protectionism

NYT Says Don't Protect Jobs, Communities, Economy, Democracy? What?

Dave Johnson — Wed, 08 Jun 2011 12:47:44 -0400

The NY Times has an editorial on trade today, Keeping Protectionism at Bay. The editorial, written by well-paid New Yorkers living far from the devastated communities of the "rust belt," explains down to us that it is a bad thing to "protect" our jobs and our communities and our economy and our democracy.

Here is the NYT editorial, depicted in graphic form:

Here are excerpts,

With growth still slow and unemployment high, many developed countries are resorting to measures that restrict imports — from antidumping investigations to tariff increases. This must stop.

[. . .] This course is not surprising given the sluggish recovery. In Europe and the United States, the end of fiscal stimulus has left communities and industries foundering. And with the international solidarity sparked by the global financial crisis eroding, governments want to give domestic firms an advantage.

Workers, Companies Want A Level Playing Field

Far from wanting to "give domestic firms an advantage," American companies are asking for a level playing field. Confronted with countries that engage in organized cheating as a national policy, our companies are at a terrible disadvantage. China, for example, engages in currency manipulation that means goods produced there have a 30-40% price advantage in world markets, even before taking other factors into account, like the subsidies many of China's companies receive.

Companies Against Countries

Conservative "you are on your own" ideology blocks our government from getting involved in developing an industrial/economic policy. But other countries are not similarly tied down and can act as a country. This leaves our companies and workers on their own, up against national governments coordinating and promoting entire industries. Individual American companies have little chance when trying to compete with national governments.

Democracy A Disadvantage?

Americans fought and sacrificed to build and keep the protections and benefits that democracy offers. Those include good jobs with good wages, worker safety laws, rules preventing companies from polluting, and so many other things that conservatives complain make us less “business-friendly.”

But “free trade” deals have let the big, monopolist, multinational companies get around these protections of democracy. They let these companies move factories over the borders of democracy to thugocracies and pit employees here against desperate, exploited people who have no voice, no power and no money. Democracy isn't free, so of course they can be made cheaper elsewhere.

Then we let those goods produced in thugocracies come back here to compete with goods made here? What?

Of course it is cheaper to make things where there is no democracy to set rules and protect working people! Is it a good idea to make agreements that necessarily put goods made in a democracy at a disadvantage because they are made in a democracy?

The NY Times is telling us not to "protect" our democracy.

NY Times Don't Care

Like the Honey Badger in the video below, the NY Times don't care. The NY Times don't give a sh*t.

Frank Sobotka explains:

Winning The Race To The Bottom

Dave Johnson — Wed, 27 Oct 2010 13:08:23 -0400

Conservative policies have propelled us into a global race to the bottom. Conservatives can take pride: we're winning!

"Free trade" -- moving factories across borders to evade the protections of democracy that generations of Americans fought for -- pits exploited workers with few rights and no means of improving their condition against Americans who once had environmental and wage protections. But such ideas as protecting the gains of democracy are out of favor. That is labeled "protectionism" and is thought for some reason to be a bad thing. Conservatives were able to break the unions and wages for working people have stagnated, while the amount going to the top few has soared.

Here is the future of American wages: From today's Washington Post: In its biggest foreign market, BMW gets skilled workers for less,

Among the applicants: a former manager of a major distribution center for Target; a consultant who oversaw construction projects in four Western states; a supervisor at a plastics recycling firm. Some held college degrees and resumes in other fields where they made more money.

But they're all in the factory now making $15 an hour—about half of what the typical German autoworker makes.

. . . the price of having a more globally competitive workforce means more in the United States could fall well short of the middle-class living standards that manufacturing workers once could expect. Wages adjusted for inflation have declined for these workers since 2003.

That's right, German workers are now paid almost twice what American's can make. (And they get health care and an average of 35 paid vacation days, we get 13.)

Tea Party Wants To End Minimum Wage

The Tea Party has its sights set on the minimum wage. They say it is "unconstitutional" and want it "abolished."

Your Wages Are Next

If you still have a job, your wages are next. You can bet that executives in every company are wondering why they are paying their employees so much when there are so many hungry, unemployed people out there looking for work. Every dollar they can save on paying you goes into their pockets.

Isaiah Poole pointed out the other day, in Latest Reagan Revolution Price Tag: A $313 Billion Wage Cut, (Please click through and read his whole post!)

New data compiled by the Social Security Administration reveals that the total wages earned by American workers fell by a total of $313 billion from 2007 to 2009, Johnston writes. That's a 5 percent cut, and is measured in 2009 dollars.

