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Guest Host: Marc Fisher
Despite the popularity of slogans like, “Buy American,” our trade deficits continue to soar. One proposal to address the problem is more detailed country-of-origin information on products to help shift American shopping habits. Meanwhile, the United States is pursuing a “NAFTA of the Pacific” trade agreement that would lower trade barriers with several Pacific countries. We explore how these ideas might affect the economy–and prices.
- Alan Uke Owner, Underwater Kinetics, and author of "Buying America Back" (Select Books, April 2012)
- Cal Cohen President, Emergency Committee for American Trade (ECAT)
- Bruce Stokes Senior fellow for economics, German Marshall Fund of the United States; Contributing editor, National Journal
- Lori Wallach Director of Public Citizen’s Global Trade Watch
Alan Uke on “Buying America Back”
MR. MARC FISHERFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your community with the world. I’m Marc Fisher of the Washington Post, sitting in for Kojo. You know, Americans buy a lot more than we sell in the global marketplace. And despite the popularity of slogans like Buy American, our trade deficits continue to soar. Our deficit with China alone is nearly $3 billion. One proposal to address that trade imbalance is to require products to carry more detailed country of origin labels.
MR. MARC FISHERLabels that would include the trade ratio the United States has with that country along with the origin of the components that went into the product. The idea is that with more information, Americans would shift their shopping habits. Meanwhile the United States is pursuing what some call a NAFTA of the Pacific, it's a trade agreement between the United States and nine countries, including Australia, Chile, Malaysia, Singapore and Vietnam. And the plan is to streamline regulations and otherwise reduce trade barriers. We are going to explore how ideas and policies like these might affect the American economy and prices with Alan Uke.
MR. MARC FISHERHe's the author of "Buying America Back: A Real Deal Blueprint For Restoring American Prosperity." He's also the founder and owner of a San Diego company called Underwater Kinetics which makes about half of the world's diving flashlights. And with Lori Wallach, the director of Public Citizen's Global Trade Watch.
MR. MARC FISHERAnd you can join our conversation by calling 1-800-433-8850 or by email at firstname.lastname@example.org. Tell us if you look at the country of origin labels on products you buy, whether you think they provide enough information. Do you base your purchases on where something was made? And Alan Uke, you have a proposal to address this trade deficit, about 60 percent, as I understand it of manufactured goods are made outside of our country and then bought here. What's wrong with that and why does it need to be fixed?
MR. ALAN UKEWell, basically, we import about $2 trillion a year in consumer products and all manufactured products actually. And we only manufacture and export $1.3. So that's what our trade deficit is, this $700 billion number and to spot $300 billion with China, by the way. And what the problem is, is that this displacement, all these dollars, is translated in the jobs. And it's about 13,000 jobs per billion. So basically that trade deficit amount should 10 million jobs which is our whole employment problem right now. And this employment problem is not going to get better until our trade deficit changes.
MR. ALAN UKENow, there's two ways to do it. And this is where the Buy in America is not entirely accurate, is that you can increase exports and that creates jobs or you can convert imports to American products. Now, there are certain countries that play fair with us and they buy about the same amount that we buy from them and so what happens is that it really doesn't matter if we trade with them. Then what happens is you get these countries, like for example China, which is very, very skewed and so whenever you buy something from China the money basically leaves the country and doesn't bounce back because they buy very little from us, 25 percent actually.
MR. ALAN UKEAnd their biggest import is scrap metal and paper. And it's actually more than a policy of the Chinese government not to buy our stuff. And so what happens is that all these jobs leave and they have all these advantages. So the only thing that can stop all that is basically a consumer movement like we've had with food and the environment where people, when they buy things, look at the labels and see where the money's going and then they make a conscious choice that this particular products got a better effect on the U.S. economy and my own job situation then this one over here. And then they start making educated choices.
FISHERLori Wallach of Public Citizens Global Trade Watch, forgive me if I'm feeling kind of like the ball in a pinball game but it was only about 15 years ago that we were being told, during the Clinton administration, that globalization was the way forward, that it didn't really matter if you bought American because we were going to sell our goods around the world and we were going to buy things from around the world and somehow this was going to lift all boats. Was that a mistake?
MS. LORI WALLACHWell, since then we've lost, not over five million of our manufacturing jobs and we've seen, for instance, with our free trade agreement partners a NAFTA, CAFTA, et cetera, a deficit explode this year, the past year, $70 billion with those countries, $300 billion with China which was another of Clinton's big deals. And so under the current trade rules, we've been hemorrhaging manufacturing.
