With the economic downturn killing jobs in the U.S. and around the world, politicians, pundits, and business leaders are loudly fretting that “protectionism is rearing its ugly head.” This concern for free trade is admirable, but coming from the same voices that have pushed the massive bailouts, record “stimulus” spending, and expansion corporate welfare over the past few months, it seems a bit like a brothel manager insisting on modest attire for his front-desk clerks.
If you dig a bit further into the legislative and lobbying priorities of those politicians and businesses now fighting off “protectionism,” you see that by “free trade” many powerful folks in Washington really mean whatever policies help well-connected multinational businesses.
Free trade, on an individual level, means I should be able to buy something from someone in France without governments getting in our way. Similarly, if I need something made, and someone in Taiwan is willing to make it, governments should not interfere.
But the leading official voices for free trade today are the same people who have authored and championed bailouts for our banks and manufacturers and frenetic spending to prop up our companies. Also, today’s free trade evangelists regularly trample on the notion of free trade by backing subsidies for manufacturers and exporters.
For instance, newly confirmed Commerce secretary Gary Locke, during his two terms as Washington State governor, was very close to Boeing and Microsoft. In 2003, he pushed through a $3.2 billion package of special tax breaks for Boeing. More to the point, he heads an agency that spends taxpayer dollars to support American companies. Nevertheless, Locke has long espoused “free trade.”
Exempting our largest exporter from tax laws that apply to other businesses is effectively an export subsidy. The Department of Commerce is, in essence, providing corporate welfare. But these government interventions don’t seem to bother today’s free-trade evangelists.
Last November, weeks after bailing out Wall Street and while pushing a $34 billion bailout for U.S. automakers, President George W. Bush, signed an agreement with other world leaders proclaiming, “we underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty.”
If governments can transfer trillions from their taxpayers to their biggest corporations, why is it beyond the pale to erect tariffs? Both are government interventions that distort markets, and transfer wealth from ordinary Americans to certain corporations. Can you really rail against “protectionism” while championing bailouts?
But this mindset—protectionism bad, corporate welfare good—is inconsistent only if you look at it from a principled mindset. If you look at it from a practical perspective—that government ought to help our biggest multinational corporations—it’s perfectly consistent.
Boeing and Caterpillar benefit from state and federal subsidies, including stimulus funds, but they also need open export markets and low-cost overseas labor making their parts. The pro-corporate welfare, anti-protectionism stance of Bush and Locke is consistently pro-Boeing and pro-Caterpillar.
While politicians’ religious preaching of free trade makes their pro-corporate welfare stance look hypocritical, the businesses benefiting from these policies are frank about the whole arrangement.
The Emergency Committee on American Trade (ECAT), for instance, is a decades-old D.C. lobbying group made up of top U.S. CEOs, including the chiefs of General Motors, Boeing, and Caterpillar. The group fiercely battles “trade barriers,” but it never pretends to be a laissez-faire organization.
While opposing the “buy American” provisions in the stimulus bill, ECAT (like the U.S. Chamber of Commerce) supported the overall bill. While opposing sugar subsidies—which take the form of import restrictions—ECAT lobbied to boost funding for the Export-Import Bank, which subsidizes Boeing, General Electric, Caterpillar, and other U.S. exporters with taxpayer-backed financing.
But ECAT president Cal Cohen says his member CEOs never claimed to be free-trade purists. He told me his thoughts on “free trade” this week in a telephone interview: “ ‘Free trade’ is a theoretical construct. What we’re talking about is practical business transactions.”
His website is equally blunt: “The members of ECAT are practical business people. They are not free trade theorists. They believe in and support measures designed to promote economic growth through the expansion of international trade and investment.”
This is the big business argument: Lowering trade barriers and subsidizing certain business activities are good for the economy. That’s a debatable stance, but at least it’s honest. The politicians, on the other hand, praise “free trade” as a matter of principle, while abandoning that principle at home.
Timothy P. Carney is The Washington Examiner’s Lobbying Editor. His K Street column appears on Wednesdays.
