Free Trade Doesn't Work

by Ian Fletcher

  So voters register their protests when given the chance, but otherwise remain stymied in their attempts to crystallize an opinion of what solution they want. A lot of voters, egged on by the rhetoric of certain well-intentioned politicians, favor solutions like “trade that is free and fair”—a bromide that neatly reconciles both sides of the debate, is completely contradictory, and impossible as policy.

  The most puzzling thing about recent public opinion polls is that while the economy consistently ranks high on voters’ priority lists, trade per se does not, suggesting that voters have yet to connect all the dots about why trade is the root cause of so many of America’s economic ills. But if trade is the cause, then presumably this will eventually tell upon public opinion and trade will move up voters’ priority lists.

  Let us now take a look at the last three election cycles for signs of how the above dynamics are slowly starting to play out in the voting booth. Because although the trade issue has yet to solidify enough to start proactively driving politics on its own, electoral evidence shows an issue bubbling right under the surface of American politics, waiting to explode.

  2004: BUSH VS. KERRY

  Offshoring first flared as a political controversy in 2004. The thing about it that differed from previous trade-induced job losses was, of course, that it threatened the white-collar middle class. But in the end, the controversy didn’t really go anywhere, in the sense of producing serious political realignments or policy changes. Offshoring was adjudged by the two parties to be a political flashpoint but fundamentally just another political issue, which changed nothing important and should be handled the way most political issues usually are: by jockeying for advantage within the established policy consensus.

  So politicians set out to win votes on the issue without taking the risks inherent in doing anything substantial. The Democrats, quintessentially Sen. John Kerry in his 2004 presidential campaign, sought to make the smallest policy proposals sufficient to position themselves as “the good guys” on the issue for voters who cared about it, while signaling to everyone else that they weren’t about to go too far. The Republicans, meanwhile, defended a status quo that they were no more or less responsible for than the Democrats using the same old (basically Ricardian) arguments that have always been used on free trade. Both responses were standard procedure for day-to-day Washington politics—which is precisely why they occurred.

  Kerry, handicapped by his vote for NAFTA in 1993, did tack left a bit in the 2004 primaries. Facing vocal NAFTA opponents in the sincere Rep. Dick Gephardt (D-MO) and the opportunistic Sen. John Edwards (D-NC), he began railing against what he called “Benedict Arnold” corporations which were moving jobs overseas. This rhetoric effectively blunted Edwards’ and Gephardt’s attacks on his NAFTA vote, enabling his wins in Ohio, Wisconsin, Michigan, and other industrial states especially hurt by free trade. Then, in May, with his nomination secure, Kerry tacked right again. In an interview with The Wall Street Journal, he claimed his Benedict Arnold reference had been misconstrued:

  ‘Benedict Arnold’ does not refer to somebody who in the normal course of business is going to go overseas and take jobs overseas. That happens. I support that. I understand that. I was referring to the people who take advantage of noneconomic transactions purely for tax purposes—sham transactions—and give up American citizenship.816

  Offshore tax domiciling is, of course, an entirely different issue than offshoring. Kerry had folded his cards.

  From that point on, the issue virtually disappeared from the campaign. Kerry’s refusal to engage George W. Bush on trade reached its nadir during the third presidential debate, when moderator Bob Schieffer of CBS asked Bush what he would say to “someone in this country who has lost his job to someone overseas who’s being paid a fraction of what that job paid here in the United States.”817 Bush offered the stock Republican responses: he talked about creating the new jobs of the 21st century, improving primary and secondary education, expanding Trade Adjustment Assistance, increasing Pell Grants to college students, and helping displaced workers attend community college. (We examined in Chapter Three why these solutions are insufficient.)