MS. LORI WALLACHAnd in part because the actual agreements create incentives to promote offshoring and increase the incentive, basically, for companies that used to make stuff here to move the investment and then sell it back which becomes the import that becomes the trade deficit. We've got the wrong rules. Trade can be good but we've seen that almost 20 years of one particular model of trade agreement. And just empirically, the data's in, its failed.
FISHERAnd Alan Uke, so is it a simple matter of fixing those trade rules and then we can get our manufacturing jobs back or have we truly priced ourselves out of competition with much of the world?
UKEWell, it's actually quite different than that. That's why I needed to write the book. And I sell to 60 countries. And I experience this. And so what happens is, with consumer products, it really isn't just the price. People make these decisions, like when they buy a car, you know, that it's not the most efficient thing, it's the one they like and when they buy clothes, you know, we'd be all wearing jump suits sitting around here if that was the more efficient thing, said I, wearing a suit, in fact I have a tie which doesn't really do anything. And so people basically buy on their values.
UKEAnd on the consumer side, if they looked at the origin and they decided to buy one to support where this is made, and it could be they may want to buy something from -- a shirt sewn in Haiti because they think the Haitians need the money, you know, or it could be that they don't want to do business with this country because they basically chop down all the rainforest to grow cotton. That actually matters where they spend their money because they create a reality overseas, they cause these rainforests to get chopped down because they're buying their stuff or they cause, you know, child labor because they buy from countries that allow that.
UKEAnd at the same time, these countries that basically buy very little from us because they don't want to but we buy from them and they're also -- that causes the loss of American jobs. And so it's time for the consumers to start looking at things like they do with labels on food about, you know, what does this mean to me, my family, my community if I buy this one versus that one?
FISHERWell, but we don't have any Wal-Mart's in Washington yet, but we're about to have some in a year or two. When that happens and people go in and start buying things that are made in China, do you think the average consumer really is saying oh is standing there in the aisle, weighing, should I buy this, it's from China, it has all these ramifications or are they just saying, hey, look this is cheaper than what I was otherwise able to buy.
UKEWell, it's not even always cheaper. What happens is the -- for example, China's got this 25 percent trade ratio, a quarter of every dollar. South Korea is 79 percent. So you help the U.S. economy greatly by buying a Korean television instead of a Chinese television. And even the Taiwan 73 percent. So it's literally, most countries wound up at 50 percent to 100 percent, just naturally.
UKEIt's only when you have these countries that actually have policies to prevent bringing American products in, like China does, that you end up with these very skewed situations that drain the jobs. And if they're going to play that game, you know, then the American consumers have to know that that's what's going on and not fall for it, basically.
FISHERBut your proposal is that you would actually bring the consumer into this political decision making by giving them information that would enable them to make an educated choice and say, you know, here's something I do want to support, here's something I don't want to support.
UKEYes, because what'll happens -- the labels, when I'm done, would have a percentage content by country. It's like a food label has a lot more information. So you see at this percent, came from here, this percent came from here. And so you look at the mix and decide if this mix is countries I want to support or it's got a lot more American stuff. And by the way, it could be having something that has entirely foreign content versus something that's got 20 percent American content. Well, you know, and you wouldn't even know that on a label right now.
UKEThis allows you to make all those choices. And these choices are very powerful. One percent shift in American spending is $1.3 million, I mean, jobs, excuse me. Because it's $10 trillion in U.S. consumer spending, one percent, $100 billion, that's 1.3 million jobs. So it doesn't take a whole lot to move the needle because -- and that's the problem with this trade stuff, is that people don't realize the majority is the consumer spending and that's the one thing they're not trying to deal with. And that's what people need to voluntarily take care of.
FISHERYou can join our conversation with Alan Uke and Lori Wallach by calling 1-800-433-8850 or email us at email@example.com. And Lori Wallach, so what's being proposed here is to put a lot more information in front of the consumer so the little tag on my shirt would not be nearly enough room to give us this information but maybe it's something more like that big sheet that comes on the window of a new car, that really breaks down where everything came from.