In one year alone, from 2008 to 2009, wage income declined $215 billion.

What can you do about this? Terrance Heath writes in, Minimal Wages For All, (Please click through and read his whole post, too!)

Here's another reason to vote in the mid-term elections this November: Conservatives think you need a pay cut. As I've said once or twice before, conservatives' bottom line message is simple: America has economic problems because too many people have had it good for too long; and when they're worse off again, the nation and its economy will be better off. The people they think had it too good for too long are you and me, and almost anyone who punches a clock to pull a paycheck.

The Answer

The answer is to insist that goods brought into this country are made by people who are paid a decent wage. That way they could make enough to buy things we make, too. That really could be called trade. And the other answer is to pay people here enough to have a decent standard of living, even if it means hedge-fund managers could only make maybe $100-200 million a year instead of billions. That way we would all benefit from our economy, instead of everything going to the top at the expense of the rest of us.

Vote as if your standard of living depended on it.

America's Elites Actually Notice Chinese Protectionism

Dave Johnson — Tue, 16 Feb 2010 14:57:41 -0500

When President Obama tried to get a "Buy American" clause as part of the "stimulus package" he was met with howls of protest. Meanwhile China has a "buy Chinese" policy for their own government procurement. Their policy includes "intellectual property" so America's "centrist" elites have suddenly noticed.

Robert Samuelson, in The danger behind China's 'me first' worldview, writes,

"It's become apparent from recent events that America's political, business and scholarly elites have fundamentally misjudged China."

Samuelson cites, among other things, China’s undervalued currency and a new “Indigenous Innovation” policy, announced in November.

“Since 1978, China's economy has increased roughly tenfold. The prevailing American assumption was that as China became richer, its interests and values would converge with those of the United States. China would depend increasingly on a thriving global economy. Freer domestic markets would loosen the stranglehold of the Communist Party. The United States and China would not always agree, but disputes would be manageable.

It isn't turning out that way.

[. . .] China's policies reflect a different notion: China First.”

Wow. Judging by the record of this crowd’s timing for seeing the dangers of deregulation, the housing bubble and the massive Reagan/Bush debt, by the time America’s “political, business and scholarly elites” - and Robert Samuelson - recognize a problem the rest of us must be experiencing a full-blown, exploding, catastrophic, earth-shaking, economy-destroying event.

Samuelson concludes,

“No longer should we sit passively while China's trade and currency policies jeopardize jobs here and elsewhere.”

D’ya think?

Background: China has been implementing what they call an “Indigenous Innovation” policy to increase their "international competitive ability." The national policy combines in-house R&D with “external knowledge acquisition.” The policy includes an "Indigenous Innovation Product Accreditation System" which is a catalog of products that receive preference for Chinese government procurement. (A "Buy Chinese" clause for their own stimulus plan and other government purchasing.) The branding and trademarks also have to be Chinese. Companies from outside China have to transfer their R&D to China to qualify.

In late January an influential (they have a lot of money and give a lot to politicians) group of 19 American lobbying organizations, including the US Chamber of Commerce and the National Association of Manufacturers jointly sent a letter to Secretary of State Hillary Clinton, Treasury Secretary Tim Geithner, Commerce Secretary Gary Locke, Attorney General Eric Holder and U.S. Trade Representative Ron Kirk. The letter begins,

"We seek your urgent attention to policy developments in China that pose an immediate danger to U.S. companies. The Chinese government has promulgated a series of "indigenous innovation" programs as part of a long-term plan that threaten to exclude a wide array of U.S. firms from a market that is vital to their future growth and ability to create jobs here at home"

This letter reflects a letter from an international group of business leaders, sent in December to Chinese Ministers, complaining about these policies.

These letters from influential lobbying organizations have caused America's "centrist" elite to wake up and take notice. Export of our country's manufacturing and jobs base wasn't a concern and efforts to do something about it were labelled "protectionist." but now China is going after the core of the huge multinational corporations, and they are starting to pay attention.

As I pointed out yesterday,

China is just taking care of its own. It should. That is what nations are supposed to do. So to the extent that we still see ourselves as a NATION, we need to take care of OUR own. We need a national economic/industrial strategy, where we say THIS is how WE are going to compete.

If America is still a nation with a democracy we're going to have to step up to the plate and compete as a country and as a people.

The Washington Times Was Against Protectionism Before It Was For It

Dave Johnson — Mon, 16 Nov 2009 18:00:48 -0500

President Obama is visiting Asia, and is blasted over and over about America's supposedly "protectionist" policies.

