The First Shots of the Trade War
With the G-20 summit approaching, cheerful talk of “international cooperation” fills the White House press-room. These comments carry with them the implication that “free trade” is integral to “cooperation,” a fact made explicit in the last meeting of the G-20. There, in the name of “united action,” world leaders agreed not to install any new protectionist measures. Since then, protectionist measures have flourished. Instead of global cooperation we have its opposite: international tensions are on the rise as trade disputes sharpen.
For example, the Obama administration “slapped a 35 percent tariff on Chinese tires… and China responded this past weekend by threatening to retaliate against U.S. chickens and auto parts. That followed French President Nicolas Sarkozy’s demand on Thursday that Europe impose a carbon tariff on imports from countries that don’t follow its cap-and-trade diktats.” (Wall Street Journal, September 15, 2009).
The U.S.-China skirmish is especially explosive, since the relationship is central to the functioning of the global economy. China stood silent for years as the U.S. imposed tariffs on various Chinese products, a passiveness that lured Obama into his recent action. China’s quick response sent a strong signal: enough is enough.
China’s Commerce Secretary warned that the U.S. tariff "not only violates WTO rules, but also runs against U.S. pledges at the G-20 summits, constitutes an abuse of trade remedy measures, and sets an extremely bad precedent in the current backdrop of a world economy in crisis."
One aspect of this “bad precedent” is that the tariff could inspire other U.S. corporations to apply for China-specific protections, perhaps setting off an avalanche of tariffs that China will inevitably respond to. The Wall Street Journal confirms:
“Trade lawyers said the [U.S.] decision could invite a raft of similar petitions for temporary protection from Chinese imports. Such so-called safeguards.” (September 14, 2009).
If the China-U.S. relationship sours, much of the global economy may spoil with it.
Another recent trade spat flared up between U.S.-based Boeing and Europe-housed Airbus. Years ago the U.S. filed a grievance at the World Trade Organization (WTO) claiming that Airbus received unfair subsidies from European governments (Europe’s identical grievance against the U.S. is still pending). A preliminary decision finally announced that Europe is guilty of illegally subsidizing Airbus, with the full implications yet unknown.
An immediate outcome of the dispute is the demand from some U.S. congressmen that a multi-billion dollar U.S. military contract be awarded to Boeing instead of Airbus. Politicians are using the nationalistic “buy American” slogan to pressure the government to bless the mega-corporation Boeing with mountains of U.S. tax dollars instead of its European counterpart. If the U.S. government were to freeze Airbus out of the gargantuan U.S. military market, large-scale retaliatory measures would surely be expected. As it stands, the seeds for such a conflict are being planted. Business Week notes:
“On sheer politics, Boeing clearly has an edge over Airbus: The company has a big presence in such Democratic strongholds as Illinois, Connecticut, and the state of Washington and it can count on labor unions to work Congress on its behalf.” (September 16, 2009).
So not only does Boeing’s billions of dollars enable it to purchase politicians, which is out of the reach of Airbus, but misguided labor leaders are encouraging workers to fight alongside the corporate giant as it battles an international competitor. The same Boeing that threatened to leave the state of Washington for a union-free South has labor leaders singing its praises until the factory doors shut.
Workers should not lend their voices in defense of the corporate shareholders that squeeze profits from them; an independent position is needed — less they’re suckered into the corporate “partnerships” preached by CEO’s, politicians, and defunct labor leaders.
One way to gain a worker’s perspective on trade is to study history. A simple appraisal of the Great Depression proves an undeniable fact: protectionist measures taken by governments deepened the depression, led to a trade war, and helped fuel the national conflicts that ignited World War II.
With this conventional wisdom known by every world leader today, why are protectionist measures on the rise? Why does Obama speak against trade protectionism while at the same time imposing protectionist tariffs?
Although free trade is crucial to the functioning of a capitalist economy, the desire for short-term profits sometimes supersedes rational considerations, especially in a recession.
Large recessions create huge drops in corporate profit rates. To help maintain profits, corporations force politicians to use tariff walls to exclude foreign competitors. In an earlier article we wrote:
”In normal times, market warfare is kept at bay by such institutions as the World Trade Organization and more importantly the profit-induced cooperation of the rich countries. In times of deep recessions, however, these niceties fly out the windows. The banks and corporations that ultimately control politics in each country demand bailouts and other forms of protection from the cruelty of the once-friendly “free market.” (Will Obama Start the Next Trade War? February 5, 2009).
Some U.S. corporations may find that having a seller’s monopoly over the highly valued U.S. market — by imposing tariffs — is more profitable than cooperating with the Chinese. But these U.S. corporations aren’t mom and pop local producers, they’re world exporters. And while they’re making super-profits by blocking Chinese imports, these U.S. companies subsidize their exports abroad by the monopoly profits at home, which is considered “dumping,” causing further retaliatory measures from the Chinese and other countries suffering from the competition.
Not only does protectionism create global conflicts, but it also destroys the jobs that some claim it saves. When tariffs cut off imports to the U.S., consumers are forced to buy more expensive products, creating inflation that hurts the economy as a whole. More importantly, when U.S. corporations are shut off from foreign markets via retaliation, job slashing and wage cutting are the inevitable results.
It’s true that free trade is essentially an agreement between corporate-controlled governments to unleash raw, unbridled competition among the world’s corporations. Such a system deserves zero support since workers are constantly asked to make sacrifices so that the company they work for can survive. Protectionism, on the other hand, equals a breakdown of the global capitalist system, creating a vicious battle between corporations for access to the best markets, rarest raw materials and cheapest labor.
As long as the economy is controlled by the super wealthy and produces things only for their profit, neither free trade nor protectionism should be a concern for workers. We cannot afford to link our fate with that of “our” corporations, since the corporations are not ours to begin with. Their profits are raised at our expense by lowering wages, administering frequent layoffs, and reducing benefits.
Groveling to politicians to “protect” American corporations is a losing strategy for workers. Instead, workers must demand and fight for living wages and good benefits from their employers. If a company threatens to move to a place where labor is cheap, workers are not powerless. In Latin America workers have developed militant methods to keep jobs in their community: mass protests, strikes, and factory occupations are used interchangeably to assert control over their workplace. As long as workers see themselves in competition with workers in other countries, ALL workers will inevitably be caught up in a race to the bottom. Companies all over the world will tell their workforce that in order for the company to survive foreign competition, the workers will have to accept lower wages and reduced benefits. But if workers begin to forge alliances across borders, then we can all begin to demand that our wages and benefits rise collectively, and the corporations will have no place to go.