WALLACHWell, and this is where the trade agreement -- so-called trade agreements come back in. Because there has been a use increasingly over the last 20 years by the big multinational companies who don't want the consumers to have that information who are very happy with the way it is right now, thank you very much, who have used trade agreements -- it's a good brand, free trade's a great brand to put in place internationally, a lot of limits on what kind of practices countries can implement. So for instance, this idea of more information is terrific. You know, when you try and change the dynamic, you have the consumer and you have government actions.
WALLACHBut for the consumer to be informed, you need certain government actions to require these labels, for instance. But increasingly, the corporations are using the trade agreements to try and forbid the governments from using the labels. And just in the last six months, the World Trade Organization, has ruled that we can't have country of origin labels on meat, we can't know about dolphin safeness of our tuna fish. And so part of what we've been advocating is to get the trade agreements out of the business of undermining consumer information and safety. I mean, this trans-Pacific partnership agreement that you mentioned, there's a proposal in there to ban Buy America procurement.
WALLACHNow, why would a trade agreement deal with how my government spends my tax dollars? It's an important policy tool to, for instance, create a new market in green technologies. We've used it over and over. And 90 percent of Americans, on a bipartisan basis, support it. And here would be a trade agreement imposing that limit on how states or the federal government can act which is another tool for creating the demand for domestically made good.
WALLACHSo you'll hear a view in the next hour of the perspective from businesses that this is good for you. But in fact, these trade agreements aren't even promoting the growth of exports because our past ones are exports to the countries like NAFTA countries have been half of what our exports are with other countries. So we just need to weigh to have the space to use tools like Alan's suggesting.
FISHERAnd Alan, we have an email from Kathy who says "I've just returned from Paris where there's a new initiative conspicuously labeling products on grocery store shelves, a small French flag decal on the shelf mounted barcode indicates products that are made in France. And people I spoke with are buying accordingly due to the extent possible, choosing, say the French made tissues over those made elsewhere, even at much higher prices." Is that the kind of thing that you're looking for?
UKEWell, yes and two things. First of all, the label is only going to be an inch square. It's not a big sheet, okay. And the second thing is, that these other countries do this actively, the Chinese, the Japanese, the Koreans, the French, the Germans, they all have a home team preference and they go out of their way to buy their own stuff.
UKEAnd the Americans, the only ones that really aren't trying to -- in fact, in France, nine out of the top selling cars are French manufactured. And they're not very good cars, frankly, but even by their own magazine ratings. And Germany's next door. But what happens is French understand that they want to support their own economy, it's their own jobs. You know, so they're loyal to their own companies and they buy their own products, basically.
FISHERMaybe you have a more optimistic view of the consumer than I do, but I'm a little skeptical of the idea that people will go out and make that political analysis and then say, I need to do this to support my fellow American, as opposed to doing what my family can afford to do and buying the cheaper good.
UKEWell, three things. First of all, the majority of spending in the United States isn't by the lower income people that don't have choices. The majority of the money sits in the middle class and upper middle class and upper class. So those people have choices. And second thing is that you only have to move one or two or three percent of consumer spending to make a giant effect. So we're talking about on the margins that you have this one versus that one, that you know this one right here's gonna get a little bit of a bump, you know.
UKEAnd the third thing is that it would also force these other companies to start acting differently because if they saw the Americans reacting like this, then they'd make an effort to maybe open some plants up here to assemble their products or include some American content in the stuff they're shipping over here. And these all add up to a few percent. And that few percent's all we need to make a giant change.
FISHERThat's Alan Uke. He's the author of "Buying America Back: A Real Deal Blueprint for Restoring American Prosperity." And we're also talking with Lori Wallach from Public Citizen. And when we come back after a short break we'll talk to some callers who've been trying not to buy Chinese goods, but haven't had much success with it. I’m Marc Fisher and you're listening to "The Kojo Nnamdi Show."
FISHERWelcome back. I'm Marc Fisher of the Washington Post sitting in on "The Kojo Nnamdi Show," and we are talking about the trade deficit and strategies for buying American and making it easier to buy American. We're talking to Lori Wallach from Public Citizen's Global Trade Watch and Alan Uke who is the founder and owner of a company called Underwater Kinetics. Now let's go to Mona in Burke. Mona, it's your turn.
MONAYes. Hi, thank you for taking my call. I have been in a Wal-Mart literally twice in my life and both times it was to help my daughter buy something. My husband and I have been trying for as long as I can remember to buy American, not to buy Chinese goods, but it is extremely difficult to find American made goods. An example was last week I was trying to buy some new pasta bowls and although I went to a very good store, everything I looked at was made in China. And I ended up buying British pieces. I didn't find anything made in America other than Martha Stewart which didn't appeal to me.
