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Backsliding on trade liberalization isn't helping the U.S. out of its economic woes one bit.
China recently overtook Japan as the second largest national economy in the world. Thirty years ago, when China began liberalizing its economy under the leadership of Deng Xiaoping, it was one of the poorest nations in the world. China has come a long way since then. Millions of its citizens have been lifted out of poverty. Yet in the West, many advocates of protectionist trade policies see Chinese prosperity as a threat, rather than an opportunity.
The world has made tremendous economic progress in recent decades thanks to freer international trade. The movement of goods, services, capital, and people across borders has led to increasing prosperity. That is why American backsliding on trade liberalization since the beginning of the Great Recession is so worrying. Candidate Obama was muddy on his stance on trade during his campaign for the presidency. Today, his administration's approach to trade wavers between neglect and protectionism.
An estimated 8 million jobs have been lost in the United States since early 2008. For politicians seeking to place blame elsewhere, international trade -- and trade with China specifically -- make for a convenient punching bag. Preventing jobs from being "shipped overseas" -- as if jobs were fixed goods -- is a common talking point amongst politicians across the political spectrum. And organized labor's opposition to liberalized trade has helped make it untouchable by Democratic politicians, who rely on significant union support in their campaigns.
Negotiated trade agreements -- with Colombia, Panama, and South Korea -- all await Congressional approval. Aside from a potential resolution of the South Korean agreement, no progress is expected anytime soon. Predictably, special interests have found problems with each agreement, from environmental and labor concerns to accusations that foreign countries "unfairly" promote exports.
The economic stimulus bill included many "Buy American" provisions. These arcane rules prohibit construction projects funded by stimulus money from importing raw materials, even when they cost less than if acquired from domestic producers. (After Canada complained, the administration carved out an exception to this provision for Canadian companies in exchange for U.S. access to other Canadian markets.) And last September President Obama signed a bill increasing tariffs on tires imported from China, a move that was widely seen as a gift to Big Labor unions and was strongly denounced by our trading partners.
Now the protectionists are turning their attention to stringent enforcement provisions in existing trade agreements, hoping to use those as de fact trade barriers. Last week, the U.S. government filed a complaint under the Central American Free Trade Agreement with Guatemala over their failure to uphold labor laws written into the trade agreement. The alleged violations include the illegal firing of union workers and the failure to engage in collective bargaining. This was the first time a country has filed a formal labor complaint over a free trade agreement (possibly under union pressure). There is considerable danger in all this. Even small tariffs can lead to retaliation, resulting in protectionist wars.
Protectionist policies are gaining traction in labor markets, too. In the United States, many hurdles are being erected to obstruct their lawful movement. Earlier this year, the Department of Labor (DOL) raised the hourly minimum wage for foreign farm workers on H-2A visas to $12.24. Additionally, background checks are now mandatory for all immigrant farm workers, at the employer's expense, and all existing contracts must be redrafted according to these new rules. The total cost runs to thousands of dollars per employee.
For the H-1B visa, which covers highly skilled foreign workers in specialty occupations, the U.S. Customs and Immigration Service (USCIS) scheduled 25,000 surprise workplace inspections in 2010 -- a fivefold increase from the previous year. While such inspections aren't prima facie protectionist, they cause severe workplace disruptions that can often shut down operations for hours and sometimes more than a day.
At the beginning of the Great Depression President Herbert Hoover signed the Smoot-Hawley Tariff Act and an executive order choking off all legal immigration into the United States. International trade and the flow of people collapsed catastrophically, adding to the misery of the Depression. The Obama administration has not blundered in such spectacular fashion, but a thousand legislative and regulatory cuts could savage the economy if they continue unabated.
To revive economic growth and increase global prosperity, the United States and other governments need to recommit themselves to freeing up trade in goods and services, as well as the movement of people across borders.
Bill Hussein O'Stalin| 8.31.10 @ 6:53AM
The final sentence should have read, "as well as the LEGAL movement of people across borders."
Old Soldier| 8.31.10 @ 7:11AM
Has Obama ever read a history book?
Shamus| 8.31.10 @ 7:23AM
Obama says he wants more exports, but he doesn't.
