly,” about “securing access” to the world’s burgeoning markets, and about “leveling” the global playing field.
But because McCain condemns as dangerous economic isolationism all unilateral U.S. moves to create leverage by threatening or imposing trade restrictions, he has no strategy worthy of the name for achieving these goals. He’s simply left with relying on the kindness of strangers and with hoping that the World Trade Organization’s overwhelming protectionist majority will for some unspecified reason abandon the trade free-riding that has made the United States the world’s importer of last resort and biggest net debtor, and that has ravaged its productive base.
Undoubtedly contributing to McCain’s evident distaste for the trade restrictions actually needed to punish and change predatory foreign behavior is a deeply conflicted – at best – view of U.S. domestic producers. On the one hand, McCain not only praises the U.S. economy as “the most productive, energetic, and flexible in the world” and as “the world’s innovator.” He also repeatedly makes the standard Republican/conservative/multinational business argument that American producers are constantly struggling against counterproductive domestic policies like excessive taxes and regulations – and, to be fair, far too often this is the case.
But McCain’s sympathy vanishes whenever industries, companies, and workers struggle against the protectionist and mercantile policies of foreign governments. And when they seek help from Washington, he dismisses them in one of two ways. He either scorns them as incompetents – enterprises that use “old technology to produce old goods” or as “old industries” akin to “buggy whip factories” in the automotive age. Or he blasts them as “special interests” and “special pleaders” constantly angling for “corporate welfare.”
Evidently no one has told McCain that high-tech domestic producers not only have wracked up massive and skyrocketing trade deficits, but that dozens of these industries are losing at accelerating rates big shares of their home U.S. market – the market where they should have the biggest advantages.
Nowhere is this blind spot bigger or more dangerous than in McCain’s record on defense-related trade issues. It’s bad enough that this supposed national security whiz has displayed no regard for the need to maintain a strong, broad-based domestic defense manufacturing complex over the long haul, but he has specifically led recent efforts to further weaken already inadequate Buy American requirements for military procurement – all in the name of realizing short-run savings.
Even worse, McCain has stoutly opposed proposals to hinder in any way the ability of predatory foreign producers from competing for Pentagon contracts against their U.S. counterparts. Thus he opposed permitting the Air Force even to consider European subsidies to Airbus in deciding whether the European Airbus consortium and its U.S. partner Northrup-Grumman would beat out U.S. firm Boeing for the high-profile $35 billion contract for a new fleet of aerial refueling tankers. It’s hard to imagine creating a bigger incentive for foreign trade cheating at the expense of thoroughly competitive domestic producers.
But there’s something even stranger about McCain’s trade and globalization views than his neglect of foreign predation. McCain is an avowed believer that “in our free society, it is left to each one of us to make our way in the world,” that “government should do only those things that individuals cannot do themselves,” and that “our prosperity...cannot be provided as another government benefit.” Yet he recently has countenanced all manner of government economic interventions and bailouts – except for companies and industries harmed by foreign cheating.
McCain has endorsed the government-orchestrated rescue of Bear Stearns, the Federal Reseves creation of an emergency lending facility for big Wall Street firms, and the big housing bill that would create a government program to refinance as much as $300 billion worth of failing mortgages. He just backed the federal takeover of government-created mortgage giants Fannie Mae and Freddie Mac because they got too big to be allowed to fail. And he proposed a summertime gasoline tax holiday for motorists that was a huge giveaway to the oil industry.
For good measure, McCain has called for overhauling – and significantly expanding – federal job training and reeducation programs to “help workers who’ve lost a job that won’t come back find a new one that won’t go away.” So enthusiastic is McCain about such historically unsuccessful government “work-to-welfare” policies that he’s even supporting a variant concocted years ago by liberal outsourcing interests – wage insurance, which will help workers in hard-hit industries “make up part of the difference in wages between their old job and a temporary lower-paid one” they’ve taken while retooling themselves.
But although he backs government-supported “pure research and development” for more fuel-efficient automotive technologies, McCain has reverted to Mr. Free Market when asked about a more comprehensive revitalization plan for the Big Three Detroit automakers.
So what does all this mean for Americans favoring much smarter trade policies in order to rebuild the U.S. economy’s productive sectors? Clearly, McCain is adamantly opposed to realistic strategies for achieving this vital goal.
Sen. Obama, as discussed in an earlier column, has not demonstrated a strong commitment to such strategies. (See “Trade and the White House Race Part II: Does Obama Really Care?” May 27, 2008, at http://www.americaneconomicalert.org/view_art.asp?Prod_ID=2996)
But what if Obama turns into Bill Clinton and, like the former president, toes the line of the Democrats’ Wall Street-centered outsourcers (who have given generously to Obama’s campaign and who hold prominent advisory positions), and seeks a string of new outsourcing deals? Would the unions and the more heavily Democratic Congress that seems inevitable spring into opposition, as they did after NAFTA’s signing? Or would they stay in party-unity mode – at least for a while – keep quiet, and hope for a few crumbs of welfare for displaced workers?
In theory, a McCain presidential victory could draw the trade and globalization battle-lines more clearly, and in a more partisan way. The result could be a stalemate between a Republican White House and a Democratic Congress that would at least prevent any more harm being done on the trade policy front. At the same time, Congress’ Democratic leaders could view trade policy as a great opportunity for bipartisan cooperation – just as they did in spring, 2007, when they reached a potentially dangerous compromise with the Bush administration on labor and environmental standards in trade agreements.
All told, then, come November, trade-minded voters will face a real conundrum, as former Fed Chairman Alan Greenspan liked to say. One thing, though, seems clear – the campaign to restore America’s economic vitality will need to be actively and vigorously waged no matter who wins the White House.
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).