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How to recapture the Republican advantage on trade

By Jesse Richman, Howard Richman, and Raymond Richman
web posted May 26, 2008

When a new issue emerges that is popular, sometimes one party captures the issue and wins elections thereby.  At other times no major party will adopt the issue and third parties emerge to champion it.  Finally, some issues are dealt with by both parties. 

The Democratic Party, but not the Republicans, began talking about trade in 2006 when Senator Chuck Schumer took leadership, both on the trade issue and in enlisting Democratic candidates who would make trade an issue. The result was that the Democrats recaptured the House and Senate in 2006. Trade has also been a major issue in each of the recent Democratic special election victories in formerly solid Republican districts.

Public opinion on trade has shifted decisively against current policies.  Americans are increasingly concerned that current trade policies are not serving the interests of the U.S. economy.  In an October 2007 Wall Street Journal/NBC News poll, 59 percent of Republicans agreed with the statement that

"Foreign trade has been bad for the U.S. economy, because imports from abroad have reduced demand for American-made goods, cost jobs here at home, and produced potentially unsafe products."

Enough of the 59 percent of Republicans who believe that foreign trade has been hurting the US economy are willing to vote on that basis that the party cannot afford to ignore them.  People used to say that a conservative is a liberal who has been mugged. Many Republican voters are free traders who think their country is being mugged.  

How has the mugging occurred? The Chinese government, the Japanese government, and others have been intentionally keeping trade unbalanced in order to steal our industries. They have been following the old mercantilist practice of selling to us without buying from us and have accumulated trillions of dollars as evidence of their manipulations.  U.S. government policies have abetted rather than obstructed such strategies.

The result has been the loss of one U.S. industry after another, the decline in U.S. median wages as manufacturing workers move to the service sector, and the current stagnation of the American economy. Our trade agreements have been designed to reduce tariffs, but have not stopped our loss of industries because they have failed to address other trade manipulations. 

In spite of the shift in public opinion, the Republican Party leadership has forged ahead as if public opinion had not changed one iota.  John McCain on the stump dismisses voters concerns about trade.  In January he told Republican primary voters in Michigan that their "jobs aren't coming back."  During an early April trip to Wisconsin, he paid little attention when Bucyrus CEO Tim Sullivan told him about the new 40% Chinese tariffs on his company's mining equipment exports.  In late April, McCain stood before a shuttered Youngstown Ohio factory and asked voters to reject the "siren song of protectionism."

The Wall Street Journal editorial staff has been encouraging Republican inaction. On May 6 they wrote an embarrassingly bad editorial, "Indiana to Beijing," which began by endorsing a deal that moved defense production to China and concluded by arguing that the United States faces a choice between exports and protectionism.  This is a false choice, and a Republican Party of reflexive ‘free trade' will continue to lose elections. 

There is a better approach, and the party that seizes it firmly will win on the trade issue.  The better approach is balanced trade, which would not only reduce American imports (like protectionism) but would also increase American exports (like free trade).

President Bush and Senator McCain should announce tomorrow that the mercantilist governments had better start reducing their trade surpluses with us on their own, or we will impose Import Certificates, an idea initially recommended by Warren Buffett and elaborated in our book Trading Away Our Future. If the mercantilist countries do not comply, Import Certificates, tied to exports, would gradually force trade into balance.

Faced with import certificates, China would remove its 30 percent tariff on Michigan auto parts, its 30 percent tariff on Harley Davidson motorcycles, and its 40 percent tariff on Bucyrus mining equipment. Our manufacturing companies would hire back laid-off workers and begin building new highly-efficient factories to meet growing world demand.

If the Republicans were to insist on balanced trade, then our mercantilist trading partners would have to import from us in order to continue to export to us.  The result would be a prosperous U.S. economy led by new highly-efficient U.S. factories, and the Republican Party would start winning elections again. ESR

The lead author, Jesse Richman (jrichman@odu.edu), is an assistant professor of political science at Old Dominion University. The three authors represent three generations from the same family and are co-authors of the 2008 book, Trading Away Our Future, published by Ideal Taxes Association.


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