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Current Trade Deficit:    
Trade and the White House Race Part II: Does Obama Really Care?
Alan Tonelson
Tuesday, May 27, 2008
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Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
Maybe it’s the latest sign of the apocalypse or simply another indication of the continually jaw-dropping nature of the 2008 presidential race.  But the biggest reason to question Democratic frontrunner Barack Obama’s commitment to be a major change agent – as this campaign’s signature buzz-phrase would have it – for U.S. trade policy is his failure to pander wholeheartedly.

As I noted in my examination of Sen. Hillary Clinton’s trade policy record and prospects as a reformer (“Hillary the Trade Warrior?” May 2), before entering the Senate, neither she nor her Democratic rival had expressed many qualms about or even showed much interest in trade and manufacturing issues.  Neither treated these issues as priorities as members of “the world’s greatest deliberative body,” either, seemingly valuing them as little more than opportunities to take potshots at President Bush or please certain constituencies..

As Presidential candidates, Clinton and Obama have talked more about U.S. trade policy failures, and they began acting like veritable globalization mavens once the primary schedule took them to manufacturing-heavy, highly unionized states like Ohio, Pennsylvania, and Indiana.  

Their attacks on current and recent U.S. trade policies make broadly similar points – it’s sent too many good-paying jobs overseas, it’s especially bad for unions and the environment, and it’s run solely for the benefit of that powerful, greedy, and monolithic entity they call “business.”

At this admittedly late date, however, the similarities stop.  As noted, Clinton has staked out policy positions far more detailed than Obama’s.  At the very least, someone high up in her campaign has recognized as a big political opportunity the genuine betrayal felt by U.S. trade policy’s literally millions of individual and business victims, and urged her to bone up seriously on the subject.  More important, Clinton obviously agreed.

Further, Clinton has addressed the issue with unmistakable passion.  Whatever her real views, she sounds truly outraged by policy crimes and negligence that have decimated vital industries and entire communities.  She sounds truly fearful about the national security consequences of lost global industrial and technology leadership.  In short, despite dissembling about her support for past trade agreements that understandably nurtures suspicions of post-nomination backsliding or worse, Clinton at least sounds upset enough about trade policy’s costs to order a major shake-up – or values the issue highly enough to create that impression.

If fervor was the major distinction between Obama and Clinton trade policy, the explanation might plausibly be personality differences with no real policy implications.  But the generalities with which Obama has addressed trade policy until very recently – and which still characterize his website offerings – indicate that the gap is much wider.  At best, Obama’s cursory approach is not trade-specific and stems instead from a broader disinterest in governing’s gritty details.  At worse, it reflects either a genuine dismissiveness of the need to strengthen the economy’s productive base and healthy growth prospects, or an inability to conceal completely a fundamental agreement or at least high comfort level with how America’s place in the world economy has been changing.

Not that Obama’s campaign has been devoid of useful insights and genuinely informed observations about trade policy.  His repeated point that seminal trade policy mistakes like NAFTA and expanding China trade were made during the Clinton presidency is much more than a politically inspired poke at his nomination rival.  It represents an unprecedented acknowledgment by a nationally renowned Democratic figure that recent trade policies and their fallout represent thoroughly bipartisan policy failures – as well as a valuable reminder to the party that not all of today’s economic problems began on January 20, 2001.

Like Clinton, Obama has – at last, and only after heavy public pressure by the United Steelworkers’ union – endorsed the Stabenow-Bnnning-Bayh currency manipulation bill.  Along with its House counterpart, the Ryan-Hunter legislation, these measures are the only bills before Congress capable of helping hard-pressed domestic producers and their employees fight effectively against one of the most harmful forms of predation practices by America’s trade partners.  And although parroting Clinton’s view that “It’s hard to talk back to your banker” when addressing China’s trade cheating, he has displayed more understanding of the crucial leverage that America retains with Beijing.  “They have access to the biggest market in the world,” he told The Indianapolis Star before Indiana’s critical presidential primary.  “They are very dependent on the United States.”

