Thursday, May 5, 2005

43. Free trade hurts everyone

William McKinley wrote, "Open competition between high-paid labor and poorly paid European labor will either drive out of existence American Industry or lower American wages." Of course, to account to the present century we must insert "third world country," where "European" once resided, however the impact of such insight is obviously clear. The source of such open competition is free-trade agreements, which have acted on American society to increase the wealth of shareholders at the expense of American jobs. Further to the impact on American society is the effect on the countries in which the cheap labor is extracted, human rights are trampled and environmental laws are rendered essentially nonexistent.

In my brief, MBA-inspired, Republican days, I thought differently about free trade, albeit my thinking was most inspired by the fact that I believed free trade acted to enhance the lives individuals in foreign countries rather than for the wealth of large corporations. Moreover, it is not that I did not buy into the fact that many MBAs inspired to be CEOs and that their primarily obligation was to the shareholder, rather that I did not immediately recognize the loss of American jobs, the impact on the environment and the state of the trade deficit.

Our local congressional representative, Sherrod Brown, has written a book regarding the misrepresentation of free trade along with the many concerns about the impact of free trade here and abroad. In the book, he details the abuses made on developing companies for corporate profits. In addition to the violations of worker rights as well as environmental and safety laws, he notes that low third workers cannot even afford to purchase the products they producing. Detailed in corporate abuse and passionate of workers' rights, Congressman Sherrod Brown's book, "Myths of Free Trade," in many ways, is to American free trade policy what Howard Zinn's book, "A People's History of the United States," is to American history.

Several examples in Brown's book illustrate his notions. In one example, Brown briefly chronicles the Levi Strauss Company, which from 1998 to 2003 closed every one of its American factories. Although Levi Strauss was one of the last holdouts, and did offer a decent severance package to its employees, it was forced to compete with other companies that were already making full use of inexpensive labor. As Brown notes, "In fact, the company make no jeans anywhere in the world; all of their production is subcontracted."

The wealth created by companies in foreign countries is shortsighted, and is not creating consumers, let alone a middle class- as proponents of free trade might argue. Brown notes in his book, "With only 4 percent of the population living in the United States, and another 10 percent living in Canada, Western Europe, Australia and Japan, who will purchase the goods made by the hundreds of millions men and women earning only a few dollars a day?" Furthermore he notes, "Nike paid more money in 1998 to Michael Jordan than it paid its entire 30,000 Vietnamese workforce of mostly young village girls. Who will buy the shoes? General Motors, Mexico's largest private employer, pays its employees forty dollars a week. Who will buy the cars?"

It is the use of cheap labor in developing countries that allows companies to excessively lobby its interests in Washington. It also allows companies to spend more money on high-price company spokespersons. Would the money not be better spent on American workers, or even to pay a fair wage to foreign workers? One might have believed that each Nike purchase was paying for Michael Jordon's endorsement, and that is true in some respect- but more significantly, it is what Nike is not paying in wage labor that allows it to market itself through high-priced spokespersons.

Globalization should be of competitive advantage, that is, of natural (geographical/climate) advantages, technical advantages or economies of scale. Competitive advantageous should not be created due to low wages or favorable environmental or safety laws. For example, if China enjoys natural advantages in terms of soil and climate in the growing of rice, then significant importations of rice are justified (and, perhaps, in turn used to purchase American products). If, however, the advantage were a workforce earning $4.00 a day, poor operational conditions and the non-existence of environmental standards, then I would favor tariffs to hold the country accountable and protect American industry-, which cannot possibly compete. Finally, the idea that American companies would send their employees, by the thousands, to the unemployment lines to outsource production, specifically to take advantage of low wages and lax environmental or safety laws is nothing less than deplorable.

Although a few courses and a couple of books in no way qualifies me as an authority on the complicated subject of free trade, I agree with Abraham Lincoln who wrote, "I don't know much about the tariff. But I know this much. When we buy manufactured goods abroad, we get the goods and the foreigner gets the money. When we buy the manufactured goods at home, we get both the goods and the money." In addition to, the jobs, I might add.

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