August 11, 2003
by Irwin Stelzer
Free trade and free elections do not always coexist peacefully. In an economy in which workers find jobs hard to come by, employers find their pricing power sapped by foreign competition, and the 2004 election campaign is on fast-forward, free trade is likely to find itself among the badly wounded.
When the gaggle of Democratic candidates appeared before the AFL-CIO trade union conference last week, vying for the dollars and foot soldiers so important in the primary campaign, most promised to veto any new free-trade agreements. In a display of protectionism red in tooth and claw, the steelworkers’ union declared that president Bush’s 30 percent tariff on imported steel does not satisfy their appetite for protection. They denounced Bush and promised to back any more protectionist Democrat in the general election.
Meanwhile, the president’s economic team was touring the nation’s hinterland to announce that the economy is a coiled spring, about to unleash a full-blown recovery on the nation. Treasury secretary John Snow, commerce secretary Don Evans, and labor secretary Elaine Chao picked their venues carefully, holding their meet-the-citizen sessions in the plants of some of America’s most successful companies, such as motorcycle maker Harley-Davidson, a firm that was on the verge of bankruptcy before it won tariff protection in the 1980s, and now is happily profitable and a major exporter of heavy motorcycles to Japan. That should give free traders something to think about!
Imagine the surprise of the Bush team when most of the questions were about the flight of jobs to
The dirty little secret is that many of
It is certainly true that
The problem for the administration is that trade with
Second, the administration knows that it must produce a growing economy by the first quarter of next year if it is to be assured victory in the November 2004 elections. One thing that can derail the recovery now underway is a further and rapid rise in interest rates. Here,
But even if Bush concentrates on the trade statistics alone, he will have some difficulty deciding what to do. Much of what
In this as in other matters involving trade, the relatively few who are hurt by imports know who they are, and they organize to make their voices heard in Washington, whereas the millions of consumers who benefit from cheaper gym shoes, t-shirts, autos, and other products—10 percent of the trade deficit is accounted for by the $10 billion worth of Chinese goods bought by Wal-Mart—don’t recognize the relationship between free trade and their ability to get more bang for their bucks. If the president is not to deviate further from his free-trade philosophy, he will have to hold off the few, who will be angry, in the interests of the many, who will neither know nor appreciate his efforts on their behalf. That is a lot to ask of a politician.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.
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