MONASo we try to buy...
FISHERMona, are you trying to buy American out of a sense of patriotic loyalty or to support American jobs or what's your motivation there?
MONASupport American jobs, absolutely. So yes, I do spend more money. I mean I'm glad that I'm in a financial position to be able to do so. I do spend more money. I buy shoes which are made in Texas. And they're a lot more expensive than some other shoes I could find, but I choose to do that and so does my husband because we do wanna support American jobs. But I feel as though manufacturing has left the United States. I will also say that I will admit, with some embarrassment, we've bought Toyotas for the last 20 years, but the last car that we just bought, which was three months ago, was a Ford.
MONAAnd we did that consciously. We decided not to buy another Toyota and, you know, put our money where our mouth was and buy an American car.
FISHERAnd, Alan, you think that kind of sentiment, I mean, there was a time 10, 15 years ago when that kind of sentiment would have been dismissed as a sort of nationalistic jingoism. Now is there a difference in the way we perceive all that kind of …
UKESeveral things. One is that you gotta realize how this whole happened is that basically it was the retailers that did this. They had things that were made in America that, you know, cost them -- let's say it'd be $5 and they sold it for $10. Well, they discovered they could get this stuff made in China for $2 and that they could drop their price maybe to $9. Okay. So suddenly they're making more money on the imports than selling American products 'cause people are used to paying American prices.
UKEAnd that's how you ended up with all these giant chains. They were fueled to their expansion and the advertising they could do by the higher margins they were making by importing things. And that's how you got a Wal-Mart. And so what's happening is that they're doing everything they can to promote this stuff, to hide the fact that it's made overseas and then to dry up a competing product made in the United States. So it's an us-versus-them thing with the retailers. And it's ironic, you know, but I see it myself in my own retail products I make.
UKEAnd so it really takes the consumer to buck back and say, no, I don't want that. I want this. And they'll have to carry it because that's what sells. It's like organic food. You know, people demanded it. They wouldn't buy anything else and so they started offering it. It's gonna take a consumer movement.
FISHERLet's go to Jim in Annapolis. Jim, you're on the air.
JIMHi, thanks for taking my call. My question has to do with unintended consequences, which I'm sure both of you have thought about. For example, the effect on the inflation rate or the impact on some sort of reactive Chinese or Chilean trade policy or to follow the prior caller's comments, if we switch what are we gonna buy?
UKEWell, you're gonna look at the trade ratio and you're gonna buy something that has a better trade ratio. And remember, there's more countries out in the world that make things than China.
JIMRight, but it will have an effect on how much we pay.
UKENot necessarily. I mean, there are other low labor countries out there. In the book, I have a list of all the countries in the world and what ratios are and a lot about them. And what happens, there's a lot of countries out there, like say example, Korea. You know, Korean television's not too much different price than a Chinese television. It's 25 versus 79 percent trade ratio. It's because the Koreans also buy from us. The Chinese try not to.
UKEAnd so all we want to do is get a country that buys from us, you know, and doesn't have policies that prevent that. And really it's a matter of competing interests nationally, that, you know, the Americans have been kind of sold out, so to speak. And that's why you see this long-term job decline. And frankly, the numbers are such that it's not gonna get better without a consumer movement because two-thirds of the economy is consumer spending, unless you change your habits to buy American or from better partners we're not going back.
FISHERBut as you said you earlier, it's not a very simple issue. There's a complexity even in how each product is made and it has lots of different sources. And, Lori Wallach, there's the example of stores such as Wal-Mart that may sell something as made in the USA here and then the very same product, when they sell it in Mexico, they call it made in Mexico. And they're both sort of right.
WALLACHWell, what Alan's talking about is very interesting 'cause it's the ratio. It tells you how that country relates, generally, with buying U.S. goods versus selling stuff to us. And so, you know, this also goes back to Jim's question, the previous caller, it's not as if suddenly you're going to be banned from buying whatever was that item that's always been there. The point is now you'll have the information in how you choose to think. All right. I wanna help create and restore U.S. manufacturing. That's a better ratio. They actually buy our stuff. And so you can make that part of your decision.
