Issue Updates
Trade
George W. Bush announced in June that he would limit imports of steel—much to
the joy of steel companies and their employees who mostly live in the states
of Pennsylvania and West Virginia, to the dismay of market purists, and to the
collective yawn of everyone else who will actually pay for this. A New York
Times contributor, in particular, took Bush to task for this. Those who produce
goods more cheaply should be rewarded rather than have their goods rejected,
she said. Period. She then cited the theoretical principles that brought about
the Bush action. She traced these to the writings of the late political scientist,
Mancur Olson. Limiting imports was a very important issue for the Pennsylvania-West
Virginia groups. It involved their jobs and their businesses so they raised
money, worked, and lobbyed unceasingly for this. The rest of us will pay for
this in higher prices for everything we buy containing steel and might have
been expected to oppose the limitations with equal vigor. But, because none
of us individually has enough at stake to put time or money into the issue we
finally lose. (Of course, it also didn’t hurt that Pennsylvania and West Virginia
presently teeter between the Republican and Democrat columns.)
The theory makes sense to me. I’ve spent a lifetime watching small, but motivated,
groups carry the day. I think that’s what I, and many of you who read this,
do. What doesn’t make sense to me is the columnist’s slant that the motivation
has to be economic. This seems to be one of the most basic divisions in the
“culture war.” Pure market guys seem unable to imagine that environmentalists,
for example, are willing to give up some amount of economic benefit today to
preserve a livable planet for tomorrow. Or that human rights activists would
pay a few cents more for a tennis shoe to double someone’s salary on the other
side of the globe. And so on.
Bush’s action and the writer’s response also serve to remind us that this aspect
of the economy, like most everything else, runs along a spectrum. Perhaps at
one end are the absolute free traders. You produce it cheaper, you get the deal.
At the other end might be a command economy. We somehow collectively decide
what everyone wants and set about producing it. I doubt, however, that anyone
is an absolute free trader. Even the woman in the New York Times would say goods
that are stolen aren’t entitled to the deal. What about goods produced with
slave labor? No, probably can’t have that either. What about goods that are
produced by people who are paid far below a living wage but don’t have any other
options? Her article, of course, doesn’t get into all that but I suspect she
would approve. Goods produced on that basis run all through our economy.
In Mexico City you can buy a best-selling CD from an entrepreneur named Raul
for 40 pesos. These sell for 200 pesos elsewhere. “It’s a very simple operation,”
Raul recently told a reporter from the Mexico City News. “As soon as U2 or whoever
brings out an album, we grab one copy from Tower Records and start the duplication.”
You can find Raul in one of the tunnels leading to the Insurgentes metro station.
“Who can afford what the stores charge anyway?” he added. Industry sources told
the reporter that Raul and people like him account for 60% of Mexico’s CD sales.
Is this OK? Is it OK if I’m just dying to hear U2?
Remember Professor Bolin’s article in our last issue (see our Web site)? People
are literally dying for medicines in Africa and other places and entrepreneurs
are taking medicines others have developed and are selling them more cheaply.
Professor Bolin and a tidal wave of public opinion believe that, all things
considered, this is acceptable.
The point here, I think, is that there are various stances one might take along
this spectrum of possibilities related to trade and we’re on the verge of an
interesting national debate that will make our leaders decide where they stand.
Various so-called free trade agreements are in the works including one that
would cover nearly all of the Western Hemisphere. The corporate interests that
sponsor and promote these arrangements appear to have a very fundamentalist
view. Nothing that would interfere with trade in any way should be involved.
This, in large part, accounts for their insistence on trade promotion authority
(previously called fast track authority) for the President as a first step.
This means that the only role of Congress in free trade agreements is to vote
them up or down. By granting trade promotion authority, Congress gives up its
right to propose amendments—whether they’re in defense of labor, in defense
of the environment, or in defense of their big contributor’s factory. Legislation
granting such authority was introduced in the House in June by Rep. Crane (R,
Il).
The views of other interests run the gamut. Very few, but some, oppose all trade.
Many insist that labor, environmental, and other standards must be incorporated
to level the playing field. Opposition to the trade promotion authority does
seem to bind all of these people together, however, because they see taking
this out of the hands of Congress as eliminating their opportunity to influence
the result.
Before Bush’s recent trip to Europe a senior U.S. administration official said
that the common perception of him there was of a “shallow, arrogant, gun-loving,
abortion-hating, Christian fundamentalist Texan buffoon.” Well, not so fast
there. His action on steel, even if taken for the wrong reasons, may indicate
that he’s not a complete fundamentalist on trade. Watch what develops.
Energy and the Environment
In May the Bush administration announced its Energy Plan. It consists of drilling
early, everywhere, and often and rounds itself out by resurrecting long-discredited
resources like nuclear and coal. Its presentation was accompanied by gratuitous
sneers at anyone foolish enough to believe that conservation might have a role
to play. “Personal virtue,” this stuff—nothing more, said Vice President Cheney,
the recently retired oilman who chaired the task force that put the plan together.
If your only tool’s a hammer, every problem looks like a nail.
Shortly after the announcement, however, funny things started to happen and
it will be interesting to see how much of the plan will ever become incorporated
into policy. Perhaps the funniest took place later in the month when James Jeffords,
a hitherto relatively unknown senator from a small state, announced that he
had had enough of proposals just like this one and resigned from the Republican
party. His action threw control of the Senate to the opposition and cast doubts
on the future of much of the administration’s agenda. While membership in the
Senate remains the same, of course, the leadership of the committees that report
legislation out to that body have all changed. For example, the Energy and Natural
Resources Committee was chaired by Frank Murkowski of Alaska who was very keen
on opening the Arctic National Wildlife Refuge to drilling. His sudden successor
is Jeff Bingaman of New Mexico. Bingaman has a strong environmental record and
says he has no plans to forward any such legislation.
While the Jeffords news is Roman Numeral One in any discussion of where we’re
going in energy and the environment, there are other notable things taking place.
As we noted in our last issue, the administration has had problems getting out
of the gate on the issue of global warming. Secretaries O’Neill and Whitman
have announced that this is a problem and something ought to be done. The Vice
President has had to straighten them out on this. But, the evidence continues
to pile up. The first week in June the New York Times reported that “in a much
anticipated report from the National Academy of Sciences, 11 leading atmospheric
scientists, including previous skeptics about global warming, reaffirmed the
mainstream scientific view that the earth’s atmosphere was getting warmer and
that human activity was largely responsible.” This has finally gotten too big
for even Bush to reject and he now says that emissions generated by human activity
do affect the climate. He continues to argue strenuously, however, that the
Kyoto Protocol is not the solution. The Weekly Standard, a journal that is very
popular among conservatives in official Washington, may give us some insight
into the thinking here. In its July 4 issue it describes the Protocol as “a
huge transfer of resources from the United States to the Third World.”
As we write, the Energy Plan seems to be getting less and less respect. The
House Appropriations Committee recently approved raising fuel efficiency standards
for SUVs. And, General Motors has entered into partnerships with small companies
to work on hydrogen production, storage, and refueling.