  Bush’s position gave Kerry a clear opportunity to define himself politically with his response at a critical juncture in the campaign. But instead of taking on Bush over trade, Kerry accepted Bush’s basic premise that free trade is best and that his proposed solutions could work, and attacked him for cutting job training funds, Pell Grants and Perkins loans.818 Bunt. Amazingly, Schieffer gave Kerry another chance to exploit the issue minutes later. Kerry squandered it again, with a self-consciously defeatist answer dressed up as political courage:

  Outsourcing is going to happen. I’ve acknowledged that in union halls across the country. I’ve had shop stewards stand up and say, ‘Will you promise me you’re going to stop all this outsourcing?’ And I’ve looked them in the eye and I’ve said, ‘No, I can’t do that.’819

  In other words, trade isn’t really a political issue at all, because there’s nothing politics can do about it. Not only is there no meaningful difference between Republicans and Democrats on the issue, there cannot be one. Kerry went on to talk about tangential issues—corporate tax loopholes, violations of international trade rules, subsidies by Airbus, Chinese currency manipulation, and fiscal discipline.820 Bush had won by forfeit.

  In retrospect, it is entirely plausible that Kerry’s decision to bunt on trade cost him Ohio and thus the entire 2004 election.821 This problem extended far beyond the narrow confines of trade as such. By refusing to separate himself from Bush on economics on the single best issue for doing so—where Bush was furthest away from the opinions of swing voters—Kerry allowed social issues summed up as God, guns and gays to determine the election for the lower-middle and working-class voters who were his natural constituency. This problem continues to fester: a 2008 study of the electorate in Ohio by the Center for Working-Class Studies at Youngstown State University suggests that thanks to Bill Clinton’s support for NAFTA in 1993, working-class voters “still do not trust Democrats and they haven’t come back to the Democrats.”822 As a result, these voters have tended to view Republicans and Democrats as equally unlikely to protect their economic interests and have therefore voted on noneconomic issues. (At the national level, this trend has been analyzed by Thomas Frank, who took Kansas as his case study in his book What’s The Matter With Kansas?)823

  2002-2006: FREE TRADE OPPONENTS START WINNING

  No Republican has ever won the presidency without carrying national bellwether Ohio. The trade issue’s ability to tip Congressional races was first noticed in a 2002 race for the 17th District (around Youngstown) of that state. In the Democratic primary, Tom Sawyer, an eight-term incumbent who had voted for NAFTA in 1993, faced Tim Ryan, a 28-year-old former high school quarterback and first-term state senator. Writing in The Nation, John Nichols described the dynamics of this race:

  Sawyer and his Democratic challengers agreed on most issues. But trade was the dividing line. And trade mattered—especially in Youngstown and other hard-hit steel-mill communities up and down the Mahoning Valley. Though Sawyer had voted with labor on some trade issues—including the December Fast Track test—he is known in Ohio as the Democrat who backed NAFTA, and for unemployed steelworkers and their families NAFTA invokes the bitterest of memories.824

  Sawyer lost by 13 points. In the wry post-mortem words of Howard Wolfson, executive director of the Democratic Congressional Campaign Committee (DCCC) in Washington, “[In] some districts in this country, a free trade position is not helpful.”825

  The 2006 midterm elections proved Wolfson prescient. In these contests, a number of Republicans were taught the same lesson Rep. Sawyer had learned: opposition to free trade could push challengers over the top in competitive races. According to a post-election analysis by the left-leaning Naderite group Global Trade Watch, no fewer than seven Senate and 30 House seats flipped from pro- to anti-free trade in this election.826 S
eventy-three percent of winning Democratic candidates emphasized trade as an issue in their campaigns, while 72 percent of losing Democratic candidates did not. 827 Not a single candidate of either party ran on free trade as a positive agenda, and not a single opponent of free trade was ousted by a free trader in either the House or the Senate.828