WALLACHSo, you know, as far as the unintended consequences, I would say in that category, I would look out for these trade agreements. 'Cause again, most folks think that trade agreements were about expanding exports. But in fact, after doing this kind of trade agreement, our export growth to the countries we have the deals with declined. And then we've had a tax on things that don't seem to be about trade, like having consumer information to be able to make the kind of informed decisions Alan's talking about.
WALLACHAnd so to track all this stuff I would just suggest folks go to our website, which is tradewatch.org. We're gonna be tracking what happens with Alan's proposal, which hopefully gets turned into legislation. That's tradewatch.org.
FISHEROkay. Let's go to Lisa in Washington. Lisa, it's your turn.
LISAWell, yes, good afternoon. Thanks for taking my call. I think also the attitude of the American public has to enter into this because they think buying quantity and buying cheap is really a better deal. But in the end, you know, you could buy a shirt American made and you pay $30 for it, but it's gonna last you versus buying five shirts at $8 from China. And I think we have this sort of -- after Wal-Mart introduced this buy cheap, you know, we nearly all into this, yes, we need to buy cheap.
LISABut it's much, I think, so it's that attitude that has to change in terms of how we buy. We want to buy quality rather than quantity. And we buy one of a kind rather than ten. And then secondly, too, I think we have to really start to look at how are these things made in China. So here we are basically, anything that's made in China we're supporting their labor or lack of labor laws. I mean we are really supporting child labor when we buy -- like these kids are buying Nike shoes and I guess it's better now, but I don't know. I'd just like to hear your comments. And, you know, but I think we all need to be a little bit more conscious as to how we buy what we buy.
UKELet me give you an example of how it can be done differently. Germany's a role model. They get paid $12 an hour more than we do in factories. So they compete in the same international market against the Chinese and they have very little unemployment because they make an effort to buy their own goods. And it's a national priority to have manufacturing and export. And what they do when they buy things is they pay more for something, but they wanna get high-quality things. So they get fewer things, but they last a long time. And ultimately, they're actually better off because instead of having to replace these things, they buy them once and they have them for years.
UKENow, with this extra $12 an hour, which is a lot of money -- it's a couple thousand dollars a month -- they not only can afford to buy nicer things, but they have money left over. So their standard of living is higher. And so there is unintended consequences. This trying to save money is actually lowering your own income.
FISHERIsn't there a chicken and egg issue here? I mean, let's say everyone said this is a great book, "Buying America Back." I really wanna do this. I wanna contribute to building more American jobs by going out and buying American products, but as all these callers have been telling us, they can't find those American products 'cause they're not being made. So how does this cycle get going?
UKEOkay. Well, buy from a better trade partner. There's lots of trade partners out there. You know, the worst probably is China and Vietnam. And remember 95 percent of the world's population isn't American. You know, we're only five percent. And there's a whole variety of countries where you can buy things from. And most of them, you know, actually have better trade ratios with us. And if you just switch it to somewhere else, you know, that does buy from us, our manufacturing jobs increase because we're building more things for export.
FISHERLet's got to Ray in Arlington. Ray, it's your turn.
RAYGood afternoon. My question is for both of your guests on the show today. I was wondering if they've practiced what they preach. Do they both, you know, contribute to buying American (word?). For instance, what kind of car do you own? Do you own an American car? Do you own a foreign car?
UKEWell, I now own American cars. I used to buy foreign cars and then I saw what was happening. I have a Cadillac, which is by the way an SRX, which is a wonderful car actually. I've had BMWs and Lexus's and Mercedes and all that. It's real world class. And then my wife drives a Pontiac Solstice. It's a sports car.
WALLACHChevy Malibu, parked out front.
WALLACHBut to answer this question, also with the previous caller about -- and you pointed out, Marc, chicken and egg. So one of the policy tools that's been implemented to create demand so that producers in the U.S. can scale up is Buy America. So one of the issues that has my hair on fire is the notion that in this transpacific partnership negotiation the U.S. would bargain away the right to have Buy America government expenditures. 'Cause that's a good way to invest in creating a domestic market, if you already give the preference, then companies see, oh, well, guaranteed, we know we have these purchasers. Let's invest. And then you start creating the stream for American-made goods.
WALLACHBut also for folks who want to do it right now, as someone who's very attentive to this, look online. You would be surprised, with shoes, with sheets, with t-shirts. It's hard to do it in the store, which is unfortunate 'cause I like to support brick-and-mortar ma and pa stores, but you can actually find this market. And the polling basically stands up to what all the callers are, people want it.