The Columbia and Korea free trade agreements are being left to rot, even though they would be very beneficial to the US.
This president reminds me a lot of Richard Nixon.
RJ| 8.31.10 @ 8:08AM
The surprise workplace inspections by the U.S. Customs and Immigration Service - primarily being conducted at "H-1B dependent" companies with over 50% of their employees on H-1B visas - are about law enforcement and fraud prevention, not about protectionism. Would you prefer more H-1B temporary workers overstaying their visas, or more H-1B temporary workers like Faisal Shahzad - the failed Times Square bomber - or does checking the background and visa status of such people cause too many "workplace disruptions"?
P Revere| 8.31.10 @ 8:30AM
Yeah, NAFTA's been great for American jobs. How come China protects its own workers better than we do? Germany is thriving yet it is much more difficult for foreign indentured servants to work there. You are simply a cheap labor lapdog, Nowrasteh. No one is buying your propaganda with +10% unemployment.
Clinton nee Publius| 8.31.10 @ 9:07AM
Levying tariffs and providing subsidies for trade always hurts the home market first. In both cases, the outcome is always to introduce inefficiencies into the home market that artificially inflate prices and actually make the problem worse.
Political demagogues tried it with steel to appease the steelworkers unions and that ended the dominance of American steel manufacturers and the steelworkers unions. We have seen the same with all other sectors in manufacturing.
There is only one recipe for success: make capital financing more efficient, eliminate tariffs and subsidies and adopt taxation policies that allow products to be exported in the most competitive manner possible. You can't compete when you are carrying the banks and the government on your back and that is what this is really showing us.
BB| 8.31.10 @ 9:11AM
It is NOT protectionism for the H1B visa to be ruled unconstitutional, as this visa (and the L-1) gives employers the ability to immediately deport any H1B/L1 employee. This amount of power over employees represents a violation of the 13th Amendment to the U.S. Constitution (the amendment that freed the slaves):
“Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.
Section 2. Congress shall have power to enforce this article by appropriate legislation.”
Kerry| 8.31.10 @ 7:05PM
Where did you get your legal training? An alien can only be deported by an Immigration Judge or in the case of a criminal a federal judge. An employer can only report a firing and then they are never deported. How is it slavery when the visa holder is free to leave this country at anytime and the visa is only good 3 or 5 years anyways. Most employers file an I-140 to get them their green cards way before that. Get your facts straight.
Steve| 8.31.10 @ 11:32PM
It is slavery as i witnessed it. It is 21st century type of slavery though. It is not 19th century or earlier type of slavery, since that obviously no longer applies, but it is still slavery in a 21st century context and interpretation of what slavery is.
What do you call working 12 hour days and getting paid for only 8 hours (i.e. they can only report 8 hour days) , and maximum 40 hours per week while having to do weekend work most of the time. I witnessed that at least at one large fortune 100 American bank, where Indian contractors working for one of the large Indian labor importing companies had to do that week after week after week after week... ??
What do you call having the Indians warehoused several per bedroom , in reserved apartment complex next to the work site... ??
What do you call the Indians behaving in a typical slave / master relationship with respect to their american managers, and the american managers loving the fact that they are worshiped by their Indian subjects ?
...
It is definitely slavery, the 21st century version though
BB| 9.1.10 @ 9:44AM
An H1B employee is immediately "out of status" at the end of their last day of work at a job, and is required to leave the country. The employer is not, of course, directly ordering the deportation, they are merely making the employee subject to immediate deportation by the U.S. government.
In United States v. Kozminski, 487 U.S. 931 (1988), the Supreme Court of the United States ruled that the Thirteenth Amendment circumscribed involuntary servitude to be limited to those situations when the master subjects the servant to:
1. threatened or actual physical force,
2. threatened or actual state-imposed legal coercion or
3. fraud or deceit where the servant is a minor, an immigrant or mentally incompetent.
The federal anti-slavery statutes were updated in the Trafficking Victims Protection Act of 2000, P.L. 106-386, which expanded the federal statutes' coverage to cases in which victims are enslaved through psychological, as well as physical, coercion.
Being put "out of status", subject to immediate deportation, is a form of "threatened or actual state-imposed legal coercion".
