By Daniel Gross
Sunday, December 3, 2006
Since the midterm elections, concerned internationalists have fretted that the incoming Democratic Congress will curtail the nation's free-trade policies. In Slate, Jacob Weisberg identified the new breed of protectionist Lou Dobbs Democrats. "So is America headed for a bout of protectionist class warfare?" worried the Economist. "With the Democrats having won a majority in Congress, and disquiet over globalization growing, a party faction that has been powerless -- the economic populists -- is emerging," Louis Uchitelle wrote in the New York Times. Washington Post columnist Sebastian Mallaby, reflecting the consensus, concluded that "the two parties have opposing attitudes on the subject of trade: Republicans see it as a source of growth, Democrats as a source of inequality."
However, these arguments misunderstand the new politics of trade. It's not a left-right split. Since 2000, Bush Republicans have done as much as Democrats, if not more, to erect trade barriers and tariffs. President Bush has talked a good game about free trade, and his administration has negotiated bilateral free trade agreements with Australia, Colombia, Morocco and several other countries. But just as free trade was a bipartisan project in the 1990s, this decade's anti-trade backlash has been bipartisan as well. Sens. Charles E. Schumer (D-N.Y.) and Lindsey O. Graham (R-S.C.) share little in common besides a desire to slap huge protective tariffs on Chinese goods. And all by themselves, Republicans have done great damage to the cause of free trade in the past several years.
In March 2002, for example, Bush proudly signed "temporary safeguards" that imposed tariffs of 8 percent to 30 percent on most steel imports for three years. This was a classic Karl Rove option play: Advance the Republican cause in formerly Democratic strongholds of Ohio, Pennsylvania and West Virginia at the expense of the companies and workers in industries nationwide that consume steel. When the World Trade Organization ruled the tariffs illegal, and retaliatory tariffs were set to be imposed on goods produced in Florida and other politically sensitive states, Bush ended the so-called safeguards in December 2003.
In May 2002, Bush signed the Farm Security and Rural Investment Act, which Republicans passed without much help from Democrats. Just six years after President Bill Clinton signed the 1996 Farm Bill, which slashed agricultural subsidies, Bush jacked up federal payments by as much as 80 percent for cash crops such as soybeans and corn and offered new subsidies for crops such as peanuts and lentils. He even revived the subsidies on honey, wool and mohair that Clinton had killed. Bush's signing of this bill led the Economist to brand him just about the worst thing the magazine can call anybody: an anti-globalizer.
The bill inspired threats of retaliation from aggrieved trading partners and contributed to a perception that Washington wasn't serious about making the tough decisions required to further free trade. In fact, some analysts have blamed the failure of the Doha Round of global trade talks this year on the U.S. refusal to alter its expensive anti-consumer, anti-free trade farm policy.
There's more. Earlier this year, Bush proposed dropping the absurd 54 cent-per-gallon tariff on imported ethanol, first enacted in 1980 (although he didn't recommend cutting the 51 cent-per gallon tax credit for domestic ethanol producers). The Republican Congress, filled with members from big corn-producing states, said no.
Even as lame ducks, Republicans in Congress haven't been unanimous voices for free trade. In mid-November, more than 60 Republicans voted against a proposed free-trade deal with Vietnam, supplying the margin of defeat and embarrassing the president on the eve of a state visit. The Wall Street Journal noted that a vote had been delayed in part because Graham and fellow GOP Sen. Elizabeth Dole (N.C.) had put the bill on hold, pending measures protecting U.S. textile companies.
With the GOP base now shrunk to the Old Confederacy (sugar, cotton, peanuts) and the Great Plains (corn, wheat, soy), look for more of the same protectionism. Senate Minority Whip-elect Trent Lott (Miss.) doesn't like free trade in agricultural products any more than he likes affirmative action.
There's one other critical Republican failure when it comes to free trade. Encouraging the spread of trade means more than receiving cheap goods from China. It's about creating the social and political conditions favorable to the continued expansion of trade. Free trade has exposed U.S. workers to global competition on an unprecedented scale. In recent years, wages have stagnated (despite massive increases in corporate profits and steady economic growth), jobs have become more insecure, and benefits such as pensions and health care are being wiped out. Is free trade the cause of all these woes? Not necessarily. Does free trade coincide with all these woes? Absolutely.
Rightly or wrongly, many Americans, even those who reap the gains of trade daily, identify free trade and globalization with their declining financial security. And the response of Bush and congressional Republicans has essentially been: tough. Companies facing ferocious overseas competition won't provide health care benefits anymore? Open a health savings account. Companies won't provide pensions? Privatize Social Security and cut benefits.
This you're-on-your-own attitude has ultimately been more damaging to the cause of free trade than anything the Democrats could do. Yet, in coming months, we're sure to hear a great deal of talk tarring Sen. Harry M. Reid (Nev.) and Rep. Nancy Pelosi (Calif.) as the present-day incarnations of Sen. Reed Smoot and Rep. Willis C. Hawley, the sponsors of the disastrous Smoot-Hawley Tariff Act of 1930. By slapping massive tariffs on a vast range of imported goods, Smoot-Hawley helped turn a recession into the Great Depression.
But Smoot and Hawley were Republicans. And so was President Herbert Hoover, who signed that disastrous legislation into law. Today, the protectionist gene may no longer be dominant among Republicans, but it's still an important part of the GOP's DNA.
Daniel Gross covers business and finance for Slate, the online magazine at www.slate.com.