WALLACHAnd that online market's growing. So you can do it.
FISHERLori Wallach is director of Public Citizen's Global Trade Watch. And Alan Uke is author of "Buying America Back: A Real Deal Blueprint for Restoring American Prosperity". We will continue our conversation about free trade with guests representing business when we come back after a short break. I'm Marc Fisher and you're listening to "The Kojo Nnamdi Show".
FISHERWelcome back. I'm Marc Fisher of the Washington Post sitting in for Kojo Nnamdi. And we are talking about the trade deficit. We have two new guests now. Bruce Stokes is senior fellow for economics at the German Marshall Fund of the United States and contributing editor with National Journal. And Cal Cohen is president of the Emergency Committee for American Trade, a business lobby representing 50 top exporters. And gentlemen you heard this idea of having a more detailed kind of label on our goods that would spell out exactly which countries each component of a good comes from in the service of encouraging Americans to address trade deficits and also buy in a more patriotic manner. Bruce Stokes, will that do the trick and is that right problem that they're addressing?
MR. BRUCE STOKESWell, I mean, I think, look, if we believe in market economics -- market economics are based on consumers having a great deal of information. And we think that they will then make the best decisions for the overall economy. To be against giving consumers more information is to be against market economics. So I think it is a great idea. People should be allowed to make decisions based on whatever criteria they want. Now, I think it's necessary, but not sufficient to address the broader issue, which is we produce far less than we consume. And we have to produce more of what we consume if we're to bring our trade deficit into some kind of control. And this won't get us there, but it is a step in that direction.
FISHERCal Cohen, we've heard from listeners who have been calling in and emailing us. They really want to buy American and yet they're frustrated because they go to the store and there just aren't that many American goods. How does that vicious cycle that we've gone through since globalization began get turned around so that there are manufacturing jobs?
MR. CAL COHENWell, I believe it's a question of reversing the economic order. Whether you're producing goods in the United States or overseas, increasingly the products are produced with inputs from around the world. And the definition of a totally native product is elusive. For that reason I would say to you that the goal of increased information, as Bruce is addressing, is one that traditionally we'd like to see.
MR. CAL COHENBut the book that is being discussed today sets out a blueprint for restoring American prosperity, and I would say what it misses is how one goes about restoring prosperity, and that is by increasing access to the 95 percent of the world's consumers who live outside the United States. The author of the book is focusing in on five percent of the consumers in the world. He's focusing in on the 20 percent of the world economy that is here in the United States.
MR. CAL COHENIf we are going to support good jobs in America, if we're going to grow jobs in America, we have to ensure that the products that we produce in America access the markets around the world. And unlike Lori Wallach, I would say the best way to do that is to get other countries to reduce their barriers to our services and our products, and by doing so, we're going to get the increased jobs and support the jobs that we have now in the United States.
FISHERAnd how do you go about doing that because obviously those countries enjoy things the way they are, and other than tough talk, what leverage do we have?
COHENWe have a great deal of leverage. Let's use the example of China as the example. I would say right now there are tremendous barriers that exist in the China market, but many of your listeners may not know that over recent years the Chinese market was the fastest growing export market bar none for the United States. In other words, we are shipping everything from food to manufactured goods and providing services in ever increasing amounts to China.
COHENIf we were to reduce our exports, I would say by buying more in America, we have more to lose than to gain because other governments would be more than happy to put in places to restrict exports of products that have the label made in America.
FISHERBut Bruce Stokes, although we are only five percent of the world's population, we consume a good deal more than that, right?
STOKESWe do, and a good example would be to pick up on Cal's point about China. The Chinese are not a member of the international agreement on government procurement. We are, the Europeans are. The Europeans have recently put forward a proposal to say look, if we don't get better access to the Chinese public procurement market, which is a huge market, we're gonna start denying the Chinese access to our public procurement market, or at least that will be an option we may want to exercise.
FISHERAnd what would that -- what would that mean?
STOKESIn essence, currently the Chinese give preference to domestic producers for their public procurement market, far beyond anything that's buy...
FISHERMeaning the goods that the government buys?
STOKESYes, exactly. It's buy Chinese on steroids, right?
STOKESWe buy a lot from the Chinese. We have a lot of buy America provisions so we probably don't buy as much as we could from the Chinese in our public procurement, but still, there are ways to exercise leverage here to try to do what Cal's suggesting, which is to open up that Chinese market to more American-made goods and services.
