Washington Moves Quickly, Learns Slowly on Trade
Knight-Ridder/Tribune Media Services, February 29, 2000
The next major battle over American foreign economic policy is heating up, and big business is hauling out the heavy artillery. This time the issue is trade with China. The Clinton administration and its corporate allies want Congress to grant permanent NTR (normal trade relations) status to China.
On the other side are unions, environmental organizations, and citizens' groups-- the same folks who helped paralyze the WTO in Seattle. Their claim is that expanding trade relations with China will lower wages and environmental standards, increase job loss here, and worsen the US trade deficit.
Currently, China's NTR status must be renewed each year. But last November, the Administration made a deal with China in for the country's entry into the WTO, in which the Administration promised to make these trade relations permanent.
In this deal, China made a number of concessions that could potentially bring tens of billions of dollars to US businesses. Although China could still join the WTO even if Congress rejects permanent NTR status, that deal would be on shakier ground. And the whole bargain could fall apart.
Increased friction over these issues could also hasten the demise of the WTO itself. The organization is only five years old and was dealt a severe blow when its millenium round negotiations collapsed under a cloud of tear gas and mutual recriminations among the representatives present in Seattle.
The Clinton administration and its allies have claimed that increased market access up the road will lower our trade deficit with China, and create jobs here. But all the evidence (including that from our own US International Trade Commission) indicates that this deficit will continue to grow. That's not surprising: although the Washington-Beijing deal has some tasty morsels for American insurance and financial firms, their profits on operations in China won't create any exports or jobs back home.
If this story sounds familiar, that's because it is. In 1993 the same people, including some prominent economists who should have known better, bragged that NAFTA would create some 200,000 new jobs in the United States. Conservative estimates today show a net loss of at least half a million jobs since NAFTA went into effect in 1994, as our trade deficit with Mexico has soared to a record $22.8 billion in 1999.
With China, we are also starting out in a much bigger hole: a $68.6 billion merchandise trade deficit, the largest with any country other than Japan ($73.9 billion). And our overall trade deficit (goods and services) is also at record levels ($271 billion for 1999). This pile-up of America's foreign debt, as we continue to run mounting trade deficits, is not sustainable.
The idea that opening up China's markets for grains like wheat or corn will help US farmers is also far-fetched. In order to accomplish this, the increase in Chinese imports would have to be large enough to raise the world price of these commodities-- a dubious proposition, to say the least.
NAFTA is perhaps the best analogy to understand our trade deals with China: although NAFTA was sold as a "free trade" agreement, its main purpose was to lock in certain rights and privileges for US corporations that wanted to produce in Mexico for export to US markets.
Their goals in China are similar, with wages as low as $1.00 per day. And like NAFTA, permanent NTR and WTO membership for China will solidify their position. Certain US firms (the insurance giant American International Group, Morgan Stanley Dean Witter) have the added possibility of breaking new ground in ownership and access to strategic sectors of China's economy, such as insurance, banking, and telecommunications.
On the other side, organized labor and human rights groups have argued that any trade deals with China should be conditioned on improving human rights in China. Although the media tends to view labor's demands as merely disguised protectionism, this is unfair. American unions, out of solidarity as well as self-interest, support the rights of workers everywhere to organize freely, and it is difficult to imagine putting an end to the global "race to the bottom" without these and other basic human rights.
For all their highly paid consultants and experts, our political leaders seem to be very slow learners. Ever since NAFTA brought America's foreign economic policy out from behind closed doors, they have been on a losing streak-- with almost every major international commercial initiative stopped dead in the water. Sooner or later they will get the message: trade deals that benefit the few at the expense of the many just aren't going to fly, when you can't keep them out of the news.