"China on Monday accused the United States of increasing protectionism..."

Think about it, the country with the massive trade surplus accuses the country with the massive trade deficit of being "protectionist." Call it The Audacity Of Projection.

Our trade opponents have learned that all they have to do is shout the word “protectionist” and their American enablers will quickly run from doing anything that might help American companies and workers. But what happens later, when the consequences start hitting home? Do the "free trade" shouting, foreign-competition enablers take the blame and accept responsibility when Amercan dollars are spent overseas and American workers lose jobs and American factories close? Who could have known that they would point the finger at the President instead of themselves?

Here is what I am talking about:

On February 8, 2009, during the debate over the stimulus package, the conservative Washington Times joined the "free trade" chorus, denouncing the package's proposed "Buy American" requirements as the same kind of "protectionism" that conservative mythology says caused the Great Depression: EDITORIAL: How to cause a depression,

...Tucked within the economic stimulus bill the House passed last week was a clause requiring state and local public works agencies to buy American iron and steel for their reconstruction projects, and the Senate expanded it to all manufactured goods.

[. . .] The stimulus bill has a way to go before it reaches Mr. Obama's desk, but if strong "buy American" mandates are present at that time, he will have no choice but to veto the bill. Otherwise, he will be forever known as Barack H. (Hoover or Hawley) Obama.

Conservative free-traders got what they demanded. In response to these and other cries of “protectionism!” the Senate backed away from the Buy American clause, changing it to vague language requiring that the money be spent in ways consistent with existing treaties.

Since this wording gives the President some discretion in how the money is spent conservatives started demanding the President spend it ... outside of the country. For example, a Washington Times editorial on March 24, EDITORIAL: The Mexican-American War of 2009, ended by blasting President Obama for wanting American stimulus dollars to stimulate America's economy:

"Wasn't Mr. Obama going to be the "international" president who was going to get the rest of the world to love us? The path to improving relations does not involve destroying jobs in other countries as well as in our own."

So now it turns out that many stimulus dollars are being spent according to the wishes of the "free trade" conservatives, with money to purchase wind turbines creating jobs in Europe and China, and who could have known, the very same free-trade conservatives are JUST OUTRAGED that President Obama is sending American stimulus dollars out of the country! For example, a Washington Times editorial on November 13, EDITORIAL: Stimulus creates jobs in China, begins,

Of the $1 billion in clean-energy stimulus money spent since the beginning of September, $850 million has gone to foreign wind companies. It doesn't take a bunch of experts at a hastily planned "jobs summit" to discover this isn't the way to bolster employment in America.

Indeed, the 11 U.S. wind farms that received stimulus money from the Treasury have imported 695 of the 982 wind turbines to be installed, creating 4,500 jobs overseas. That's far more overseas work than the stimulus money has created in the United States.

Yes, how DARE they not require that American stimulus dollars be spent in America! This from the very same Washington Times editors who earlier in the year demanded exactly that.

Who could have known that conservatives would attack President Obama for the consequences of giving in to conservative demands??!! The Washington Times was against protectionism before they were for it. Call it The Audacity Of Hypocrisy.

The lesson to be learned here is to stop listening to these conservative, "free trade" clowns. They are only interested in making the rich richer at the expense of the rest of us and will say whatever advances that goal. We should start just doing what is right for the country, our workers, our factories, our companies and our jobs.

Building a Smart Grid, Smartly

Eric Lotke — Tue, 27 Oct 2009 13:04:42 -0400

President Barack Obama announced today $3.4 billion in government grants to help build a "smart" electric grid. Like many Obama initiatives, it’s a smart first step. But much more is needed and one piece is rarely mentioned at all.

Start with the problem. America’s electric grid is aging and not keeping up with demand. Electricity demand has increased by 25% since 1990 while construction of transmission facilities decreased by about 30 percent. The results are higher costs and more blackouts. Carol Browner, the president's top adviser on energy and climate change, called the grid “outdated” and “dilapidated."

Our discussion of energy is dominated by wind farms and solar panels. They’re important, of course. But they leave open the question of moving the energy from the where it’s made (offshore wind farms or sunny deserts) to where it’s used (cities and factories). That’s the grid. It’s called smart because it can re-route electricity in accordance with demand or around trouble spots.

In the end, we want it all. Wind farms, solar panels and a smart grid to bring the energy from point A to point B. That’s our clean energy future.