FISHERLet's go to a call from Tony in Arlington, Va. Tony, you're on the air.
TONYHello, yeah. My name's Tony. I'm from Arlington. I come from -- I'm an inventor. I've been doing a lot of carpentry and construction for the last 20 years to finance this, and I come from a long line of master machinists and tool and die makers who are always very involved in keeping informed on world affairs. I've taken quite a bit of IRT, international relations theory, and this canard is always put forward by the free traders.
TONYIn my family we call traders traitors, but by the free traders that if we'd promote free trade and globalization the whole world will just dissolve in a huge orgy of world peace to the interdependents. That's absolutely untrue. There have only been two world wars, and both of these world wars if you look they're between the two -- the world's two largest trading partners. In the case of World War I that was England and Germany. In the case of World War II it was Germany and Russia.
TONYAnd I think it's fantastic you're doing the show and pushing this. I think we need more of it. I have a bucket of kitty litter -- bucket full of tools that I bought -- foolishly tempted to buy them that were made in China. I don't hate the Chinese, but the point is, these are tools that almost either cut a finger off or burned a house down or, you know, killed someone in some other way.
FISHEROkay. Let's let...
TONYThe point is, in this case free trade is making me if I wasn't, you know, nice enough not to go ad hominem. I mean, it is promoting this like, and I think what you're doing is very important, and I think we got to -- we really should start with the procurement act, but I think...
FISHEROkay. Let's get a response from Cal Cohen. There is this palpable frustration among everyone who's been calling in about the impact of the policies of the last 15 years that, you know, we see globalization helping other countries, and we see our own economy being undermined in many ways. Is that frustration -- are people drawing the right conclusions about how globalization has changed the economy?
COHENI would say to you that as a result of trade agreements, to give a specific example, exports to those countries with which we have trade agreements are growing faster than they would otherwise have grown, and are among the fastest-growing markets in the United States. It's another way of saying that trade expansion does work. Many of the listeners would want to know, for example, what's the purpose of something like the Trans Pacific Partnership Agreement that you were referencing earlier in the program.
COHENThe purpose of the Trans Pacific Partnership Agreement is from the U.S. perspective to access the fast-growing markets in the Asia Pacific region, the countries bordering the Pacific whether in the Americas or in Asia, and it would be an opportunity to increase the products that are produced here in the United Stets. I would say to all your listeners that is a tremendous opportunity and that's what trade agreements are all about, creating opportunities for entrepreneurs such as Tony who was just on the line, but also for businesses and workers that otherwise would not exist.
FISHERCal Cohen is president of the Emergency Committee for American Trade, a business lobby representing 50 top exporters, and Bruce Stokes is senior fellow for economics and the German Marshall Fund of the United States. And Bruce Stokes is there -- when you hear, particularly in this presidential season, this campaign, Rick Santorum has been running around the country talking about how he's going to bring back millions of manufacturing jobs, and will do so with a much more muscular approach to trade agreements. Is that pure campaign rhetoric or can a dramatic different be made simply by president fiat.
STOKESNo. I think -- look. I think the goal is laudatory. I think it is both good for the American economy and good for the global economy if we produce more of what we consume because in the run up to the financial crisis, we had a deficit with the world of five to six percent of GDP. It was unsustainable and it wasn't sustained, and it caused a global crisis. We need to go back to a much smaller trade deficit on a permanent basis. The only way -- Cal's right. We should try as much as we can to export as much as we can, but the arithmetic doesn't work.
STOKESWe also have to produce more of what we consume, and the reality is, that's going to take multiple policies working in tandem. We need a weaker dollar for a long period of time. We need buy America and other things. We need to make it more socially acceptable and, you know, your neighbors would want you to buy American and you want to buy American. But that won't do it either. We need industrial policy. We are very good at industrial policy. NIH which is right on the outside of Washington here is industrial policy.
STOKESWe created a biomedical industry that leads the world because we poured billions -- we can do that with other industries, but we're gonna need some of that kind of promotion of domestic industry. So we're gonna need a number of different policies including stronger enforcement of the trade laws which the president, and every president I've covered as a reporter for the last 25 years has said I'm gonna be tougher on the foreigners than the guy who proceeded me. Necessary again, but not sufficient, and we need more free trade agreements.