  Certain individual races epitomized the trade aspects of this election. In Pennsylvania’s 8th District, north of Philadelphia, Democrat Patrick Murphy challenged Republican incumbent (and CAFTA supporter) Mike Fitzpatrick. Because Murphy was not expected to win, he did not receive significant support from the DCCC and was therefore unaffected by its decision not to use free trade as an issue. Murphy attacked Fitzpatrick for “crippling” the local economy by supplying the deciding vote for CAFTA.829 This assault, plus a trade oriented get-out-the-vote program, enabled him to upset Fitzpatrick by 1,521 votes. In central Florida’s 16th district, Tim Mahoney also made CAFTA a centerpiece of his successful campaign to capture the seat vacated by scandal-disgraced Republican Mark Foley.830 And in southeast Iowa’s 2nd District, Democrat Dave Loebsack exploited trade themes to dislodge 30-year GOP incumbent—and staunch free trader—Jim Leach.831

  The trade wave crashed over the Senate as well in 2006. Six anti-free-trade Democrats—Sherrod Brown of Ohio, Claire McCaskill of Missouri, Jon Tester of Montana, Bob Casey of Pennsylvania, Sheldon Whitehouse of Rhode Island, and Jim Webb of Virginia, plus Independent Bernie Sanders of Vermont—captured seats formerly held by free traders.

  In addition to the above victories, it has been estimated that another 10 to 20 failed Democratic challengers could have won, had they attacked free trade.832 Unfortunately, the DCCC was headed by Rahm Emanuel, a former suburban Chicago congressman who is now President Obama’s chief of staff. Emanuel, who had played a leading role in securing Democratic votes to pass NAFTA while serving as a White House staffer under Bill Clinton in 1993, decided not to use the issue.833 But for this decision, Democrat Lois Murphy, for example, might have beaten Republican Jim Gerlach, rated by nonpartisan observers as one of the most vulnerable GOP incumbents in the nation, in Pennsylvania’s 6th district northwest of Philadelphia.834 Instead, Gerlach squeaked back in with 1.2 percent of the vote after the DCCC effectively vetoed a trade-oriented get-out-the-vote program.835

  2008: OBAMA, HILLARY AND MCCAIN

  Like John Kerry four years earlier, Barack Obama was a vocal critic of free trade during the Democratic primaries. In debates with Hillary Clinton and responses to questionnaires from groups like the Pennsylvania Fair Trade Coalition, he denounced Chinese currency manipulation, promised to take a tough stance against dumping, opposed extension of Fast Track negotiating authority, and criticized NAFTA.836 His denunciations of free trade sharpened as he approached the crucial March 4 Ohio primary. Trailing badly in the state after winning 11 primaries and caucuses in a row, he unleashed a direct mail piece which charged that “Hillary Clinton thought NAFTA was a ‘boon’ to the economy,” asserted that she “was not with Ohio when our jobs were on the line,” and claimed that “only Barack Obama consistently opposed NAFTA.”837 Clinton fired back with a mailer of her own documenting Obama’s own past support for free trade and had phone bank calls made in which she claimed Obama had distorted her record.838

  The rhetorical battle between the two candidates reached its climax in their debate at Cleveland State University on February 26, 2008. Responding to a question from moderator Tim Russert, both said they would pull out of NAFTA if Canada and Mexico refused to renegotiate:

  Clinton: I have said that I will renegotiate NAFTA, so obviously, you’d have to say to Canada and Mexico that that’s exactly what we’re going to do...Yes, I am serious...I will say we will opt out of NAFTA unless we renegotiate it, and we renegotiate on terms that are favorable to all of America.

  Obama: I will make sure that we renegotiate, in the same way that Senator Clinton talked about. And I actually think Senator Clinton’s answer on this one is right. I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced.839

  Broadly speaking, it was a draw between the two candidates on trade. Both were making loud gestures of opposition, though neither was especially convincing to anyone familiar with the candidates’ records.

