- The Washington Times - Tuesday, December 7, 2010


International trade issues have the strangest effects on political and policy types. They have turned liberal Democratic devotees of big government at home into champions of government-free commerce abroad.

Just think of the Clinton Democrats — or the Carter Democrats. They have turned die-hard conservative opponents of Chinese communism into enablers of Chinese communist international economic policies. Just think of all the right-wing think tanks urging greater vigilance against Chinese expansionism while staunchly opposing serious responses to predatory Chinese trade practices like currency manipulation.

Now, trade issues have turned Republican political and intellectual leaders, fresh off administering him the mother of all midterm election shellackings, into breathless fans of Barack Obama, at least when it comes to the transformational coup he supposedly pulled off in reaching a new trade agreement with South Korea.

Not that prominent Republicans and conservatives are the only unusual President Obama cheerleaders these days. Many congressional Democrats and the United Auto Workers are shaking the pom-poms, too. But the GOP enthusiasts are certainly the strangest. For two years they’ve trashed Mr. Obama as a fanatic socialist at home, a patriotically challenged apologist-in-chief abroad, and an egomaniac in face-to-face meetings.

Now he’s the master wheeler-dealer who’s pried open a Korean market that’s been hermetically sealed for decades, as well as shielded domestic industries from South Korea’s shady export promotion schemes. Or does the GOP credit Mr. Obama’s soaring oratory or superior intellect with carrying the day?

Of course, this establishment Republican and conservative gushing stems largely from two factors: the controlling influence of both multinational corporations convinced that the South Korea deal’s passage will grease the skids for more offshoring-focused trade agreements, and an outmoded Cold War ideology viewing trade agreements as easy opportunities to cement geopolitical allies’ loyalties.

Yet the South Korea deal and its bipartisan popularity in Washington also reflect an equally bipartisan fantasy that’s transformational, much more fundamental, decades old and dangerously misleading. It’s the fantasy that skillfully enough drafted texts, sufficient street smarts and the inherent virtues of free markets will unfailingly create for American producers trade bonanzas in whatever country is targeted.

The trouble with this fantasy is its assumption that the main problems vexing American businesses and their employees abroad are discrete practices that can be readily identified and eliminated with the stroke of a pen.

The U.S. works this way when straying from free-trade ideals or implementing policy or regulatory decisions generally. But few of the U.S. trade competitors use this approach. Even in culturally and politically similar Europe, practices discriminating against the U.S. are often secretly formulated and implemented by bureaucrats only intermittently accountable even to their citizenry.

But these European problems pale compared with those presented by South Korea and other Asian countries. Their trade and broader economic strategies differ in important details. But Asian barriers to imports and subsidies for exports are so numerous, variegated and intertwined, and the lines between government and private sector so faint and blurry, that they mock the notion of discrete predatory practices.

Indeed, these economies are most accurately thought of as nationwide systems of protection or mercantilism. Their raison d’etre is supporting domestic economic actors and disadvantaging their foreign counterparts. When they do admit foreign goods and services and technology and capital, the goal is never establishing genuinely free domestic markets or liberalizing commerce globally, but accessing resources not yet available at home. Coupled with an active rejection of Anglo-American rule of law in favor of opaque, policy- and relationships-dominated governing systems that are literally millennia old, and the case for handling these issues with detailed, black-letter agreements containing long lists of permitted and prohibited behaviors collapses.

Republicans and conservatives should understand this especially well. Unsentimentally realistic when warning that Washington bureaucrats can never keep up with far cleverer and more agile private-sector actors on domestic regulatory fronts, they shouldn’t suppose that American officialdom becomes more effective overseas. Even clearer should be the reality that literally ancient ways of approaching crucial subjects like economics don’t change through government-to-government negotiations. Fundamental cultural and social change, which often proceeds glacially, is needed first.

Doubters need only peruse the recent U.S. trade policy record. Outsourcers’ carping notwithstanding, there’s been anything but a shortage of trade agreements signed by the U.S., including deals with global reach. The net result: Soaring trade deficits and national debt, and shrunken opportunities to grow by creating competitive goods and services, rather than real estate speculation and financial gimmickry.

Asia’s markets are anything but more open, either. After decades of negotiations, does anyone imagine it’s become materially easier for Americans to sell to the Japanese anything they don’t already make? And for the past year, American business interests operating in China have filled the media with complaints of Beijing’s growing protectionism — and re-establishment of control over major sectors of the economy — all in violation of explicit international commitments.

The lessons of recent trade experience, therefore, are crystal clear. Reducing American trade deficits is vital for boosting growth and hiring, especially with slack domestic consumer demand and business investment, and mounting pressures on public debts. But signing new trade deals, especially with arch-protectionist countries like South Korea, can’t achieve this goal. Instead, domestically produced goods must be substituted for imports in America’s own market. The result would be hundreds of billions of dollars worth of economic expansion without raising overall demand levels. Budgetary pressures would consequently ease. Perhaps most important, employment prospects would brighten not only for Main Street Americans, but for political incumbents as well.

Alan Tonelson is a research fellow at the U.S. Business and Industry Council, a national business organization whose nearly 2,000 members are mainly small- and medium-sized domestic manufacturers. Author of “The Race to the Bottom,” Mr. Tonelson also is a contributor to the council’s website www.AmericanEconomicAlert.org.

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