The Resurgent Protectionist Democrats

By December 23, 2006Trade

Much has been written these last few weeks about the struggle for the soul of the Democratic party over trade. Bill Clinton, his Administration and his allies in the Democratic Leadership Council (DLC) were unabashed free traders. But some new Dems in the ascendancy are more Dobbsian in their bent.

Two of them — protectionist Byron Dorgan (D-ND) and Sherrod Brown (incoming D-OH) have an op-ed in the WaPo today, blaming the world’s ills on trade, hammering away at the two basic commandments for the new Smoots and Hawleys, i.e., that trade agreements cause trade deficits and that companies are frantically relocating overseas to take advantage of low wages in a global “race to the bottom.” We are weary of repeating the facts — the facts — but repeat them we must:

  • Trade agreements don’t cause the trade deficit. Over 90% of the manufacturing trade deficit is with countries with which we have no trade agreement;
  • Trade agreements open markets to US manufacturers by lowering the barriers to entry of US-made goods;
  • Some 90% of what US manufacturers make overseas stays overseas. It doesn’t get shipped back to the US;
  • The biggest reason manufacturers locate a plant is to be near the customer. Developing areas of the world are booming for that reason — they are customers;
  • We don’t compete on the basis of wages in this country, never have. To put it differently, we’ve competed against low-wage countries forever and won, because we are the best, most competitive manufacturers in the world. That’s still true. If wages were the driver, as our trade expert Frank Vargo likes to say, Haiti would be an international economic powerhouse. Think about it.
  • In any event, the growing cadre of protectionist Dems — and some Republicans — is worrisome. We want more trade agreements because they open markets for our US manufacturers large and small, just do. These so-called “multinationals” are nothing but a mass of small companies in the supply chain, exporting their stuff all over the world.

    As the new Congress convenes, the fur will undoubtedly fly over trade. Let’s just hope that in the process, the facts do not fall victim to the debate.

    UPDATE (By Carter Wood, 12-24-06): North Dakota blogger Rob Port at Say Anything links to us and Greg Mankiw and offers his own thoughts on prairie protectionism in this post. See, not everyone in the Great Plains is opposed to trade.

    And best wishes on the upcoming wedding, Rob!

    UPDATE 2: And Don Boudreaux at Cafe Hayek has wise words about “utterly bizarre and cartoonish” arguments.

    Join the discussion One Comment

    • Dan says:

      I see out-sourcing directly where I work, as part of a high-tech industry, and particulary, a company hell-bent on trading higher cost engineers in USA to a much lower wage class of engineers overseas. You are extreme on the other side, i.e., anti-protection of the middle class. You fail to see something else. You need to read Russian history, primarily about the Bolshevik revolution. With that, I will repeat what I have already written in another blog: You open source and free trade advocates are just begging for a bloody revolution aren’t you? You may be one of the first in the gunsights. Imagine that, millions and millions of guns in the hands of the working class! You and the government better fear us.