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).

by Alan Tonelson

Here’s hoping Ron Kirk knows how lucky he was yesterday – and how lucky he personally may remain – unless America’s political leaders start getting their act together on trade policy.  

The policy itself is a shambles.  Say you don’t believe that a single U.S. government trade decision has ever cost the U.S. economy a single job or penny’s worth of output.  Even so, who can still reasonably doubt that the nation’s trade-driven international deficits and their financing by America’s export-obsessed trade partners with almost free credit led directly to the consumption, financial, housing, and overall economic bubbles whose bursting now threatens a prolonged global depression.

Further, nearly every respectable survey taken since Mexico’s economy went bust immediately after NAFTA’s implementation shows that these trade policies are about as popular with everyday Americans now as Bernie Madoff is in Palm Beach, Fla.

Yet Kirk, President Obama’s choice to be U.S. Trade Representative, found out at his Senate confirmation hearings yesterday that America’s political establishment looks poised to give him an indefinite pass as steward of this policy.  For if the Finance Committee, which held these hearings, is representative, the establishment has learned next to nothing about how trade policy has sapped the vitality from the U.S. economy’s irreplaceable wealth-creating core.  Consequently, U.S. leaders generally have no clue that transforming this policy is essential for achieving a real  recovery – i.e., one fueled not by more government spending, more consuming, and more borrowing, but by new production, more sustainable privates sector jobs, and higher, more reliable incomes.

Of course, it never was realistic to expect that Kirk or the Finance Committee members would recognize these relationships and realities.  After all, the former Dallas Mayor and most of the legislators enthusiastically supported this failed trade strategy.  Still, it’s amazing to be reminded how confident they still are in these positions, and how completely mired in the stalest 1990s trade policy cliches and sloganeering they remain.

Kirk’s prepared statement was a classic example.  Right off the bat, he made clear his – and presumably the president’s – belief that trade is one area where no major U.S. policy changes are needed whatever.  Think about it.  The rest of Washington’s approach to the economy is being turned upside down and inside out.  The U.S. government now owns a good chunk of Wall St., the federal funds rate is down to zero, Washington is subsidizing the U.S. economy with literally trillions of dollars of new spending, tax cuts, and loan guarantees, for years federal budget deficits will break all peacetime records.  And none of these revolutionary moves has even slowed the economic meltdown.  Yet according to Kirk, despite its “imperfections, the world’s trading system and institutions provide a strong foundation for commerce....”  I wasn’t present at the hearing, but I could easily imagine the Committee earnestly nodding in assent.

As the USTR-to-be sees it, his top challenge is to “restore people’s faith in the process” – since “many Americans believe that we are losing good jobs because of a trading system that is tilted against them.”  His two leading remedies?  Making “a real and renewed commitment to enforcement of our trade rules, including those addressing labor and the environment.”  

The trouble is, few of our trade partners use rules-based, U.S.-style systems to organize their own politics and governance.  Why on earth would any rational person expect them to apply the idea to trade policy?  And how much more experience do we have to rack up with elusive foreign non-tariff trade barriers and subsidies, and completely secretive and unaccountable foreign trade bureaucracies to admit the folly of these wishes?  None of these questions, however, occurred to the august members of the Finance Committee.

The hopes placed by Kirk in including strong, enforceable protections for workers and environment in new trade agreements are just as out of touch with reality.  Most of America’s leading industries, after all, are capital- and technology-intensive.  Labor costs are a relatively small share of their total costs.  Moreover, workers were in vast oversupply around the world long before the global economy began imploding.   The economic crisis has created even more of a buyers’ market for labor that no U.S. mandates can overcome.

Let’s not forget, moreover, that unless we send literally millions of American bureaucrats traipsing across China, India, Indonesia, Vietnam, Brazil, etc. to inspect their tens of millions of workplaces, these labor provisions are completely unenforceable.  The Committee’s only substantive reaction?  Ranking Minority Member Charles Grassley’s (R.-Iowa) fears that these measures might be too effective in slowing trade!
    
If Kirk and the rest of the administration were really serious about effectively integrating trade policy with environmental concerns, they would drop their cap-and-trade schemes – which under any foreseeable circumstances can only encourage the offshoring of more production and jobs.  Instead, they would start imposing sanctions on China’s heavy industry exports, which benefit so much from the near total absence of meaningfully enforced environmental protection regulations.  The cap-and-trade point should have been a no-brainer for Committee Republicans, who are generally leary of such sweeping environmental initiatives.  But in the context of trade policy, these worries are evidently totally forgotten.

For good measure, Kirk pledged to “fight to open markets to our goods and services,” and “work to...ensure that our workers who are negatively impacted by trade receive the assistance they need to move forward and the skills required to compete in the 21st century economy.”  

But how Kirk plans to boost U.S. exports in a world economy that is shrinking and seeing new trade barriers grow like topsy is anyone’s guess.  Fortunately for him, no one on the Committee asked him.  They were too busy repeating this blather themselves.  And obviously, Kirk’s interrogators have remained as blissfully unaware as he that many of the highest tech, most skilled jobs in our economy have proven just as vulnerable as garment sewing to offshoring or to its flip side, the import of super-cheap immigrant labor.  

In fact, it’s hard to avoid concluding that, in preparing for these confirmation hearings, Kirk quickly reviewed some Bill Clinton-era trade policy propaganda and concluded that regurgitating it under oath would satisfy the Finance Committee and the rest of the Senate.  Politically, he’s surely correct, and his confirmation seems assured.  

But dealing with China (a country never mentioned once in Kirk’s prepared statement) and other tough-minded predatory traders will be much different than handling softballs lobbed by Finance Chairman Max Baucus & Co.   In fact, here’s a rule of thumb you can count on – at least until America’s productive base withers past the point of no return, and even the World’s Greatest Deliberative Body recognizes the disaster it helped create.  The smoother Ron Kirk’s relations with Congress as U.S. Trade Representative, the worse America’s odds of overcoming the crisis.

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