Years ago, when I was a reporter in San Diego, we had a contest: Who can bore readers with the fewest words in the lede (the winner, at three words: "Otay Water District," as in, "Otay Water District directors voted Tuesday to..." -- the reader would have moved on to the hockey scores after only three words).
Nowadays the winner is "world trade talks." A funny thing, that, considering how much globalization has revolutionized American lives, for good and ill, while most Americans haven't been paying attention. So prop open your eyeballs as I note that world trade talks collapsed yesterday.
I suspect something more fundamental changed. The failure of the Doha Round of talks may well mean the end of the trade paradigm that has prevailed since the end of World War II. This is the biggest news story that will get the least attention.
The shorthand for the Doha collapse is that China and India balked at further trade liberalization over U.S. demands that they open their agricultural markets. The U.S. and E.U. promised to cut some of their subsidies to agriculture if the developing world lowered its tariffs on the goods, and China lowered some of its industrial tariffs.
Doha marks the emergence of China, especially, along with India and Brazil as global trade powers. Trade agreements will no longer be driven by the United States or the European Union. But on a deeper level, all sides are starting to see that globalization is producing many losers, as well as winners, and national interests are no longer automatically guaranteed by what is suddenly the "old" paradigm of trade liberalization.
The historical irony is worth noting. The Republican Party was founded, and ruled nearly unchallenged for decades in the late 19th and early 20th centuries, on its support for "the tariff." This heavy duty was put in place to protect American manufacturing, and arguably played a decisive role in the nation's rise to industrial pre-eminence. This was Washington's tax stream, too. It was widely supported because Republicans argued that it protected rising wages and living standards for American workers (an argument still going on among historians). Even Grover Cleveland, the one Democrat to occupy the White House between 1861 and 1912, only dared tinker with "tariff reform." The policy produced losers, too, of course -- especially farmers who had to buy higher priced manufactured goods and had no similar policy support for their products.
Today's Republican Party is wholesale "free trade." A cynic might note that's because the party's masters are now transnational corporations and wealthy citizens of the world, as opposed to home-based Carnegies and Rockefellers of the Gilded Age. But American trade policy has a less jaded pedigree. The giants that crafted world institutions and American foreign policy after World War II and the Great Depression were convinced that protectionism had played a large role in both cataclysms. Their goal was simple: the gradual lowering of barriers worldwide, every nation playing by the same rules.
It hasn't exactly worked out that way. As markets have globalized, American manufacturing jobs have been decimated, moving to nations with lower wages and few, if any, environmental or worker protections. The "race to the bottom" is real, and it has moved into service jobs as well. In yet another historical irony, American farmers are the last heavily protected, heavily subsidized major U.S. industry. Meanwhile, everybody is not playing by the same rules. China still protects its industries, and manipulates its currency, in a way that would have made William McKinley envious.
Democrats and Republicans largely supported the post-war trade consensus, even to the Clinton administration's advocacy of the North American Free Trade Agreement and the momentous entry of China to the World Trade Organization. And so long as America was dominant, it was a hands-down winner. Even today, shoppers get low prices and lots of choices thanks to trade. Certain industries and transnational companies are winners. But a tipping point came when the losers were no longer just "lazy, overpaid union steelworkers" and the like.
The losers have risen exponentially in America in recent years, making NAFTA a dirty word in many states and blocking further trade legislation in Congress. Nations such as China and India need only look at Mexico to see what would happen if they opened their farm markets to competition from the U.S. The result would be widespread destabilization of farming regions, with millions left with nothing to do but migrate to cities (thus did NAFTA destroy Mexico's old farming system, sending the refugees north). Meanwhile, as America eliminated most of its trade "barriers," it became a debtor to the Red Chinese in a dangerous, ultimately unsustainable standoff. They need us to buy their cheap products; we have to borrow from them to do so.
It wasn't supposed to work this way. In the ideal of trade liberalization, China would be buying as much from us as we from China. It hasn't worked for a variety of reasons, including the power of transnational corporations and movable capital, China's size, and the wage differential. For average Americans, the profound undiscussed question is whether our living standards must invariably fall to somewhere meet the rising living standards of the developing world? (It hasn't helped that we have spent decades wounding our public schools and failing to invest in infrastructure, making ourselves less competitive; but, hey, you got your tax cut).
This is a very complex issue, and a pause is a good thing. I don't have all the answers, but I have moved from years spent as a "free trader" to a skeptic about how our trade agreements have actually been crafted and their consequences. There's a balance between "protectionism" and the trajectory of our trade policy since the 1990s. And lest you buy the line about the "liberal media," I have actually lost job possibilities because of my personal shift in opinion. The ruling elite wants the current paradigm of globalization to continue. For now, it's hit a very big wall.
Excellent post.
There are a variety of problems with globalization (including capital flows) that we understood only too late and too obscurely. Transnational corporations symbolize this problem with their allegiance not to any nation-state but to their own bottom lines. In America, the ideology is counterintuited by a dominant political mood that mixes xenophobia with Free Market pieties.
If the American individual is now a free agent in the world market, as this ideology insists, then there's not much preventing a long, long fall. After several generations of easy prosperity, the breadwinner jobs are vanishing. Alongside that is our expensive, auto-intensive infrastructure and social decay. It's not that every city looks like Phoenix with its huge underclass bivouacked in declining neighborhoods. But Phoenix is supposed to be a city of the future. In that case, the future really is grim.
China and India are rich in a way America no longer is. Their social capital guarantees compliant and adaptable workers who also manifest an enviable thirst for education and hard work. They graduate MILLIONS more engineers than we do. Society itself coheres instinctively by internalized rules and mores.
The left-right divide in America approaches bedlam because the blame game is the only language we know to explain our predicament. We came apart starting in the 60s because the so-called American Dream was always schizophrenic. Was it Mayberry or Las Vegas that beckoned? As much lip service as was paid to "real" America, most seemed eager to leave. We espoused small-town virtues as we decamped to places like Phoenix never to look back except politically. That Norman Rockwell print in the living room was bought at Wal-mart.
Free trade promised a new world (fulfilled) and new opportunities for Americans (not quite). But the larger problem for us is that we're not a homogeneous nation with an extant social matrix. Having giving up the old, we bitterly complain about the new. And the paradox is that not even this insight can help us.
Posted by: soleri | July 30, 2008 at 09:09 PM