Such is an implicit question asked in this candid essay constituting our visit to Beijing’s People’s Daily; the $12 trillion question is whether Americans are by and large concluding, given the rise of China and India and their ability to pick off some of our lower-skilled industrial jobs (and in the case of India, some white collar jobs too) that free trade is not nearly as good a thing for America as once thought.
Certainly, this is a question perennially asked by one of the Democratic Party’s leading (and declining) sub-constituencies, industrial trade unions. They insist that all free trade costs domestic jobs, and hence, sucks, and we should have rampant protectionism on anything and everything, the costs to the (vast-majority) non-unionized work force be damned. Democrats from Bill Clinton to John Kerry have, wisely, rejected this balderdash for the most part (though a persistent and malignant minority like the thankfully retired Dick Gephardt have not), and held fast to the correct view that free trade is to our benefit.
What’s interesting here is what I’d call “shades of the 1920’s.” Shortly after the stock market crash of 1929 (which was more of a prologue to the Great Depression, rather than “Act I”), Congress, in its infinite wisdom, brought on the Great Depression in spades by passing the most irresponsible trade legislation in this country’s history, the Smoot-Hawley tariffs, more or less designed to try to stimulate American economic activity by eliminating foreign trade. When other countries promptly retaliated, setting off an international cascade of protectionism, cutting off potentially growth generating trade at a time when economic activity was slowing down anyway… let’s just say, the Depression was on.
Conditions are very different now: for one thing, the Chinese, Japanese and others are very heavily invested here, and, frankly, are propping up our economy as it is by funding both our trade and federal budget deficits. For another, while there is some resentment over “outsourcing”, there is no general sentiment that free trade is bad (at least, yet). Still…
(BTW– note the perversely refreshing candor of the essay: openly admitting that China is a tightly authoritarian state. Anyway…) So: free trade good. Yes, it has a downside, but its upside is bigger. Now, if we could actually engage in free trade and stop artificially propping up our own oil industry (note that our defense budget is largely a subsidy to keep oil prices lower than otherwise, among numerous other distortions.) We’ll see if (as I expect) Chinese patience on this outlasts ours… I hope not, but you never know…
tdog
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