The NYT joined the list of shrill proponents of the Bush-Clinton trade agenda with today's editorial. It starts by telling us that it would be a bad idea to raise the price of steel imported from China because that would make the planes produced by Boeing more expensive: "What would happen to Boeing if the steel used in its jets became more expensive? The last thing a country with a record trade deficit can afford is to hurt its exporters." Is that so? If Boeing were cheating on its taxes is the NYT saying that we could not afford to crack down on the company? U.S. tobacco companies are also big exporters. Is the NYT opposed to tobacco taxes? [It is also worth noting that planes use relatively little steel. They are made primarily from aluminum and other light weight metals. Thanks to J.M. for catching this one.] But the really good stuff is yet to come: "But rather than posturing, the White House would do better if it educated Americans about free trade�s benefits, which include cheaper clothes, televisions and cars, all of which hold down inflation. According to the Progressive Policy Institute, a Democratic research group, foreign manufacturers invest more in America than American manufacturers invest abroad. It doesn�t feel that way to workers, who know that their wages have stagnated and hear every day that overseas competition is to blame and that little has been done to help displaced workers. But China didn�t break the piggy bank. President Bush and Congress did, with ill-conceived tax cuts for the wealthy and the war in Iraq." Let's see if we can find all the misinformation and distortions in these two paragraphs: 1) Foreign direct investment is often a response to protectionism, or the threat of protectionism. For example, the Japanese auto manufacturers first began locating factories in the United States in response to "voluntary" export restraints and threats of other protectionist measures in the mid-eighties. The association of foreign investment with "free trade" is simply confusion on the part of the NYT editorialists. 2) The actual amount of money invested by U.S. manufacturers' abroad compared to the amount invested by foreign manufacturers in the U.S. is a completely meaningless number, except to someone trying to score propaganda points. Why on earth would a U.S. steel worker care if they lost their job because their steel company had invested in a plant in Mexico as opposed to contracted to buy steel from a plant in Mexico? The Progressive Policy Institute may have the data to support its claim, but this claim has nothing to do with who benefits or is harmed by trade. 3) The way in which trade (mostly in manufactured goods) holds down inflation is by keeping down the price of manufactured goods. This in turn keeps down the wages of manufacturing workers and less educated workers (workers without college degrees) in general. It is not clear how happy these workers should be about the fact that their lower wages have helped to keep down prices. If we had negotiated trade deals that were instead intended to put highly educated professionals in direct competition with their counterparts in the developing world, then we would pay much less for health care, college education, and newspapers than we do today. This would lower inflation, but it is not clear how happy doctors, lawyers, economists, and journalists would be about getting paid 50 percent less than they do today -- maybe if we educated them about the benefits of free trade .... 4) "China didn't break the piggy bank. President Bush and Congress did, with ill-conceived tax cuts for the wealthy and the war in Iraq." Okay, the problem is workers' before tax wages. It's pretty hard to see how the tax cuts for the wealthy and the war lowered before tax wages. Maybe the NYT could educate us on that one. (I'm not defending these policies, but I can't blame the pain in my knees on them either.) So, the NYT has four serious misrepresentations or distortions in two paragraphs. That's educating people about trade.
--Dean Baker