But many more statements and positions underscore just how peripheral trade policy is to Obama’s thinking – and even to his international economic policy thinking.  Indeed, the main impression he leaves is that, whenever he gets the chance, he’d rather talk about anything but trade policy – even though throughout the policy agenda, trade policy failures underlie the problem, and trade policy change is essential to the solution.  In the process, Obama manages to mouth many of the most misleading myths about trade policy and globalization in general that have been spread by America’s outsourcing lobby.

For example, Obama is big on making sure “that every American has the skills needed to compete in the global economy” and find employment in “the jobs of the future.”  But here Obama repeats the same tragically (cynically?) mistaken views advanced by every analyst over the past twenty years who has blamed the woes of American workers and industries on lousy schooling and skills.  After all, the “jobs of the future” are scarcely less vulnerable to offshoring than the simplest labor-intensive positions imaginable.  Consequently, sterling education is no guarantee of economic security.  In fact, if this were not the case, and high-skill, knowledge-intensive U.S. jobs were safe and sound, why would the Obamas and others be worried about American competitiveness to begin with?  

More important, two decades of experience leave no doubt that the biggest vulnerabilities of American workers and industries have been created by U.S. trade policy.  Even most of America’s best jobs will keep flying overseas – or tumbling down the wage scale because offshoring threats are so credible – as long as NAFTA-style trade deals keep giving multinational companies the no-brainer option of supplying U.S. markets from extremely low cost but increasingly productive foreign export platorms.

Obama’s promises to revitalize current industries and seed new sectors through various domestic industrial policy initiatives also will fail unless current trade policies are completely transformed.  If trade policy-created offshoring options remain intact, all the funding on earth for his proposed Clean Technologies Deployment Venture Capital Fund and clean technology centers program and Advanced Manufacturing Fund and advanced vehicle technology initiative and new infrastructure fund will do painfully little for domestic manufacturing.

Obama believes that most of the jobs created by these programs will be “jobs that pay well and can’t be outsourced.” (Presumably, the same would go for the output they fostered.)  But why in the world not?  Are they supposed to fall into some fundamentally different category from the “jobs of the future” that Obama’s competitiveness worries suggest “can be outsourced” – and that are already relocating to China, India, and Mexico, etc.?

Surely, what this industrial policy smorgasbord makes clearest is Obama’s ignorance about the mutually reenforcing nature of America’s current trade strategies and the accelerating internationalization of advanced production and even innovation capabilities.  Not that he is alone.  Even most trade policy critics fail to appreciate fully, the most revolutionary change produced so far by the combination of (a) guaranteed foreign access to U.S. markets, (b) the opening of major third world economies to international investment, and (c) high-speed communications and transportation, is the transformation of productivity itself into what economists call a mobile factor of production – a source of competitive advantage as easily offshore-able as jobs or individual pieces or equipment of technologies.  

In other words, contrary to almost universally held assumptions, the innovation capability itself responsible for creating the world’s most advanced goods and services is no longer confined for any meaningful length of time to high-income countries, where they still overwhelmingly originate.  As soon as they are perfected, the entire system they represent can and will be transplanted abroad for mass cultivation at bargain basement cost levels.  

Yet because these costs are so low, the incomes generated by advanced production and innovation jobs in developing countries are very low as well – and most important, too low to create new markets big enough to absorb anything close to most of this new output.  As a result, this business model’s success still depends heavily on exporting the surplus to a U.S. market obligated by trade agreements to remain wide open regardless of changing circumstances.  

Ultimately, however, what may speak loudest about Obama’s real trade policy views is the stubbornly elitist tone that has marked the candidate and his campaign.  Take the (admittedly brief) schoolmaster-ish recitation of textbook-style open trade’s virtues and allegedly iron globalization-related economic realities that comes in virtually every major Obama statement on the subject.  