Petronius| 8.31.10 @ 10:02AM
What these bottom feeders with their sandbox mentalities will never understand is that their goal of reversal of fortune cannot be accomplished by taxation, regulation, and, or social engineering. There is no way any government can facilitate the economic advancement of line employees and simultaneously prevent the employer from making a profit. France does this and look where it gets them. In Europe, commerce that isn't controlled is prohibited. But Luddism is it's own reward. Ask any union member how many bills he pays with emotional vindication. They'd rather be out of work so long as their betters are out of business.
Abbot| 8.31.10 @ 11:32AM
H-1Bs are a product of protectionism. There should be free immigration so we can concentrate our efforts on weeding out the few criminals in the system, not dissipate scarce resources making sure somebody dotted all their "i"'s on their immigration forms.
jgo| 8.31.10 @ 12:17PM
Let's see, India-based body shops with operations in the USA have fewer than 20% of their staffs US citizens (let alone the many other fraudulent aspects of the program which they accept as SOP). USCIS found some level of what even they with their ultra-low standards would call fraud associated with 20% of H-1B applications. A multitude of studies by researchers from Columbia U, Computing Research Association (CRA), Duke U, Georgetown U, Harvard U, National Research Council of the NAS, RAND Corporation, Rochester Institute of Technology, Rutgers U, Alfred P. Sloan Foundation, Stanford U, SUNY Buffalo, UC Davis, UPenn Wharton School, Urban Institute, and US Dept. of Education Office of Education Research & Improvement have reported that the USA has continually been producing more US citizen STEM (science, tech, engineering, math) workers than we've been employing in these fields. Yet you claim that we need even more cheap, pliant, young labor for STEM work, and are eager to lower the standards, rather than raise them to the "best and brightest" standard used (abused) in lobbying for creation of these visa programs. Of course, something more closely resembling actual market pricing of such visas, with the price including proper background investigations of applicants, would greatly cut the abuse of such visas by greatly reducing their numbers.
Kerry| 8.31.10 @ 7:08PM
There is also a loophole in the law so that someone filing for a substantial investor visa for a greed card can have 15-20 people all put in a small amount of money and they all get their cards! Then they file for their relatives because there are no other "qualified relatives". One business i.e. gas station = 20 green cards. We are so stupid!
jgo| 8.31.10 @ 12:19PM
Garrumph. Of course, that should have been " see, India-based body shops with operations in the USA have fewer than 20% of their staffs US citizens. USCIS found some level of what even they with their ultra-low standards would call fraud associated with 20% of H-1B applications (let alone the many other fraudulent aspects of the program which they accept as SOP)..." Editing via this tiny, 5-line text-box is error-prone.
Mark MacInnis| 8.31.10 @ 12:20PM
Sorry, but I am not buying the complete free trade argument, hook line and sinker, even though I am a fiscal conservative. First of all, the theories only work if trade is COMPLETELY free in all directions. If not, then the altruistic countries leading the free-trade discussion disproportionally bear the costs of free trade and do not share in the benefits. Secondly, it presumes a RATIONAL group of importers and retailers and an imformed consumer base....wise enough to discern value, educated enough about choices to make wise decisions about how to best invest their purchasing power.
My theory about why the stimulus was SO EXTROARDINARILY weak in its impact on the economy is the FACT that nearly NONE of the consumer goods we buy are made in America any longer. Time was, stimulus dollars hit the accounts of the infrastructure builders (roads and bridges, etc.), then they would buy cars and appliances, and since those were made here the employees and stockholders of the car companies and appliance companies would buy clothes and home furnishings, and so the textile workers in the Northeast, and the stockholders of their companies, would buy...well, you get the idea. Money would thus churn through the economy and repay the treasury through the tax process. No more, and I think this is the great UNDERREPORTED and MISUNDERSTOOD aspect of the lost manufacturing jobs from America. Now, the first tier of stimulus dollars goes to Walmart for TV's and microwaves, and thence to China....and....then....does what for our economy? We were sold a bill of goods by the pro-nafta business forces, that we could convert to a "service" economy...but the rub is that the services we were doing for each other are things we could just as easily, and more thriftily, do for ourselves...make coffee, cook lunch, cut our grass, maintain our homes.....so the American economy is "out of balance.' As a result, the stimulus impacts expected of the recent stim package, based on HISTORICAL models, was never going to happen, because PAST KEYNESIAN STIMULI happened in an economic environment (i.e., balanced economy between the production and manufacture of goods, with some service sector) which was conducive to receiving the stimulus and churning through AMERICA....I think the great flaw of American and world economic thought is the failure to recognize this new reality, and the over-reliance on old models in determining economic strategies to combat this new-world recession. Should have been obvious to any thinking person. I guess not.