But we want something else with consequences we don’t always recognize. We want to be self-sufficient. We don’t want to replace our dependence on foreign oil with a dependence on foreign manufacturing. And we want those clean energy jobs to be located at home. Especially if we’re funding them with our own tax dollars. As Campaign for America's Future co-director Robert Borosage puts it:

“Not simply a timid buy America policy satisfied with the final assembly of parts and technologies made elsewhere, but moving entire supply chains so that our workers and engineers and entrepreneurs are familiar with cutting edge technologies that our inventors can soon surpass.”

Right now, half of our wind turbines are imported from overseas. Ninety percent of our solar cells are manufactured in China — which requires that its own solar installations use domestic (Chinese) content.

This isn’t about protectionism or neanderthal rejection of global trade. It’s about thriving in a competitive global economy. America needs to think strategically. Move away from asset bubbles and debt-driven consumer spending. Rebuild our real economy of production and manufacture.

Public investment in infrastructure is a crucial step in that direction. It creates jobs now and increases our competitiveness in the future. A new smart grid is part of it — and it’s even smarter if the transformers aren’t imported from China.

If you’re near DC, please come to our conference Thursday October 29, building the new economy. It’s free, and Senator Sherrod Brown (D-Ohio) will share his ideas over lunch. It’s time to pop the bubble economy.

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UPDATE: After this post was published, the White House released additional detail. Most important: The smart grid program includes $25 million to expand the necessary manufacturing base. It's a small amount and nowhere near the top of the release -- but the White House calls it "a significant and growing export opportunity for our country and new jobs for American workers." It's nice to see details trending in that direction.

Does China's Nylon Tariff Help American Manufacturing?

Dave Johnson — Mon, 19 Oct 2009 12:39:42 -0400

A few weeks ago, in a case involving a tire import surge President Obama enforced our trade agreement with China. The agreement spelled out that a disruptive surge in imports would be remedied by imposing a tariff, which is what the President did. Of course he was accused of "protectionism" be people confused about the meaning of the word.

In today's news China is imposing a tariff on US nylon. Beijing Goes After U.S.-Made Nylon,

The ruling was the latest in a series of punitive measures that started last month, when the administration of President Barack Obama imposed a 35 percent tariff on Chinese-made tires. Beijing quickly followed up with a threat to increase tariffs on American exports of chicken meat and car parts.

. . . He Maochun, a professor of economics and diplomacy at Tsinghua University, said China had no choice but to combat American protectionist measures with its own.

The article fails to inform readers that the President was simply enforcing an agreement we had in place with China, and the Chinese statement that this is "protectionist" goes unchallenged. It is unfortunate that the New york Times misleads readers like this.

Does this Chinese tariff hurt or help American manufacturing? Nylon is a raw material. This means toothbrushes, etc. that have been manufactured in China will be much more expensive to import now. Isn't this an opportunity to start making these things in America again?

Major Free-Trade Economist Says China Tire Tariffs "Part Of The Rules"

Dave Johnson — Thu, 08 Oct 2009 14:37:44 -0400

The Wall Street Journal's Real Time Economics blog wrote this yesterday:

Princeton University economist, author and New York Times columnist Paul Krugman won the Nobel Prize in economics last year for his work on international trade — so the guy knows what he’s talking about when it comes to this subject.

[. . .] Krugman downplayed concerns about protectionism.

The Obama administration’s move last month to impose tariffs on certain imports of Chinese tires raised much concern that nations are leaning towards protectionism — a move some economists say worsened and prolonged the Great Depression.

But Krugman isn’t convinced. First, he said, protectionism was an effect –– not a cause — of the Great Depression — a frequent misconception among economists, he said. And despite “incidents” it hasn’t really been a factor in the current downturn.

He added that as for the tire tariffs, they “aren’t really a big deal,” because they are “part of the rules” under world trade agreements and are temporary — rather than permanent — in nature. [emphasis added]

As I have been saying all along, this tariff was just enforcing the rules. Trade can't work, even "free" trade, without rules that are enforced.

And stop calling everything that might help American manufacturers "protectionism." Watching out for one's own interests in not a bad thing. Watching out for your country's workers and manufacturers isn't a bad thing either.

Myths Of Protectionism Are Spread To Exploit Workers and the Environment

Dave Johnson — Fri, 18 Sep 2009 08:01:44 -0400

“Protectionism” is a very powerful word. In fact, simply evoking the word is capable of ending debate on any subject related to trade. Invoking the magic words, “You can’t do that, it would be protectionist,” settles all arguments.

