Wednesday, January 28, 2009

Free Trade Isn't

Something I have believed for some time now, that U.S. businesses sending wages abroad should not have the privilege to sell to U.S. salaried consumers, is part of a post by WaPo's Harold Meyerson today. He has discovered that the businesses that have globalized their businesses are using those earnings to lobby against our own domestic industry.

It is not to the advantage of the American worker that his jobs are sent abroad, at any level. When the businesses that keep work, facilities, and tax payment here at home are lobbied against with the funds gained by off-shoring all that business product, they are more than ever disadvantaged. Call it Free Trade, but it's far from free when it comes to our own workers' profits.

Speaking yesterday at the Economic Policy Institute, a liberal think tank, Cassidy noted how the promises made when the Clinton administration was promoting China's accession to the WTO have been turned on their head. "Claims were made that U.S. exports of goods to China would increase substantially," he recalled, "creating jobs in the higher-paying export sector." Instead, American manufacturers shuttered factories here and opened them in China, while China's undervaluation of its currency guaranteed that U.S. products would not be sold there. Indeed, Cassidy added, U.S. exports to China "consist primarily of raw materials" -- hardly the product of superior U.S. technology and production.

What Cassidy offered yesterday was a more full-throated version of a critique that has begun, tentatively, to emerge from the Obama administration: that the U.S.-China economic relationship is flawed, in part, as Treasury Secretary Tim Geithner has said, because China manipulates its currency to make its exports cheaper and ours unsustainably pricey. That's a clear shift in policy, since currency manipulation, which generally has a far greater effect on the price of internationally traded goods than tariffs do, was a wrong that the Bush administration was loath to right. As Thea Lee, the AFL-CIO's chief international economist, has pointed out, the U.S. trade representative's office has for years routinely referred complaints about currency manipulation to the Treasury, which has referred them to the International Monetary Fund, which, according to a report in Monday's Financial Times, has not discussed China's currency policy since 2006.

Such a discussion would be of more than academic interest, since the economic relationship between the United States and China is the linchpin of the global economy -- that is, a central cause of the global economic crisis. China produces and we consume; China takes the proceeds from our consumption and lends it back to us, not so we can produce more -- American multinationals would prefer the Chinese do that -- but so we can take on more debt and continue to consume.
(snip)
Last week, the House Appropriations Committee voted almost unanimously to require the use of U.S.-made steel in the infrastructure projects included in the stimulus, unless the U.S. industry -- which is running at 43 percent of capacity -- was unable to supply it. You might think that American business, beyond the steel industry, would welcome such language, but, in fact, using Americans' tax dollars to stimulate American production looks like the last thing globalized American business wants. A letter opposing "Buy American" provisions in the stimulus has been signed by the U.S. Chamber of Commerce, the Business Roundtable and several other such groups.
(snip)
The only mystery here is why the Chamber and the Roundtable aren't compelled to register as foreign lobbyists. Of all the terms we could use to describe them, "American" certainly does not spring to mind.


The U.S. consumer is fast disappearing, and that is a large part of the economic crisis. Businesses have proliferated to offer their products to a level of salary that has been lowered and/or leveled off, to the detriment of absolutely every business.

The loss of jobs and job returns was for awhile disguised in those figures of 'increased productivity', showing more work for less pay. Not to anyone's surprise who isn't reality-challenged, the disappearing American consumer is resulting in disappearing profits, and disappearing businesses. Even the investor can't avoid any longer the results of throwing out American jobs and salaries. His stocks are disappearing, too, as support for businesses turns out to be not shares but the business itself.

Those rich and richer CEO's aren't self-sustaining. It should have been Economics 101. Instead, the fantasy of Consumer Confidence replaced solid dollars and sense. Buyers are working people earning living wages. Suck.On.That.

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A shoutout to the ACLU, today seeking memos from the former occupiers of the White House that gave them bases for encroaching on our freedoms and for torturing in violation of all laws. President Obama's removal of the restriction placed on public information for the past eight years enables us to start correcting the violations of our laws.

In another indication that the ACLU may get its way, the nominee to head the OLC, Dawn Johnsen , has previously indicated she thinks that such memos should generally be released.

Before her nomination, Johnsen wrote in an article for Slate, the Internet magazine , that the central question in the debate was whether OLC could issue "binding legal opinions that in essence tell the president and the executive branch that they need not comply with existing laws — and then not share those opinions and that legal reasoning with Congress or the American people? I would submit that clearly the answer to that question must be no."

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4 Comments:

Anonymous Anonymous said...

Dear Reader,
I recently wrote a scholarly article on this topic, which is to be published in March. The article approaches China’s policies from a different perspective - framing it around historic stigmatization of miserliness and usury. The article can be downloaded from here http://ssrn.com/abstract=1332842
Please contact me at the website with any comments or feedback.
Regards

9:26 AM  
Blogger tapsearcher said...

The Free Market has vanquished the Free Enterprise system. We tend to forget the small businesses that have gone out of business in recent years. In the computer field , I witnesses about a 1,000 small computer dealers and system houses go out of business in just a tri-state region.

Wage and salaried workers were not the only ones hit hard by Free Trade.

Free Trade is not trade as historically practiced and defined. Free Trade is primarily about moving production and factories from place to place for the sake of cheaper labor. Workers become the commodities being traded.
Free Trade also includes outsourcing and insourcing of workers. We know of what large system support company that uses green card workers from India. They work around the clock at one half the pay, American workers would get. Then they take the money back home with them with no value added to the economy where they made their living.
See http://www.bizarrepolitics.com/globalization-of-money-products and http://tapsearch.com/tapartnews and http://tapsearch.com/flatworld for insight into the global economic arena

12:39 PM  
Anonymous larry, dfh said...

As I've mentioned before, pollution is the main reason many of the industries re-locate to India/China. I have no doubt duPont would leave the U.S. completely if it could unload its incredibly polluted footprint.
In India, wages are on a par with the U.S., in some industries at least. But these companies pollute like crazy there. Despite what all the supposed business experts (bullshitters) claim, it's all about the waste. Labor is often contracted through middle-men, so the price paid for labor is greater than that claimed by the lou dobbs types. Additionally, concerning the pharmaceutical industry specifically, FDA-mandated inspections are harder to undertake in China, and probably in India as well.

5:35 PM  
Blogger Ruth said...

Labor as a commodity is something like what is happening in the contractor/temp labor field, where companies bid for contracts to, say, clean buildings or process food, and a low bid really means that hirees will be treated with minimal care, much of it will be illegal. So, in many fields we are outsourcing right here in the U.S., as well. As to pollution, again, we do a lot of that here, see the series on pollution in TX that I covered, and the amount of waste in our air and water that is overlooked because of outright bribery of the supervising authorities, like EPA in TX. Free Trade has led industries to assert their right to despoil in the name of business right here as well. I agree, it's an ethics issue as well as pure economics.

1:21 AM  

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