Second Thoughts on Trade
A few months ago, Robert Cassidy found himself pondering whether trade actually benefited the American economy. "I couldn't prove it," he says. "Did it benefit U.S. multinational corporations? Yes. But I cannot prove that it benefits the economy."
Such doubts would hardly be news if they came from an established critic of free trade. But Robert Cassidy was the chief U.S. negotiator on China's 1999 market access agreement with the United States -- the document that was the basis for Congress's extension of permanent normalized trade relations to China, which in turn enabled China to join the World Trade Organization. During the 1990s, Cassidy was the assistant U.S. trade representative for the Asia-Pacific region, and before that he worked in the Treasury Department's international affairs office.
Which is why his rejection of U.S. trade policy is worth more than passing notice. 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.
The next time we turn our attention to crafting a new linchpin for the global economy, Cassidy says, we need to do better. He contends that the new administration and Congress can invoke anti-dumping laws to mitigate the unfair competition that results from China's currency policy. More elementally, he argues, U.S. trade policy should be based on America's economic self-interest. It speaks volumes about the last couple of decades of U.S. trade policy that the man who negotiated many key points of that policy now thinks that they were calculated not to enhance our national interest but, rather, those of U.S. financial and corporate interests.
The debate about the stimulus package before Congress has helped expose the huge rift between our national interest and that of our globalized business sector. 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.
It was bad enough when our banks and corporations decided to take their funds out of American manufacturing to promote low-wage production in China. Now they want to direct the tax dollars behind the stimulus program to the same end.
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.