Why, exactly, is protectionism so bad? Why can't we have fair trade that lifts workers and protects the environment instead of unregulated free trade that exploits workers and the environment? Well, after spending time looking for evidence to support the "protection is bad" arguments what I find boils down to, basically: "Because it is. Shut up."

Here is how it works, in the current discussions of how to fix the problems that led to the financial crisis there are established discussion-enders. Often the 1930s depression is invoked. For example, if you want to bail out big financial corporations and executives (and their bonuses) you say it was a “credit crunch” that caused the depression so we have to prevent another credit crunch. Booga-booga, end of discussion (even though lending is still declining even a year after the huge bailouts...) If you want to maintain low-cost import pressures to force low wages you say "protectionism caused the depression." For other arguments, you can say it was unions that caused the depression, or perhaps government regulations, or perhaps taxes. You get the picture. Booga-booga, end of discussion.

By the same magical mystique, current trade and economic discussion rules prohibit ever, ever suggesting that the depression and hence the current economic problems (because of course they are exactly the same thing, just as Vietnam was exactly like World War II) happened because of:
• extreme concentration of wealth at the top,
• monopolistic and predatory corporate practices,
• wages and compensation that are too low for regular people to participate in the economy,
• insufficient taxation of the wealthy,
• exporting manufacturing capacity,
• overconsumption,
• unsustainable practices,
• encouraging people and businesses to borrow too much,
• coziness between government and wealthy special interests,
• insufficient regulation of corporations,
• or any argument that might result in people thinking that regular people should participate fairly in the economy or have a degree of control over the government and corporate practices.

So with these rules in mind I would like to address a few of the myths about protectionism that have grown into a “conventional wisdom” that always serves the interests of the wealthiest few.

Myth: Protectionism caused the depression or made it worse. Thom Hartmann addresses this very well, so I’ll leave it to him. In 2004's, Democracy - Not "The Free Market" - Will Save America's Middle Class, Thom wrote,

When conservatives rail in the media of the dangers of "returning to Smoot Hawley, which created the Great Depression," all they do is reveal their ignorance of economics and history. The Smoot-Hawley tariff legislation, which increased taxes on some imported goods by a third to two-thirds to protect American industries, was signed into law on June 17, 1930, well into the Great Depression. In the following two years, international trade dropped from 6 percent of GNP to roughly 2 percent of GNP (between 1930 and 1932), but most of that was the result of the depression going worldwide, not Smoot-Hawley. The main result of Smoot-Hawley was that American businesses now had strong financial incentives to do business with other American companies, rather than bring in products made with cheaper foreign labor: Americans started trading with other Americans.

Smoot-Hawley "protectionist" legislation did not cause the Great Depression, and while it may have had a slight short-term negative effect on the economy ("1.4 percent at most" according to many historians) its long-term effect was to bring American jobs back to America. [emphasis added]

Myth: Protectionists are “against trade,” and the similar argument protectionism is about creating barriers or just keeping out foreign goods. This is a way to short-circuit the actual arguments that trade should be fair to both sides instead of just unregulated and exploitative. Fair traders want trade to be conducted in ways that are fair and respectful of working people on both sides of the transaction. They want people to be paid fairly and their working conditions to be safe and they want the environment to be protected. When trade is conducted this way everyone benefits in the long run.

Myth: Protectionism costs jobs. This scare-tactic is used by opponents of almost every policy that benefits working people. "Raising the minimum wage costs jobs." "Taxing corporations costs jobs." Etc. Fair trade policies would increase the number of jobs because the workers making the goods that we import would be paid enough to buy the things we make here.

Myth: Protectionism ties up manufacturing resources in outdated uses. This is a valid criticism of protectionist trade policies if those policies were enacted as the result of lobbying by interests seeking to protect themselves from competition that is based on innovation and increased efficiencies. This is a key point and I want to repeat it. Fair trade advocates oppose exploitation of workers or the environment. Fair traders do not oppose fair competition, and it is important that trade regulations reflect this.

There is no question, as I pointed out earlier this week in Myths of Protectionism: Stories You Are Likely to Hear in the Wake of the China Tire Trade Tariff Case that protectionism can be misused by wealthy interests to feather their own bed in ways that harm the rest of us such as by companies that protect their franchise from fair competition. I wrote,

As with all rules they can be manipulated by the currently-powerful. This was done to keep some prices unreasonably high, encourage monopolistic practices, reduce access to localized or regionalized specialties ... So after we built up a manufacturing base the time came to start selling to others. This necessitated back-scratch trade agreements: you scratch my back by lowering your tariffs, we’ll scratch yours by lowering ours. Etc. And each country's markets expand - as does the competition.

