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Free trade overlooks predatory policies

A few weeks ago, I was traveling through north Louisiana to a conference. As we neared Lake Providence, I couldn’t help but notice hundreds of parked rail cars.

Not long after that, I saw large numbers of shipping containers stacked in an open field in Memphis. (Memphis has an intermodal hub in which those containers can be moved from rail cars to trucks.)

This time last year, freight rates were through the stratosphere. Shipping containers were hard to come by. West Coast ports were so congested ships were having to wait weeks for their turn at the loading docks.

As long as the global economy was rocketing along on steroids, few in business gave much thought to exorbitant freight rates. Most business executives just wrote it off as the normal cost of doing business and passed the costs on to the consumer.

A handful of individuals questioned whether it was such a good idea to be spending so much money moving materials, such as cotton, from the West Coast to the Far East and back when we had a perfectly good textile industry in the United States.

The retail establishment – the Macy’s, the Dillards, the Wal-Marts, the Targets – turned a deaf ear. Their attitude, in general, seemed to be: Don’t bother us, we’re making money here.”

Now, no one is making money, and companies that were reporting high profits a year ago are reportedly on the edge of bankruptcy. And, while much of the blame can be laid at the feet of the housing and financial sectors, the current recession might not be as severe if this country hadn’t abandoned so much of its manufacturing.

I receive newsletters published by experts in world trade. Mostly they criticize anyone who dares to question whether free, unfettered and largely unregulated trade is such a good idea. One of their arguments: If everyone will just open their borders and allow trade to flow freely, we’ll soon work our way out of this global recession.

That’s what happened with the Multi-Fiber Arrangement that sprang from the General Agreement on Tariffs and Trade. Over 10 years, the United States phased out its import quotas and textile and apparel products, and the U.S. textile industry is now a shadow of its former self.

If the United States could count on others to develop industries where they have an economic advantage and not use predatory pricing that would be one thing. But, too often, countries such as China have poured billions of dollars into industries where they had no such advantage unless you count dollar-a-day labor.

The result has been Chinese companies pushing American and other companies out of markets where they had enjoyed comparative advantages for decades but could not compete with the Chinese government. As a result, U.S. companies have reduced employment by nearly 4 million jobs in the last year, including the 663,000 that were lost in March.

U.S. cotton farmers, meanwhile, have not been able to replace their domestic market with exports because the Chinese government subsidizes its cotton farmers to the equivalent of 80 cents per pound.

If free trade advocates want to advance their policies, they need to be pushing for governments to clamp down on predatory trading practices such as those that have led to hundreds of thousands of job losses here and elsewhere. Either that or we should all be learning to speak Chinese.


TAGS: Legislative
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