So, let's shelve the pro-free-trade rhetoric and begin providing AMERICAN companies with incentives to on-shore jobs, and provide FOREIGN investors for reasons to on-shore capital....the only way we as a nation are going to revive our economy, build our way out of the fiscal mess we are in is AMERICAN growth....the rest of the world can go to hell in any one of the particular handbaskets they are free to choose...and please don't give me the tired saw that we will be destabilizing the rest of the world and making them resent us....they already hate us and the only way to protect our "interests" is by a strong military payed for by American taxes...not with borrowed Chinese bond money....
jgo| 9.1.10 @ 11:02AM
Except that Keynesian stimulus has never worked, and we've never seen anything resembling actual free trade.
The United States gov't needs to recommit to getting Red China, India, VietNam, Poland, France, Italy, Spain, etc., to open up trade to US-made goods and services, and not just to taking US-developed intellectual property (including "knowledge transfer", i.e. training their cheap labor) and capital goods. Something to end their rebates of VAT to their domestic manufacturers and such would be a positive step. Something to end US government tax incentives to send capital (financial and goods) over-seas would also be good. And, as I wrote, before, artificial gov't incentives for bodyshopping -- domestic and across borders -- should also be terminated.
Mark MacInnis| 8.31.10 @ 12:25PM
I forgot to add, that our government is compounding the injury by providing training and technology to third-world countries to make them more competitive, while driving OUR education system into the ground with PC, new-age garbage. Further eroding the US's ability to compete. So, let's keep giving away jobs, technology, capital, etc. etc. and expecting the American economy to fight back with two hands and a leg tied behind our back....kind of like "keep doing the same thing and expect a different result...." You know....Einstein's definition of insanity.
Derek Leaberry| 8.31.10 @ 1:18PM
Absolute free trade has led to deindustrialization, the rise of the therapeutic state, and soft jobs for soft, socially liberal people. It has been a dagger at the throats of the white, socially conservative working men. Inevitably, it has proved to be anti-conservative.
Wadhwa| 8.31.10 @ 2:16PM
The economy works best when specialization is adopted by different labor groups. Specialization is a form of the very well designed Indian Caste system. Americans need to stop this stupid protectionist behavior and allow the complete adoption of specialization in Information Technology and Engineering. Yes, the caste system works. It should be only Indians doing all engineering and IT jobs in the US. This would be best for the US economy and citizens. Indians work harder and have better mental abilities than americans. americans can do other service related jobs, their different casts are better suited for those other service jobs.
Bob| 8.31.10 @ 11:43PM
Well, I appreciate your honesty
H-1b is all about installng the Indian Caste system into American society.
When I was a kid, we were told to pray in gratitude that we didn't live like that
jgo| 9.1.10 @ 11:06AM
Specialization of skills has no resemblance to India's caste system. Specialization of skills is good. India's castes, suttee, thuggee, bribery, protectionism, and massive cheating in academia, gov't and business are bad.
Steve A| 8.31.10 @ 2:25PM
Rest easy gang. The huge bounce of manufacturing jobs is just around the corner. Solar panels, wind farms, high speed choo choo trains, Chevy Volts....Oh, that's right, nobody wants this inefficient crap. The bump in production will come in producing all of the new forms needed to navigate Obamacare.
Redstateboy| 8.31.10 @ 4:36PM
it's not a pretty thought but Unions are like locusts. They descend upon area of thriving Industry and after 25-50 Years - they depart and leave behind devestation. Look at Detriot, Buffalo, Pittsburgh, Chicago, Cleveland. Unions gave the English language a new term: "Rust Belt"
PROUSA| 8.31.10 @ 6:10PM
It's just become obvious our trade and immigration policies have mostly been set up to benefit the wealthy at the expense of everyone else. It's been clearly shown the US can't compete with cheap overseas labor. We really need to confront China over their constant currency manipulation which makes their goods even cheaper than they otherwise would be.