We always have to protect against wealthy and powerful interests seizing the government's decision-making processes to further their own interests. That is just human nature. It is not an argument against the idea of having government and law, it is the reason it is necessary for us to be eternally vigilant of powerful interests and have systems and procedures in place to protect the rest of us. As with anything trade can be beneficial or harmful depending on how it is managed.

Fair traders want trade managed in ways that lift people and the environment up, increasing our standard of living and protecting the environment. Yes, we want to protect our workers and our manufacturing capacity but this is the key to prosperity and economic power. Wealthy interests are using trade as a way to pressure us to force lower wages, loss of benefits and removal of restrictions on polluting the environment.

Myths of Protectionism: Stories You Are Likely to Hear in the Wake of the China Tire Trade Tariff Case

Dave Johnson — Mon, 14 Sep 2009 06:00:00 -0400

President Obama has decided to enforce our trade laws and imposed a 3-year tariff on Chinese tires. I suspect the country is about to witness a corporate hissy fit that will surely rival any righteous teabagger’s demands to see the President’s birth certificate.

Here is what is going on: when the US endorsed China entering the World Trade Organization the agreement was that if any of our industries were significantly disrupted, we could call “time out” and give those industries 3 years to adjust. In case after case President Bush refused to enforce this agreement as China took over one industry after another. Since we then had to buy what we used to make, our balance of trade deteriorated and we now owe China vast sums.

In this case the U.S. International Trade Commission found that America’s tire industry was, to say the least, disrupted by a surge of imports of cheap tires. As with so many industries, cheap Chinese imports quickly dominated the market, American factories closed, American workers were laid off, American communities were devastated and instead of having to pay wages and maintain factories, American CEOs and Wall Street executives pocketed more and more short-term profits at the long-term expense of their own companies and our country's economy.

So this time President Obama is enforcing the agreement and applying tariffs. In fact he is applying a lower tariff than the 55% that was recommended, but the tariff of 35% is still substantial and may save jobs, preserve some manufacturing capacity, and hold the trade deficit down just a bit.

The corporate hissy fit is beginning right on schedule. The word being shouted loudest is “protectionism” and there are threats that this will lead to a trade war.

The headline at the Drudge Report screams: “CLASH OF THE TIRES LEADS TO TRADE WAR,” linking to a Financial Times story that doesn’t actually say anything about a “trade war.” In the story China’s minister of commerce Chen Deming says, “This is a grave act of trade protectionism,” and Eswar Prasad, professor of trade economics at Cornell University, calls the enforcement of the agreement “protectionist measures” while at the same time saying the tariffs are not “substantive restraints on trade.”

The Washington Post, rather than lead with the pro-American viewpoint, chose to lead with China's, “China blasts US tire duties as protectionist blow.” Many other corporate-dominated media outlets followed in a similar vein, arguing how this is a bad decision. Wall Street Journal, “A Protectionist Wave” and "Tariff on Tires to Cost Consumers". Others, like Business Week, just reported the news: “In China Tires Case, Obama Strikes Middle Ground.” (Forbes, to its credit, led with a neutral pun, “China and US: Tire-d of Fighting.”)

So what is “protectionism” and why is it supposed to be wrong for a government to protect a country’s manufacturing interests? Isn’t America borrowing so much money from other countries because we don’t manufacture enough goods here anymore to sell and thereby pay for the things we buy?

In the past a major portion of America’s tax revenue came from collecting tariffs on imported goods. This helped fund development of our competitive infrastructure while maintaining internal markets that encouraged development of industry to make goods here both for use in the country and for export. This led to manufacturing jobs. Every country that has built up a manufacturing base has done so by restricting competitive imports.

But there were problems with this “mercantalistic” approach. As with all rules they can be manipulated by the currently-powerful. This was done to keep some prices unreasonably high, encourage monopolistic practices, reduce access to localized or regionalized specialties and discourage others from importing our domestically-made goods. So after we built up a manufacturing base the time came to start selling to others. This necessitated back-scratch trade agreements: you scratch my back by lowering your tariffs, we’ll scratch yours by lowering ours. Etc. And each country's markets expand - as does the competition.

