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"For the first time in more than two decades, trade
barriers are moving in the wrong direction. This isn't the
1930s ... but Pat Buchanan is one happy camper these
days."
So writes Steve Moore in a long and anguished column in
the
Washington Times titled, "A Comeback for Protectionism." A
free-trade purist at Cato Institute, Moore is right to be
alarmed.
Americans, souring on what global free trade has done to
them, are again turning to the philosophy that converted
America from 13 rural colonies into the mightiest
industrial power the world had ever seen - in a single
century.
The economic patriotism of Hamilton and all four of the
presidents on Mount Rushmore is getting a rehearing for
the
best of reasons. Free-trade globalism has failed America.
The numbers do not lie. After throwing open U.S. markets,
we are now running a $500-billion-a-year merchandise trade
deficit, largest in human history, equal to 5 percent of
our $10 trillion gross domestic product. And what has a
decade of these soaring trade deficits produced?
First, a farm crisis. American farmers are the most
efficient on earth, but they cannot produce food for less
than in foreign lands where the environmental rules are
lax, and the labor is plentiful and cheap.
While America still runs a modest surplus in farm goods,
it
has been shrinking under free trade. That $200 billion
farm
bill Moore bewails is simply a bailout of U.S. farmers
whom
free traders sacrificed on the altar of their Moloch, the
Global Economy.
Second, a crisis in manufacturing. U.S. companies have
been
closing factories, shedding workers and building plants in
Mexico and Asia. As goods produced by $2-an-hour foreign
labor poured into the United States, they have killed off
many remaining U.S. factories. America has been de-
industrializing as rapidly as the British, before German
submarines finally awakened the Brits to the truth that
free trade is not free.
Third, a growing U.S. dependency on foreign producers, not
only for oil but the necessities of our national life and
national security.
Fourth, these mammoth trade deficits have poured hundreds
of billions of dollars into overseas coffers, that
foreigners have used to buy up U.S. assets. According to
Bridgewater Associates, foreign-owned U.S. assets rose
from
33 percent of U.S. GDP in 1990 to 78 percent today.
Foreigners now own 22 percent of U.S. corporations, 24
percent of U.S. corporate bonds and 48 percent of our
liquid Treasury market.
But trade deficits of 5 percent of GDP cannot continue
indefinitely. Eventually, a currency begins to fall, as
has
been happening to the dollar, and the price of the foreign
goods on which America now depends rises. And as prices
rise, Americans buy less from abroad.
The problem? The world has become dependent on the
American
consumer. But, if Americans can no longer afford all those
foreign goods, and they begin buying less, these nations
will go into recession and be unable to service their
foreign debts.
In 1997-1998, the United States, with a bull market and a
roaring economy, bailed out the bankrupt regimes of Asia
and Latin America. By buying their exports, giving them
IMF
loans and running a huge trade deficit, we pulled them out
of the ditch and onto their feet.
But America's economy is no longer booming. With the
dollar
falling, we cannot afford to forever buy up foreign goods.
And with the U.S. budget now in deficit, the willingness
of
Americans to bail out foreign bankrupts is going to
disappear. We may just be headed for the terminal crisis
of
the Global Economy.
Yet, the president is now being bashed for the most
sensible decision he has taken to put America first: the
imposition of tariffs on foreign steel being dumped into
the United States, which had put 30 U.S. steel companies
in
bankruptcy.
"You will start a trade war!" they screamed.
What happened? The EU, its huge trade surplus with America
at risk in any trans-
Atlantic trade war, chickened out and backed down. The
president prevailed. The
EU will not impose retaliatory tariffs. Smart fellows.
As for the U.S. steel mills Bush sought to protect,
consider this item buried inside
the free-trade Wall Street Journal.
Under a headline, "Steelmakers Post Improved Results for
2nd Quarter," a reporter
writes: "Buoyed by import tariffs, the country's two
largest steelmakers reported
vastly improved second-quarter results, as mills operate
at
nearly full capacity and prices rise.
"The outlook for the rest of the year looks solid ..."
Well done, Mr. President.
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