Jewish World Review August 23, 2004 / 26 Elul, 5764
Finding a balance in trade
Will President George W. Bush or Sen. John Kerry do anything to reverse our mounting trade deficit and the outsourcing of American jobs? Whatever American voters decide in November, it's critically important that their choice of president ends the madness that will lead to an economic and social crisis in this country.
The Commerce Department recently reported a disturbing 19 percent increase in the U.S. monthly trade deficit. With the nearly $56 billion gap in June, our trade deficit is now on pace to rise to almost $600 billion by the end of the year - more than 15 percent higher than last year's record half-trillion-dollar deficit.
I've always believed that there is nothing wrong with carrying a moderate amount of debt. But it's become all too clear that our shortsighted trade policies have created an unsustainable deficit that could ultimately spell fiscal disaster for the United States. A surging trade gap of this magnitude will only serve to limit our job creation, further our decline in global competitiveness and increase our borrowing from foreign countries.
I'm obviously not in favor of costly free-trade policies, but nor am I a "table-thumping protectionist," as I've been called. There has to be a middle ground between the two extremes, and as our deficit continues to reach unprecedented levels, now is the time to start real dialogue on the issue of fair, balanced trade before this potential crisis gets completely out of hand.
We're closer to that point than we think. Our current account deficit, the broadest measure of international trade, has risen to about 5 percent of our nation's gross domestic product. That figure has significant implications for any nation's fiscal health, even that of the world's largest economy. A 4-year-old Federal Reserve study concluded that industrialized nations are likely to suffer major fiscal crises when their account deficit rises to the threshold 5 percent of GDP. It's clear we're headed the way of crisis if we don't adjust our thinking, policies and practices.
First, we need to take a hard look at the role of the World Trade Organization in international trade. Of course we've seen a worsening trade deficit since the advent of the WTO. After all, we let the world's protectionist majority of nations write the rules of world trade and restrict U.S. interests. In doing so, U.S.-based multinational corporations have gained incredible power to ship jobs overseas and export foreign-made products and services into the U.S. market.
"The WTO is fatally flawed," says Robert E. Scott, director of international programs at the Economic Policy Institute. "It transfers power to a group of faceless bureaucrats and trade lawyers, many of whom represent the interests of multinational companies over the interests of countries who want to sustain good jobs."
It's also important to carefully evaluate our trading partners when engaging in any trade agreements and assess their economic and social impact. Instead of opening new markets to U.S. products and services, all we've accomplished in the last 10 years is a series of outsourcing agreements. And the Bush administration has been content to sign these agreements with countries that cannot possibly become significant importers of U.S. goods and services, such as Morocco, Singapore and Chile. Aside from agriculture, U.S. trade representatives have steered clear of negotiations with Western Europe and Japan, despite their obvious wealth and the size of their markets.
We should also put policies in place that emphasize the United States as a location for production. We've gone from a nation of producers to a gluttonous debtor nation, importing most of our factory-made items.
"The United States has a national interest in having production here, which is different from the interests of private businesses maximizing profits," Scott says. "We want to have policies that help build up domestic industries, with things like support for job creation, for research and development, for building up communities."
If our free-trade policies are truly beneficial for U.S. workers, shouldn't we have seen a significant increase in real wages over the past 30 years? Shouldn't working Americans participate in prosperity? So-called free trade has created the opposite of its intended effect: stagnant real wages and a declining standard of living.
There is a middle ground in between free trade and protectionism that assures rationality, mutuality and balance in international trade. I, for one, am going to vote for the candidate who most aggressively pursues balance and proportion in our trade policies.
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