Unfair competition led to the idea of protecting our standard of living. Unfair labor costs, kept low by use of child or prison labor, exploitive wages in non-democratic countries, even use of forced labor or slaves undercuts our own companies’ ability to compete. Failing to provide worker safety protections, or allowing pollution also provide trade advantages to offshore competitors. So to protect ourselves we imposed tariffs that raised the store price on those goods to prevent them from undermining our own standard of living and safety and pollution standards. We protected our national interest.

The idea of these "protection" policies is to encourage these competitors to pay better wages, improve worker safety and/or stop polluting. This way their own economy and environment could improve and their workers would be able to buy the things that we make. Used this way, the policy of protectionism improves living standards for workers everywhere, while growing our economy and improving our standard of living in the process.

The idea of “free trade” theorizes that without “government” involvement these disadvantages will disappear and prices will eventually reflect supply and demand instead of tariffs and regulations. Of course, this ignores that government as constituted in democracies is a banding together of the citizens for mutual protection, empowerment and benefit. The result of "free trade' is a downward spiral of wages, benefits, worker protection and environmental standards as countries race to the bottom in competition.

Expansion of trade is beneficial to all parties if done fairly. Of course, “fairly” is a difficult state to attain when powerful interests compete for dominance in rule-making. In this case we have the competing interests of American workers and manufacturers pitted against Chinese manufacturers. There are also the powerful interests of distributors and retailers who make a percentage off a sale, whatever the source of the goods, and Wall Streeters who buy up companies and demand short-term profits, and profit from debt.

This is where the opposition comes from. Certain powerful interests are doing just fine without any of this goody-goody do-gooder stuff, thank you, and they want things kept that way. So they will fight against changed in the status quo, no matter how necessary or beneficial to the rest of us. We see this so clearly in the health care reform fight and soon we will be hearing some outrageous lie on the order of "death panels" and "government takeover" to try to scare people away from fighting for their own jobs, wages and benefits by asking for reasonable trade and manufacturing policies.

Their primary scare word in use today is "protectionism."

Part II will examine some of the specific myths surrounding the mystical and powerful word “protectionism.”

Misuse Of The Words Protectionism And Trade Is Making Us Poorer

Dave Johnson — Tue, 04 Aug 2009 09:00:39 -0400

Can one be called “protectionist” just for pointing out when other countries are being smart? Maybe so. I’ll get to that in a minute, but first…

Language has tremendous power. People like George Lakoff and Drew Westin, who study the use of language in political discussion, say that our choice of words has the power to actually affect the “wiring” or neuron circuits that our brains use to think.

The corporate marketers and political persuaders have certainly learned the power of language to influence us. It has even gotten to the point where “neuromarketing” uses MRI and EEG to study how our brains react to certain stimuli so they can be used to market and persuade.

In politics I think that we have even reached a point where we give words more power and importance even than the ideas the words represent. In the Bush years we learned that the persuaders believed they could “create their own reality.”

"That's not the way the world really works anymore," he [Bush administration official] continued. "We're an empire now, and when we act, we create our own reality. And while you're studying that reality—judiciously, as you will—we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors…and you, all of you, will be left to just study what we do."

The influencers have become adept at scaring up the public into stampedes that can have sudden and dramatic effects on politicians. So lawmakers have gotten into the habit of basing their decisions on what they think (fear) the public believes (according to what Drudge and Fox are claiming they believe) rather than what is the best policy. And in fact, it is often the case that the public was behind the right policy all along. (Like with a health care public option -- the manipulators had the politicians convinced it was "centrist" to oppose that.) Consequently, words are used as weapons by professionals who wish to distract us from things that are in front of our own faces.

I was conscious of this the other day in the post, How Should We Talk About Industrial And Manufacturing Policy? I wrote,

“The phrase “industrial policy” sounds so Walter Mondale, 1970s, smokestacks and brick factory old-fashioned. I suspect the subject turns people off, eyes glaze over, hands reach under the table for iPhones and Blackberries…”

Making things in America is crucially important to our future economy. But today as we join the discussion of how to restore America’s economy the manipulators have been busy, so it matters as much that we use the right words as that we explore the right ideas and policies.

The Words “Protectionism” and “Trade”

Two words that have significant power today are “protectionism” and “trade.” In current usage anything that can be labeled as “trade” in any way shape or form is in all cases considered by most to be a good thing. And anything that can be labeled as “protectionism” in any way shape or form is in all cased a bad thing. Simple as that. If you want to engage in some practice that people might oppose you try to label it as “trade” to shut down discussion. It you want to block a policy that people might favor you try to label it as “protectionism” to shut down discussion.

