Stiff Trade Bill Supporters Are Whistling Dixie
To judge by reports out of Washington, Congress is hotter than the Fourth of July weather about international trade. The Senate is considering a bill that would raise tariffs or impose quotas the moment a U.S. industry complains of injury from imports. The House, at the urging of major U.S. companies, has already passed a bill that would penalize countries that restrict access to their markets while enjoying a trade surplus with the United States.
The prospect, cry critics of such bills, is for a rerun of the high-tariff Smoot Hawley Act of 1930, which blackjacked world trade and worsened the Depression.
So what is likely to happen? Nothing very much. The best bet is that Congress, after jawing through the summer, will produce a mild trade bill--authorizing U.S. participation in trade talks in Uruguay and extending patent protection to electronic software, but having little to do with tariffs and quotas.
Why such moderation? Because trade policy, as it has been throughout U.S. history, is still a matter of regional interests. And these days, says former U.S. trade negotiator Harald Malmgren, “the geography of trade is changing.” He means that while the rhetoric about threats to U.S. industry concerns the Midwest’s Rust Belt, U.S. manufacturing’s center of gravity has shifted to the Southeast.
Consider. The state with the highest proportion of its work force engaged in manufacturing today is North Carolina, followed by South Carolina. More than traditional textiles, the South is heavy industry--Alabama leads in tire production, for example--and high technology, with companies locating near North Carolina’s Research Triangle and employing engineers from Georgia Tech.
‘Good Neighbors’
The fastest-growing center of the auto industry is around Nashville, Tenn., where Nissan is expanding car production and General Motors is building its Saturn plant. Toyota is building a plant in Lexington, Ky., 200 miles north of Nashville, and in between, in the region locals call “North-Middle Tennessee,” 51 Japanese auto parts companies have started operations in the past half a dozen years. “They’re good neighbors,” says Joe Davis of the Nashville Chamber of Commerce about the companies that have invested $1.3 billion and employ 9,000 people in the area.
The political implications are clear: Powerful Southern lawmakers are not about to vote for angry legislation discouraging trade and discomfiting friends. Already one of their number, Sen. (and Democratic presidential candidate) Albert Gore Jr. of Tennessee, is saying: “We don’t need protectionism, we need perfectionism”--a call for efforts to improve U.S. productivity and quality.
Gore happens to be right. U.S. companies soon will need their own toughness and efficiency a lot more than tariffs and quotas, because shifting currency values are making it economically imperative for Japanese and other foreign firms to manufacture in the United States. Foreign competitors are about to become domestic.
And that will change a lot of things. Foreign ownership of U.S. industry will replace the trade deficit--which will shrivel--as the topic of controversy; foreign investment will make the once-poor South a prosperous region.
Meanwhile, in the industrial Midwest, the grim picture of rusting towns and jobless people is somewhat out of date, says John Torinus, the business editor of the Milwaukee Sentinel. Old firms still close down, but at the same time 50 new Wisconsin companies have financed start-ups or expansion by selling stock to the public in the last two years. Renewal has begun.
If there’s a reflection for the holiday in all this, it is that trade has always aroused regional rivalry, with “protection” finding supporters and opponents for good reasons and bad. At the Constitutional Convention, Southern states wanted no tariff on the import of slaves. Later, the South wanted to import manufactured goods from cotton-buying Britain, but the North wanted tariffs to protect growing industries. Today, generally speaking, the North still wants protection while the South is more open to foreign commerce. Trade laws affect the lives of millions. Which may be why cooler heads often prevail in making them.