We also need to reduce BOTH legal and illegal immigration. Immigration (H-1B, L1) etc comes overwhelmingly from the low wage countries (forget Japan or Western Europe) and it's just ridiculous to make US workers compete with the whole world in addition to their fellow citizens!
jj| 8.31.10 @ 6:25PM
The world may have made tremendous economic progress thanks to freer international trade but the US has declined because of it.
President Hoover did not sign the Smoot-Hawley Tariff Act at the beginning of the Great Depression. It was signed into law in June 1930 but did not become effective until June 1931. Most people date the beginning of the depression at October 29, 1929. Some even earlier. Before Smoot-Hawley US tariffs were already high. In fact, before Smoot-Hawley the US was already the world’s most trade protected nation and had been for more than a hundred years. From 1869 to 1900 tariffs averaged between 40 and 50 percent. Real wages jumped 50 percent and retail prices declined 37 percent. Contrast that with real wage declines in the free trade period from 1969 to 2000.
Despite pending trade agreements that have not been passed the US entered this economic reversal with more free trade than we have ever had. Those free trade deals did not lead to a good economy. Free trade theory and wishful thinking to the contrary, no country, not China, not Great Britain, and certainly not the US, ever got rich with free trade. Countries get rich with trade protection. The most recent examples are South Korea and China. China only pretends to be open to free trade.
Free trade is the problem not the solution.
Kerry| 8.31.10 @ 7:11PM
Free trade is one way. We have Mexicans getting TN visas as management analysts and sci techs at Pizza huts and Canadians getting visas as Sci Techs building doors, and guess who is defending them, our Congressmen. Rick Larson is known as the Canadians Congressman, because he takes up their cause more than any American.
weaver| 8.31.10 @ 8:19PM
@JJ
Good fact reporting, the fact is that the 50 year reduction in immigration resulted in the most prolific advancemes any economy has experienced in history.
We have now attained the identical 15% foreign born in the labor force rates that are identical to depression era rates.
The immigration related downward pressure on wages coupled with the upward pressure on housing is the true reason for the great recession.
jgo| 9.1.10 @ 11:21AM
I vaguely recall the Shrub saying that US import tariffs averaged about 3%, while our "trading partners'" tariffs for sending US goods there were averaging over 24% with some more than twice that. His offer was for every country to drop its tariffs to zero. But they had the gall to claim that was less of a concession for the USA than it would be for them and refused.
At the same time, he ignored things like the VAT refunds that were effectively additional tariffs which favored other countries over the USA, just as intellectual property transfer from the USA favors other countries. I include in IP transfer the former US employees being dumped being required to train their less capable foreign replacements, US tax-victim subsidies of foreign students, the several instances of Red Chines espionage facilited by our essentially open border policies, the transfer of nuclear energy tech to India and training their people to operate it, the notorious IP piracy (which has gotten worse in the USA partially as a result of exposure to foreign cultures where IP theft is accepted/tolerated, even encouraged), etc.
AMENBRO| 8.31.10 @ 9:57PM
Somebody's got to sound off like they got a pair here.. Every single one of them is a FORKING IDIOT that couldn't trade GD bubble gum Baseball Cards.
publius| 9.3.10 @ 1:05AM
Alex Nowrasteh & Brian McGraw represent an economic 5th column to American citizens. The trade and immigration policies they advocate have and will hurt American citizens who have to get up every day to earn a paycheck, which is practically ALL of us. FACT: 280,000,000 people in the US were born in the U.S. 65-70% of the population is white, European heritage, 40% of whom have German ancestry. American citizens will eventually look at our history, our organic, internal progress of American civilization, and decide it is not in our best interests to allow the flood of immigrants from non-white, non-Christian, third-world countries. Those are facts, Alex. Deal with it! Or go back to Persia, your ancestral land, and perhaps you can bring democracy and religious freedom to that part of the world.