I am thinking about this because of the post, American Protectionism Is A Myth, by Leo Gerard and Scott Paul. They wrote about the “shrill warnings against protectionist measures have been issued by editorial pages and foreign officials.”

But what is this “protectionism?” They write,

“This is the untold story of protectionism: the barriers that other governments erect to block American goods and the mercantilist measures they utilize to gain market share in the U.S. These practices range from China's currency misalignment and massive industrial subsidies to non-tariff barriers in Korea and Japan. All these impediments have been well documented by U.S. trade officials, but the mere act of identifying these practices is now viewed as protectionism, even though taking action to eliminate them would expand world trade, reduce global imbalances and preserve the free market.”

Yes, just talking about what other countries are doing to protect and promote their own manufacturing can be labeled as being “protectionist.” This is because once these practices are pointed out the natural next thought is that America should be just as smart about encouraging our own domestic manufacturing.

The op-ed, Falling Behind On Green Tech, by John Doerr and Jeff Immelt in yesterday’s Washington Post, reflects this fear of being branded with the word “protectionism.” They write,

“. . . Do we want to win the race to lead the next great global industry, clean energy? That is the choice before us.

We are clearly not in the lead today. That position is held by China, which understands the importance of controlling its energy future. China's commitment to developing clean energy technologies and markets is breathtaking.

[. . .] How can we catch up? Not through protectionism or massive government intervention but through the power of good old home-grown innovation.”

This statement is an example of how people react to the fear of the negative associations that the manipulators have placed on the word “protectionism.” (They also show a bit of fear of being branded with the word “government.”) They try to escape from any such notion by using the “good” words, “home-grown innovation.” But of course you can’t have “home grown” without protecting your home, which involves government. And you aren’t going to have innovation without the protection and enabling that government brings through schools to educate the innovators and courts to protect their intellectual property. But never mind, that's another post.

So it is “protectionist” to say that other countries have smart planning policies that are increasing their wealth because it naturally makes people realize that we ought to do the same.

For example, if I tell you that China requires that 70% of the content of wind turbines used in China be manufactured in China, where does that take your thinking about our own country’s efforts to stimulate green manufacturing jobs? It is inevitable that your thinking turns to, “then why don’t we do that?” And there you inevitably are: protectionism.

Or if I tell you that GE won't buy wind turbines from American companies, even at the same prices, it is inevitable that your thinking turns to, “why don’t we do something about that?” And there you inevitably are: protectionism.

You see, being smart and supporting our own country’s manufacturing is labeled “protectionist,” which is bad. China is smart to do this but we are “protectionist” if we suggest we should, too.

It can even be called “protectionist” just to point out that a country’s wealth comes from making things. Because making things here inevitably brings the thinking back to having the government protect our jobs. If we say we should make things here we are undercutting the profits to be made by using exploited labor there.

“Trade” is another word that the manipulators have managed to take control of. “Free trade” is now hardwired as the ultimate good. :Free trade" is trade involving no interference from government. (“Government” is another word that has “bad” attachments.) So I guess “free trade” means no police protection from thieves at the ports, no courts to enforce the purchase agreements, no protection of the ships that carry the traded goods or rules for the sea lanes they follow, no roads for trucks to carry the goods from the ports… (I can’t figure this anti-government stuff out, really. But that’s another post.)

The reason I bring up if because misuse of the word “trade” is something I keep coming back to. When a company closes a factory here and opens it in a country where workers are exploited with low wages, or the environment is not protected, making the same thing, using the same machines, and the same raw materials, and selling it in the same stores, how is that “trade?” That isn’t trade, that is closing a factory here and moving it there so you can take advantage of exploited workers or dump toxins into the environment.

But by attaching the word “trade” to a scam like this, they get away with it, because “trade” is considered to be good. You can't be against "trade," so you can't be against using exploited workers to make the same stuff you were already making here. And you certainly can't call for protecting our jobs from being undercut by the use of workers who are exploited and have no recourse. That would be "protectionism." And that is bad.

The result of this obstruction-by-words is that debt increases as we make less with which to trade, our jobs are sent elsewhere, workers elsewhere are exploited, our government is weakened and we get poorer and poorer.

So as we try to work out new policies that will get our country past the current economic crisis and move toward a new economic paradigm where we all share the benefits of the country we have built, powerful words are in our way.

When we overcome the power of these words to brand us, and our fear of that, we can begin to be smart ourselves. When we cease being afraid of being branded as "protectionist" or "against trade" then we can be as smart as the countries with which we compete.