A Globalization Offensive

A Globalization Offensive

In 2007 Congress may get real on the fallacies and contradictions of global trade.


Thanks to the aggressive spirit of many newly elected Democrats, this Congress offers an encouraging opening for opponents of corporate-led globalization to go on offense. For decades, the critics of the global system have been pinned down by multinational business and finance and reduced to playing defense. Labor, environment and other reform advocates have mostly tried to block new trade agreements negotiated by Republican and Democratic Presidents. Their efforts usually have fallen short.

This year could be different. In both the House and Senate, the growing nucleus of legislators who are skeptical of or downright hostile to globalization is strong enough to force debates on some reform ideas. That doesn’t mean the reformers will necessarily prevail. But they can employ the kind of political jujitsu that gradually leverages change by forcing reluctant officials to cast roll-call votes they would rather avoid. Do incumbents in the middle stand with the public’s rising concerns or with the multinationals? The Republican right used this tactic brilliantly for many years as its way to take over the party from traditional conservatives. Progressive Democrats can do the same if they’re willing to put some of their fellow Democrats on the spot and discomfit party leaders who may want to avoid divisive controversies. Forcing a roll call and taking down names of those who vote wrong is useful, even if the issue is likely to lose. Voters are educated and mobilized. Bruised incumbents eventually change their views. Or voters change their representatives.

Here are a few global issues that ought to be addressed. They don’t deal with every disorder of globalization, but they might jump-start a debate Congress has long avoided.

Sweatshop imports. The principle at stake is whether Congress has the power to regulate any products imported from foreign factories. Global advocates assume not, but Congress has already embraced the opposite precedent.

A few years back, American consumers discovered to their horror that fur collars on made-in-China coats purchased in US stores were made from the fur of cats and dogs. The Humane Society of the United States conducted an eighteen-month undercover investigation and exposed the slaughter of more than 2 million domestic dogs and cats by garment makers in China and other Asian countries. Congress acted swiftly. It enacted the Dog and Cat Protection Act of 2000, banning all imported garments made with dog or cat fur. The bill included fines of up to $10,000 for each illegal item and barred repeat violators from importing or exporting any fur products.

Question: If Congress can protect the rights of dogs and cats in foreign trade, will it do the same for the young girls–some as young as 11–who work in sweatshops? They stitch garments for as little as 6 cents an hour and typically work twelve- to sixteen-hour days, sometimes longer and often in brutal conditions.

The vile human abuses lurking behind famous brand names have been repeatedly exposed by Charles Kernaghan of the National Labor Committee, which has been investigating factories in Central America, China, Bangladesh, Mexico and others. Wal-Mart is among the repeat offenders. Like other US retailers, it claims to be enforcing decent labor conditions. The investigators find otherwise. Kernaghan points out that the same companies have won enforceable rules in trade agreements to protect their trademarks, labels and copyrights, yet regard protections for workers as “an impediment to free trade.” “Under this distorted sense of values,” says Kernaghan, “the label is protected but not the human being, the worker who makes the product.”

Antisweatshop legislation–the first of its kind–is ready to go, in the form of a bill introduced last year by Senator Byron Dorgan and Representative (now Senator) Sherrod Brown. It bars imports produced under internationally defined “sweatshop” conditions and holds companies accountable for using forced labor or denying basic human rights to workers, including the right to organize. The sweatshop measure could be amended to include well-defined terms requiring safe workplace construction, thus outlawing the conditions that lead to the factory fires that have killed thousands of young workers making garments and toys in Asia.

Free riders. As American companies move more and more of their manufacturing offshore, many take on the status of “free riders.” They enjoy all the benefits of being “American”–government services and subsidies, the protection of the US military–while discarding reciprocal obligations to the country: jobs, economic investment and paying a fair share of the tax burden. The new Democratic majority proposes to repeal some of the tax incentives for moving jobs overseas, but that doesn’t begin to address the scope of the deteriorating loyalty.

Congress can create a reverse incentive–higher taxation–for firms that have already moved a substantial portion of their production offshore and intend to move more. These are not marginal offenders. Microsoft has offloaded most of its manufacturing. General Electric, General Motors, Boeing and other big names are pursuing similar strategies.

A “free rider” surcharge could be enacted on top of the corporate income tax, which would raise the tax liability for firms in proportion to how much their domestic production is declining because of offshoring. By itself, the special tax wouldn’t reverse the dynamics driving the process, but it would change the incentives. The measure would inform corporate executives that the “free ride” is over and that “global companies” will begin paying a rising price for abandoning loyalty to the US economy.

Cap trade deficits. Stop the hemorrhaging. “Our economy is engaged in a very dangerous game of chicken,” Senator Dorgan warned last summer when he and Senator Russ Feingold introduced the Balanced Trade Restoration Act. The US trade deficits–$800 billion a year and rising–are either setting up an epic financial crisis for the United States or a pit of deepening indebtedness that will produce falling living standards for most Americans. “I’m afraid that our mountain of trade debt could come crashing down on our heads and make the stock-market collapse seem like a blip on the radar,” Dorgan said.

Dorgan’s legislation is the economic equivalent of “going nuclear.” It would rattle the global system profoundly, because the United States has long been the willing “buyer of last resort” for world production. By issuing a limited supply of import certificates to trading companies, the government would unilaterally restrict the amount of goods brought into the country. Gradually over five years, it could correct its huge trade imbalance. This sounds “protectionist”–and forbidden by trade rules–but is actually consistent with Article 12 of the WTO charter, which authorizes nations facing a balance-of-payments crisis to invoke emergency tariffs to correct extreme problems. The use of import certificates (first proposed by investor Warren Buffett) has the same effect as tariffs but relies more on private market forces.

Other trading nations might threaten retaliation, but that’s not a game they can easily win since the US market remains the largest buyer for their goods. The United States would have to accept the necessary pain of reducing its vast capital borrowing from overseas–hundreds of billions every year from China and other major exporting nations–and start living within its means. The virtue of Dorgan’s measure is that it would confront the deterioration now rather than waiting for a grave crisis.

America’s problems are not the whole story. The trading system itself is deeply out of whack and unstable, in need of major structural reforms that can put the entire world on a more promising path. But Dorgan figures other nations will not accept the need for such moderating changes–new international financial rules, new protections for labor and environmental rights–until they see that the United States is prepared to act on its own. If Washington does act, US multinationals would be compelled to bring some production back home, the United States would resign as buyer of last resort and major exporting economies like China would have to stimulate their own domestic consumption. These are all healthy steps toward balance and equity.

The President, of course, won’t touch Dorgan’s idea (he won’t even mention the trade problem) and neither will most Democrats, at least at first. The political community is in the hand-wringing stage: unable to act and afraid to share the blunt truth of our condition with the public at large. The politicians need a painful jolt themselves. That is what makes Dorgan’s shock therapy potentially valuable. By pushing this measure forward and threatening to demand a roll-call vote, Dorgan and his allies could force their colleagues out of denial and into inquiry and debate. Senators in both parties would find it awkward to vote against a measure that puts limits on the burgeoning trade deficits, and the roll call would be brutally clarifying for voters. Dorgan is not particularly optimistic, but he would at least like to give ordinary Americans fair warning of the reckoning that is approaching. “At the moment, there’s a great yawn about all this,” he told me. “But one day when everything collapses, people will ask: Why didn’t we do anything about this?”

Democrats with the nerve have a chance to challenge the self-satisfied status quo and expose many of globalization’s fallacies and contradictions. They will no doubt be scolded as troublemakers in the here and now, but the country will honor their courage in the long run.

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