Mitt Romney’s economic plan has a section on trade. While Romney gets it exactly right about China and offers the right proposals, his current actions tell us he might just pull out the old Etch-a-Sketch if elected. His other proposals generally go in the same old big-corporation direction, accelerating the Walmart-izing (or Bain-izing) of our economy, draining money with trade deficits, while pushing down wages. This corporatized path works for a top few at the expense of the rest of us, our economy and our democracy. Big surprise.
Romney Gets It Right About China
The Romney campaign’s trade “issue” page, describes the problem with China, and gets it exactly right. This is no surprise, since polls show the public get’s it, too. A July poll by by the Mellman Group and North Star Opinion Research found that,
When it comes to trade with China, the poll found that voters emphatically support tough action on Beijing’s cheating on currency and other trade obligations.
Surrounded by a bunch of gratuitous Obama-bashing, the Romney campaign statement says,
…[China] has adopted a deliberate policy of building up its own economy by misappropriating western technology, blocking access to its market, and manipulating its currency.
The Chinese government facilitates this behavior by forcing American companies to share proprietary technology as a condition of their doing business in China.
Romney offers more in a long document, BELIEVE IN — AMERICA, Mitt Romney’s Plan for Jobs and Economic Growth,
…[China] routinely steals our designs, patents, brands, knowhow, and technology—collectively, our “intellectual property.” Entirely fake Apple Stores operate openly in Chinese cities. It is hard to be more brazen than that.
This is not all happenstance. Rather, it is the result of a deliberate policy by the Chinese government that seeks to build up its economy by piggybacking on Western technological success. On many occasions, Chinese companies have simply reverse-engineered American products, with no regard for the patents and other protections of intellectual property rights that are crucial to our own economic well-being. The Chinese government facilitates this behavior by forcing American companies to share proprietary technology as a condition of their doing business in China. A recent study by the U.S. Chamber of Commerce reports that international technology companies consider these practice to be “a blueprint for technology theft on a scale that the world has never seen before.”
China’s unfair trade practices extend to the country’s manipulation of its currency to reduce the price of its products relative to those of competing nations such as ours. While the extent and impact of the manipulation is widely debated, the practice provides an invisible subsidy to Chinese goods sold internationally and an invisible tariff on other nations attempting to sell in China. Despite making gestures to the contrary, China’s government often excludes foreign goods from consideration for its government purchases. And it uses a variety of unfair practices—for instance, inventing regulations and standards that only Chinese companies can meet, and artificially lowering costs for Chinese companies—to tilt the playing field in its favor
Again, however, the document gratuitously says much of this is President Obama’s fault, even though he has filed trade complaints (but not declared China a currency manipulator). It was under George W. Bush that there was no enforcement of trade rules, and we lost over 50,000 factories and millions of manufacturing jobs.
Romney’s Shifty Response On China
So he gets it right about China. What does he propose in response? The Romney campaign’s Trade policy page includes a Confronting China section. The campaign says,
Our first priority must be to put on the table all unilateral actions within our power to ensure that the Chinese adhere to existing agreements. Anyone with business experience knows that you can succeed in a negotiation only if you are willing to walk away. If we want the Chinese to play by the rules, we must be willing to say “no more” to a relationship that too often benefits them and harms us.
• Increase CBP resources to prevent the illegal entry of goods into our market
• Increase USTR resources to pursue and support litigation against unfair trade practices
• Use unilateral and multilateral punitive measures to deter unfair Chinese practices
• Designate China a currency manipulator and impose countervailing duties
• Discontinue U.S. government procurement from China until China commits to GPA
(Notes: CBP is US Customs and Border Protection, USTR is US Trade Representative, GPA is Government Procurement Agreement.)
In his longer Believe In America document, Romney calls for Reciprocal Government Procurement with China, again exactly right,
The Chinese government, by itself one of the world’s largest consumers, has failed to make good on its commitment to accede to the GPA, and continues to strongly favor domestic Chinese providers. There is no reason for the United States to tolerate this state of affairs. Until China joins and abides by the GPA, a Romney administration will respond in kind by ending U.S. government procurement of Chinese goods and services.
And, later, still right on,
The United States does not have to accept forever the practices that have led to a huge and seemingly perpetual trade deficit with China. We have opened our economy to China, and China must be persuaded to extend the same privilege to us. China’s export-driven economy desperately needs access to our markets and innovations, and we have the leverage to demand that it competes on fair terms in return and provides similar access to its market for U.S. exporters. …
The time has to come to lay out a series of steps that China must take to become a responsible member of the global economy. And the time has also come to lay out the consequences that would accompany its failure to make rapid progress toward that end.
Much of this is sound. It is what we should do. President Obama has been bringing more and more trade complaints against China, and Romney says he will do this even more. Good – if he means it.
The problem with Romney’s proposed solution is that he is being shifty. Romney says he wants to get tough on China and will take action on China’s currency manipulation, and will take action on the first day he is in office. But there is something he could do right now, and is not doing. The Senate has passed a bill to do exactly this, and it is being held up by the Republican leadership in the House, at the request of the Wall Street front-group Club for Growth. Even though more than 60 House Republicans co-sponsored this bill in the House, not one of them will sign a discharge petition to bring this bill to the floor where it will pass. Romney has not asked House Republicans to bring the bill up for a vote. This is shifty. This is “Etch-a-Sketch”ing on his position.