  Voters’ suspicions were quickly confirmed. Four years earlier, Sen. Kerry had at least waited until securing his party’s nomination before backtracking on trade. Obama, on the other hand, began sending signals that his opposition to free trade was mere posturing even before he stopped bashing NAFTA on the campaign trail. He sent one of his top economic advisers, Prof. Austan Goolsbee of the University of Chicago, to meet with Canadian diplomats in Chicago on February 8, 2008 to allay that nation’s concerns about his stand on free trade. Joseph De Mora, a Canadian official, later summarized the meeting in an official memorandum that was leaked to the Associated Press:

  He was frank in saying that the primary campaign has been necessarily domestically focused, particularly in the Midwest, and that much of the rhetoric that may be perceived as protectionist is more reflective of political maneuvering than policy. He cautioned that this messaging should not be taken out of context and should be viewed as more about political positioning than a clear articulation of policy plans.840

  After some denials by the Obama camp, news of this meeting leaked on February 27, six days before the Ohio primary.841 This all but doomed Obama’s chances in that contest, which he lost 45 to 53 percent. He nevertheless won seven of the eight primaries over the next six weeks, his single and telling defeat occurring in Pennsylvania. This was a state that had lost 208,000 manufacturing jobs, and suffered a two percent decline in real median wages, between 2001 and 2007.842 Clinton scored a nine-point victory there, fueled in large part by white male blue-collar workers—whom she won by 30 points. 843

  After securing the nomination, Obama went into full retreat on trade. He retracted the pledge he had made in Cleveland to opt out of NAFTA unilaterally if Canada and Mexico refused to renegotiate and attributed his remarks to “overheated” campaign rhetoric, modestly explaining that, “Politicians are always guilty of that, and I don’t exempt myself.”844 His capitulation on free trade, combined with John McCain’s lifelong support for it, meant that the 2008 general election was the fourth consecutive presidential contest devoid of any real national debate on the issue, the last being Ross Perot’s third-party candidacy in 1992.

  John McCain, of course, took a classic triumphalist line on trade. Speaking to the National Association of Latino Appointed and Elected Officials on June 28, 2008, he said:

  The global economy is here to stay. We cannot build walls to foreign competition, and why should we want to? When have Americans ever been afraid of competition? America is the biggest exporter, importer, producer, saver, investor, manufacturer, and innovator in the world. Americans don’t run from the challenge of a global economy. We are the world’s leaders, and leaders don’t fear change, hide from challenges, pine for the past and dread the future. That’s why I reject the false virtues of economic isolationism. Any confident, competent government should embrace competition—it makes us stronger—not hide from our competitors and cheat our consumers and workers. We can compete and win, as we always have, or we can be left behind. Lowering barriers to trade creates more and better jobs, and higher wages.845

  For a glimpse of how old this rhetoric is (and what record of predicting economic success it has), take a look at the 1846 British speech in Chapter 6.

  Such thinking is, of course, no surprise from a Republican. But Barack Obama, who had more of a choice, took a very similar line in a speech to workers in brutally depressed Flint, Michigan, subject of Michael Moore’s withering 1989 comic documentary on deindustrialization, Roger and Me:

  There are some who believe that we must try to turn back the clock on this new world; that the only chance to maintain our living standards is to build a fo
rtress around America; to stop trading with other countries, shut down immigration, and rely on old industries. I disagree. Not only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off. Rather than fear the future, we must embrace it. I have no doubt that America can compete and succeed in the 21st century. And I know as well that more than anything else, success will depend not on our government, but on the dynamism, determination, and innovation of the American people.846

  We looked at why economic globalization is not an uncontrollable force in Chapter One.847 We looked at why dynamism, determination, and innovation won’t save America in Chapter Three.848

  THE 2008 CONGRESSIONAL ELECTIONS

  Despite the lack of motion on the trade front in the 2008 presidential race, progress continued in the House and Senate. After declining to run ads attacking free trade in 2006, the DCCC, startled by the issue’s potency in 2006 even when neglected, relented and aired spots on the topic in 2008. In the words of the nonpartisan Congress Daily, which detected this shift in strategy one week before the election:

  References to “job-killing trade deals,” outsourcing and anti-China sentiment abound, with more than 100 trade-related advertisements and counting…Aiding the effort are the Senate and House Democratic Campaign Committees, which have spent heavily on ads criticizing Republicans on trade.849