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The Many Faces of "Protectionism"

By Mark Weisbrot

This article was published in the following news outlets:

The Baltimore Sun - October 10, 1997
St. Louis Post-Dispatch - October 15, 1997
San Diego Union-Tribune - October 15, 1997

President Clinton's quest for "fast track" authority to negotiate new trade and investment agreements has been running into trouble in Congress. Although the House Ways and Means Committee approved the necessarylegislation by a vote of 24-14, only four out of sixteen Democrats on the panel voted for the bill. Since Republican support will not be enough to get the bill through the House, this means that the President is facing an uphill battle.

It's not surprising that this legislation, which would give the President the power to negotiate new international commercial agreements subject only to a yes-or-no vote by Congress, should face such a bumpy ride. About the only thing the President has going for him-- besides the big money on his side-- is that his opponents can be safely dismissed as "protectionists."

It's an interesting phenomenon, how this came to be such a dirty word. Surely it cannot be a result of our own economic history: the huge tariffs on British textiles were vital to this country's early industrialization. The continued protection of Northern manufacturing was a major cause of our Civil War, with the Southern slave owners unsuccessfully attempting to hoist the banner of free trade. And we kept that protection well into the twentieth century.

The experience of the rest of the world provides even scantier support for the notion that "protectionism" should be regarded as a vile epithet. The fastest growing economies this half-century has seen-- China, South Korea, and Japan-- have zealously protected their domestic markets. South Korea, which has come as close as almost any underdeveloped country in this century to approaching the income levels of the developed world, still imports less than one percent of its cars.

But memories are short and knowledge of economic history apparently scarce. All it takes is six years of cyclical upswing in the US, and the Japanese economy in a sling, to convince the opinion makers that a free trade free-for-all is as natural and inevitable as the seasons.

Those who would question the logic of a global race to the bottom are written off not only as "protectionists," but dinosaurs and demagogues crafting an appeal to the ignorant. The converse is also generally accepted: a belief in the virtues of free trade and globalization has become a badge of the educated elite, who fancy themselves as having learned something about "comparative advantage" in their Econ I course that the unwashed masses are just not intellectually capable of grasping.

How, then, to describe the absurdity that most Americans must suffer an absolute decline in their standard of living in order to "compete in the global economy?" Harvard economist Robert Lawrence has said that we cannot pay $10 an hour for "unskilled" labor in a global economy-- in fact, he says, no nation can. Is that so? How is it that we could afford such wages 15 or 20 years ago but not now?

Productivity has been growing every year. That means that we can produce more goods and services with the same amount of labor hours. Which means that we should all be able to buy more goods and services-- or more leisure-- each year. But we can't, or at least the majority of us can't. Median wages have actually declined over the past 24 years. That one statistic speaks volumes about the net benefits of globalization. The globalizers claim that cheaper imported goods will more than compensate for the disruption and downward pressure on wages caused by increasing international trade and investment. This trade includes, of course, what is produced overseas by our own multinational corporations like Nike, who pay $1.60 a day to their workers in Vietnam.

But it hasn't worked out that way. A declining real wage means exactly that: whatever benefit we have gotten from cheaper imported goods has been more than canceled out by other forces, including runaway factories and increased global competition.

Of course, the upper 5% of America has done quite well in the age of globalization, and this goes a long way to explaining how we have reached this sorry state of economic analysis. These are people who are mostly insulated from global competition, and "protectionism" for them is seen as quite benign. Take the recent decision of the federal government to pay the nation's medical schools some $400 million to train fewer doctors. It seems that doctors' salaries-- which average $170,000 and reach more than half a million dollars for some specialists-- have been threatened by an "oversupply" of physicians. So we have to pay the medical schools to reduce this supply, as we used to pay farmers not to grow corn. One would think that this would arouse the indignation of our brave champions of the free market. They should denounce this needless intervention, and point out the obvious benefit to consumers of letting market forces work their magic on the salaries of doctors. No such luck.

Such is the double standard that goes unnoticed in the debate over globalization. The rich will maintain their protection, and transnational corporations will actually increase theirs as new rights and privileges are carved out for them in international trade and investment agreements. The harsh, unsparing discipline of the free market will apply to everyone else, who must learn to sink or swim in the "new global economy."