Also, Romney’s VP choice Paul Ryan was one of only a few Republicans to vote against penalizing China for its currency manipulation when the bill did come up for an earlier vote in 2010:
…it’s worth noting that Congressman Ryan’s home state of Wisconsin lost 56,938 jobs due to the U.S. trade deficit with China, or 2% of its total employment, between 2001-2010. Congressman Ryan’s district (Wisconsin’s 1st) lost just slightly fewer than 8,000 jobs to China. Despite these losses for his state, Ryan was among a small number of Republicans who voted against a bill to penalize China for its illegal currency manipulation.
If he means it, he should ask House Republicans to vote on the currency manipulation bill. But it appears that the policy statement may be just following polls, to get votes.
Trade Deals That Drain Our Economy, Force Wages Down
Moving on from China, the overall Trade section of Mitt Romney’s Plan For A Stronger Middle Class, “Trade that Works for America” proposes the following,
• Curtail the unfair trade practices of countries like China
• Open new markets for American goods and services
• Build stronger economic ties in Latin America
• Create a Reagan Economic Zone to strengthen free enterprise around the world
“Open new markets” means that many countries place tariffs and other restrictions on goods we make, so we have trouble selling into their markets. Trade deal are supposed to “open up” the markets in these countries so American companies can offer their products. The other side of these deals is that we open up our country to goods they make.
The problem with more NAFTA-style trade deals is that we are also opening up our markets to competition from very low-wage workers in countries where the people have little or no opportunity to take the steps that can lead to improving their circumstances. Instead of just bringing in things already made in these countries, what happens is American companies move production out of the US and to these low-wage countries, and then bring the same goods back here to sell in the same stores. This droves down wages here, while doing little for the workers there. The money the workers here made instead just goes into the pockets of a few already-wealthy executives in both countries.
Job fear: This is part of a plan for the further Bain/Walmart-ization of our economy, moving jobs out of the country and using the threat of moving jobs to create job fear. When you close factories and ship them out of the country people lose their jobs. And the rest of the people are afraid of losing their jobs, so they “keep their heads down.” Companies can make them accept lower wages. They work longer hours. They even stop taking vacations and sick days. They certainly don’t ask for raises or better working conditions. This terrible job fear everyone has helps a few at the top get even richer.
“Stronger ties with Latin America” means signing more NAFTA-like agreements – Colombia, Panama in particular.
The Reagan Economic Zone would be a zone of “free trade” (also known as union-free trade) and any “like-minded nations” that embrace “free enterprise and open markets” can sign on. Countries that don’t sign on would increasingly be excluded from the markets of Reagan Zone countries. The Romney plan claims this Reagan Zone can be used to bring countries together to fight mercantilist nations like China, but the record is one of using trade agreements to fight unions and drive down wages and benefits of working people.
Other Romney documents include a call for Trade Promotion Authority, meaning the President’s administration negotiates a deal and Congress has to have an “up or down” vote on the deal as negotiated.
Exports Good, But Not If Imports Remain Higher
The premise of trade deals is that increasing exports is good. Of course. Exports mean your businesses are humming, people are working, and money is coming in. The problem is that countries like China, Germany and others understand that keeping exports higher than imports is even more important. If you don’t, money drains out of your economy faster than it comes in. Here is a chart of our trade balance over the years:
This is the trap of our one-sided trade agreements: these “free-trade” agreements increase exports. The reason this is a trap and a problem is that they increase imports more. So, on the one hand the agreements create and enrich interest groups that push for continuation and expansion of the agreements, while on the other hand they increase trade deficits, which drain our economy.
SOME People Get Rich From It
Some people get rich when they close a factory, lay everyone off, and send the production out of the country. They pocket a percentage if what those people made. So they’re made rich, and are in a position to use that money they make to influence our politics, to open up for even more of that to happen. But laying people off and closing factories drains the communities, the tax base, and creates trade deficits that drain the entire economy. Meanwhile it enriches the countries on the other side of that transaction, and they are then able to do more to keep the game going.
This is part of the Walmart-ization of our economy. Or, in Roney’s case, the Bain-ization. Close the factory here, open it over there, pocket the savings and use the wealth to keep the game going. The long-term effect on your communities, your economy, and your country are not your problem — you’re getting rich and that puts you in a position to keep the game going until the party ends.
Example: We opened up trade with China. China lets their imports grow, so we have some appearance of increasing sales to China, but they keep barriers while manipulating currency and subsidizing their companies, and their exports to us grow faster than their imports from us, which increases the imbalance. China can steadily reduce their import barriers and let their currency rise slowly, giving the appearance of moving toward open trade and providing what appear to be incentives to keep the relationship going, but by also increasing their exports they continue to drain us.
So while Romney talks the talk on China, he is not walking the walk. And his corporatized proposals push the kind of trade agreements that are draining us dry.
Romney’s plan is great, great, great on China, but looks like it is only words, words, words. The rest of his trade pan is more of the same that got us into the mess we are in — everything shifted to the top few at the expense of the rest of us, our industries, our factories, our jobs, our country and our democracy.