Despite Fresh Rhetoric About Saving U.S. Manufacturing, Obama Is Quietly Pushing Failed Bush Trade Policies
With jobs at the forefront of every voter's mind, President Barack Obama and key members of his administration have been publicly promoting new trade policies to make sure that U.S. companies don't send manufacturing jobs overseas. It's a politically and economically sound strategy—but unfortunately, it's all talk. Behind the scenes, the administration is still pushing for the same failed Bush-era trade policies that sent millions of American jobs abroad and created global imbalances that helped fuel the financial crisis.
After witnessing the outrageous Congressional hurdles presented to Obama's efforts to pass a jobs bill, the administration is understandably looking for an inexpensive, politically popular way to create jobs in America. Encouraging companies to make more of their goods in the United States creates jobs directly and indirectly, since additional jobs associated with the services for manufactured goods become needed. The plan also eases international capital imbalances that funneled trillions of dollars into the Wall Street casinos, making the entire global economy less susceptible to financial shocks. It also happens to poll very well, something Obama adviser Rahm Emmanuel clearly understands.
"In coming weeks, the president will expand his push to create clean-energy jobs to include more traditional industries such as automobiles and railroads."Made in America" will become the "big theme," Rahm Emanuel said in an interview with the Wall Street Journal.
The numbers on American manufacturing are grim. In October 2009, more people were officially unemployed (15.7 million) than were working in U.S. manufacturing. That hasn't happened since the Great Depression. And much of the damage has been dealt in the past decade alone -- 5.5 million manufacturing jobs, nearly 32 percent of the U.S. total, have been lost in the United States since George W. Bush took office in 2000.
Rebuilding an economy based on manufacturing makes our society less susceptible to the risks created by Wall Street speculation, and spurs further economic activity outside of manufacturing itself. We can't have a stable economy without a sturdy manufacturing base-- without it, our prosperity is dictated by the whims of big financiers. By 2007, nearly 40 percent of U.S. corporate profits were coming from finance, leaving a feeble base to support workers when Wall Street crashed. Fortunately, for each dollar invested in manufacturing, another $1.43 of economic activity in industries linked to manufacturing is created—a multiplier effect that makes the sector an efficient way to create jobs.
There are few political slogans more popular on the left or the right than "Let's make things in America again!" House Democrats began to talk about rolling out a massive "Making it in America" strategy after getting briefed on a poll by the Melman Group and the Alliance for American Manufacturing. The poll revealed that 74 percent of self-described Tea Party supporters would support a "national manufacturing strategy to make sure that economic, tax, labor, and trade policies in this country work together to help support manufacturing in the United States." The top concerns of most Americans, including Tea Party supporters, is not the size of the federal budget deficit, but our relationship with China, which includes a massive trade imbalance that neither major political party is directly challenging.
After seeing this poll, Scott Paul, executive director of the Alliance for American Manufacturing, said Democrats in Congress were eager to help revive the American manufacturing base. Nancy Pelosi then pressed the White House to adopt a more formal strategy and was seen leaving the White House with a folder labeled "Making It in America."
So House Majority Whip Steny Hoyer consulted with the Obama team and announced a play to roll out 18-20 bills focused on promoting manufacturing in the United States. Roll Call labeled it a "Hail Mary" eager to show they can do something on jobs. It's political gold, since Republicans will have a hard time obstructing measures strongly supported by their own political base. And the plan is cheap—it doesn't impact the budget much, since most of the bills deal with simply re-routing government subsidies to companies that make products here, rather than paying them to companies that offshore jobs.
This program marks a complete about-face from the Obama administration's prior stance on trade. Lori Wallach, director of Public Citizen's Global Trade Watch said that seeing Rahm Emanuel pushing Buy America provisions put her in a state of shock. "The White House has systematically pushed back against the actual attempts by members of Congress to expand Buy America policy." Forces in the White House are working against attempts to include Buy America legislation in clean water legislation.
But the reality is that Rahm Emmanuel has only taken the polling on manufacturing to heart, not the actual trade policies. Despite efforts by House Democrats to revive manufacturing, the White House is actively pushing the exact opposite agenda with the South Korea Trade Agreement—a deal negotiated by the Bush administration that would offshore hundreds of thousands of jobs and widen the already yawning trade deficit with Korea.
"The Made in America frame works politically," says Wallach. "But to translate it into policy the administration needs to renegotiate the leftover Bush-era Free Trade Agreements with Korea, Panama and Colombia that the International Trade Coalition says would increase our global trade deficit and explicitly forbid Buy America preferences, not push them toward passage and stop pushing back against congressional efforts to expand Buy America government procurement rules in other areas."
One of the primary impacts of the deal will be on the automobile industry, a struggling U.S. industry that employs half a million people. Put simply, the South Korea FTA would deal it a devastating blow. At the end of 2008, the U.S. had a $13.4 billion trade deficit with Korea, $10.5 billion of which came from the auto sector. For every car the United States exports to Korea, we import over 1,000 into the United States.
Passing the South Korea treaty would only widen that gap, because Korean companies can abuse their labor without reprise, cutting costs for executives in the process. The nation currently refuses to comply with international labor rights stated under the ILO Declaration on Fundamental Principles and Rights at Work. Just as troubling, the proposed treaty also explicitly bans key Buy America provisions related to clean energy production—hampering American entrance into a critical new industry while boosting Korean manufacturers with some of the world's worst labor records.
This isn't the first time Democratic leaders have talked the talk on Making It in America while refusing to walk the walk. Bill Clinton famously campaigned against the North American Free Trade Agreement (NAFTA), then aligned himself with Republicans to push NAFTA through over the objections of House Democrats. Outright lies like these have created distrust of Democrats among manufacturing workers in the Midwest. Even though the manufacturing sector is more heavily unionized than other industries, President Obama's approval rating is 11 points lower among households were a family member is employed in manufacturing than a household where no one is employed in manufacturing.
Clinton's NAFTA reversal didn't just breed long-term distrust, it also had immediate political repercussions. The agreement passed in 1994, provoking a strong rebuke to Clinton from House Leaders, including then-Majority Leader Dick Gephardt. It weakened confidence in Democrats' governing abilities by creating needless divisions within the party. Just a few months after the deal was signed, Democrats were swept out of Congress.
Obama is already facing similar divisions today. In late July, 109 Democrats wrote to President Obama asking him for a meeting. The 109 congressmen put it quite bluntly in their letter to the president what they think the treaty will do: "Implementing this pact without major changes to the text will exacerbate the U.S. trade deficit; further erode the U.S. manufacturing base; jeopardize our efforts to guard against another global economic meltdown… Moreover it is simply out of touch with what the overwhelming majority of American people want."
There are other politically and economically sound strategies the Obama team could pursue. Instead of toeing the Bush line with South Korea, the administration could back a plan to overhaul the U.S. relationship with China—a major concern for voters of many ideological persuasions. A great entry point is Chinese currency manipulation. By tampering with the value of the yuan, China is able to effectively create huge, illegal tariffs which make Chinese goods 25-40 percent cheaper than American goods.
Democrats could divide the Republican base if they brought up a bill labeling China a currency manipulator. "Almost half the Republican caucus would vote for a bill like that," said Alliance for American Manufacturing director Paul, who knows a thing or two about counting votes on trade issues from his days as trade adviser to House Minority Whip David Bonior.
So Obama and Democratic leaders have plenty of politically options available if they want to pursue sound trade policies to strengthen the economy. So far, however, the administration is simply performing a public head-fake, while continuing the Bush-era offshoring agenda.