“Now if we’re honest with ourselves, we’ll acknowledge that we can’t stop globalization in its tracks....” “I believe in trade.  I think all countries can prosper.” “To win, we have to understand some hard realities.  Not every job that’s left is coming back, and if somebody tell you they are, they’re not telling you the truth.”

Obviously, Obama relishes the role of McCain-like straight shooter and apostle of a fundamentally New Politics, and uses it when discussing many issues.  And truth-telling is clearly something politics can usually use more of.  But this iteration is fatally flawed.  Not only does it fearlessly slay red herrings that are completely irrelevant to real-world globalization challenges, and that long ago went stale.  Not only are many of the unspoken assumptions at work here demonstrably false – e.g., that many jobs that have gone overseas won’t be coming back because they are low-skill jobs that by definition have no business coming back.  

But Obama’s chosen rhetorical posture is also completely oblivious to the pervasive blame-the-victim message determinedly sent through the mainstream media for decades by America’s power structure to middle and working class audiences.  Read any major national newspaper or business-oriented magazine, tune into the network news or to CNBC, and what else do you see and hear about other than the glorification of globalization’s winners (and the bigger, the more glorious) and bemused tut-tutting at the losers (especially if they are Americans) for their unforgivable failures to seize the splendid opportunities before them?  

Does Obama really believe that former steelworkers and machinists and computer programmers now toiling at dead-end, no-benefits jobs are so consumed with scapegoting and so dangerously combustible that their greatest need  is another serving of tough love from on-high (along with enough new welfare spending to keep public employees unions happy)?

Apparently yes, meaning that despite months of campaigning across the country, Obama has become so remote from Middle America that its melancholy, its ever-so-gradually falling expectations, and its somber acceptance of globalized capitalism’s Darwinian outcomes are genuinely unknown to him.  

More evidence for this dispiriting proposition comes from Obama’s now-infamous “bitter” remarks to a group of San Francisco Bay area funders.  Obama has denied accusing “small town” Americans of irrationally (though understandably) blaming “people who aren’t like them” or “immigrants” or “trade” for their “frustrations,” and tried to dismiss the ensuing controversy as classic, mindless “gotcha” journalism and mudslinging politics.  

But that’s exactly what he said, and the substance – which is utterly erroneous – deserves extensive debate.  Further, Obama’s argument was sure to be lapped up by his audience - entrpreneurial and economically conservative but socially liberal dot.comers surely grateful to hear that the outsourcing and open borders policies they have lobbied for so successfully and use so extensively have nothing to do with the distress they read about in Flyover America.  

Moreover, this brazen Obama pander to the Silicon Valley crowd’s fears about raging Middle American primitives not only expiated whatever nascent (justified) guilt they may have felt, but once again completely misjudged the mood of the country he seeks to lead.  That’s hardly a formula for a successful fall campaign – much less a successful presidency.

At some point, the failure to understand a big truth can legitimately be seen as an unwillingness to understand.  Thus Obama’s ostentatious truth-telling may signal a deep-seated apathy about Blue Collar America – except as a voting bloc – and by extension, Blue Collar America may not be the only, or the most important audience for these remarks.  Who might they be aimed at instead? This theory sounds all too plausible – the chattering classes, the largely Washington and New York and Cambridge, Mass.-based complex of party professionals, Wall St. and multinational campaign contributors, former officials, policy intellectuals, and editorial writers and other pundits that together define the respectable, internationalist and free-trading center of American politics and policy, and that together determine which office-seekers can claim its invaluable mantle.  

Those blessed by this establishment invariably are treated as solid, dependable, responsible, statesmanlike, even gifted.  Those who are not find themselves pigeonholed at dangerous nuts.  

Could Obama’s truth-telling on trade be an exercise in assuring this establishment that, despite his unconventional racial and ethnic background, on one of their top economic priority issues, he’s safely inside the mainstream consensus - that he’s one of them?  And does his success so far mean that his tactic has worked?  

Few questions surrounding the already historic 2008 campaign will have more important answers.

Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).