STOKESWe need to, for example, in the TPP which is now under negotiation, the Japanese would like to join. The Japanese would change the economics dynamics of that agreement completely because it's a much, much bigger market than all the other markets combined in that negotiation. Could we sell more to Japan? Dubious question. A lot of people were worried about that, but we should try to open up that market.
FISHERAnd why -- go ahead, Cal Cohen.
COHENI just wanted to build on Bruce's comments. A lot of the proposals that you often hear are presented as cure-alls, and what Bruce is saying, and what I wanted to second is you need a multifaceted approach, and you can't for example, forget domestic policies such as education, ensuring we have highly educated workers here in the United States. You also want policies in place that encourage innovation.
COHENThose things together with trade agreements are the way to go because trade agreements I would be the first to admit are not panaceas, but without them I would argue that the growth that we have seen over recent years before this recent downturn would not have occurred.
FISHERAnd why is that one president after another there's been relative political agreement across the ideological spectrum on the need for stronger trade agreements, the need to bring China into a more balanced relationship, why has that consensus here been so ineffective at reaching any kind of a new deal with the Chinese?
COHENWell, a lot of problems that exist with regard to the American economy are reduced to trade agreements, when actually as Bruce is suggesting, the causes are far different and very diffuse. For example, how many of your listeners know that the United States is the largest -- the number one manufacturer in the world today? There is no one who is a more important manufacturer than the United States. But what has happened is that fewer and fewer workers are employed and producing manufactured products.
COHENWhy? Technology has reduced the demand for the people who have produced these products. Those are issues that we have to contend with, but it's much easier to simply say it's the trade agreements which have taken them away.
FISHERLet's got Perry in Brunswick, Md. Perry, it's your turn.
PERRYThanks for taking my call. Gentlemen, I try to follow issues pretty consistently, but I must confess this whole subject of free trade, fair trade, trade agreements, international trade organizations is extremely confusing.
FISHERJoin the club.
PERRYIt seems to me that what I heard earlier today was that apparently one of the international organizations is prohibiting or has prohibited the use of buy America or made in the U.S.A. on our labels, and I also heard that other countries routinely do that, and so don't the international trade organizations prohibit it all, and -- or is there no enforcement? Is this just Alice in Wonderland? I'll take my answer off the air.
STOKESWell, I mean, the case that Lori referenced, it is true that the WTO, the World Trade Organization has said that the origin labeling that we've put on beef I believe it was is not up to international standards. Without getting into the details of the case, I mean, to the extent that other people do the same thing, one would have to challenge them in the WTO system and get a ruling against it. I mean, you know, we subsidize Boeing Airbus is subsidized by the Europeans. We had to sue them and they had to sue us to get a ruling. You don't just get one ruling and then it applies to everybody.
COHENAll I would way in terms of buy America is we have laws in place that require the purchase of U.S components and U.S. input on many of our construction projects that have federal supports, and that is allowed for under the negotiated agreements that we have with other countries. That has in a sense been grandfathered. The issue that arises from time to time in the case of the United States and other governments is when they go beyond their buy national policies that have already been factored in, and what has been factored in has been called the agreement on public procurement, and it sets our rules about what can or cannot be allowed, and that is where I think the greatest danger exists.
COHENIf we build on the buy America that we have right now, we have more to lose for example in a country such as China, which could take action against our exports even more than they do now in the public procurement section. As Bruce has pointed out, they are not part of what's called the government procurement agreement, but there are many more countries that are expanding their construction in the public sector that we could be locked of. And so as some of your listeners and callers were mentioning earlier, you have to look at the balance here, and my argument would be it is a wrong approach to try to restrict access to our market in ways that are going to hurt us more than benefit us.
FISHERWe have an email from Gunnar who says -- who wants to know "What percentage of a product needs to be manufactured in a country for it to be called the country of origin." In other words, how does that definition get made? For example, he says he purchased a well-made, high-tech carbon fiber racing bicycle from China that was identical to an Italian-brand bicycle, and it's known that many, if not most of these products are made in China, but somehow the label made in Italy was allowed to be applied to this. Is there an accepted rule around the world for that, or...
COHENThere are a number of different rules that could be found in agreements, and now I'm getting into technicalities, but one is called transformation. If you take components and put them together and create a new product, the new product could be the basis for the country of origin. You've taken the components let's say in Mexico, from the United States, from Mexico, perhaps from Korea, created a new product, the argument could be you transformed this material, created a new product. Other definitions are based on percentages and those are defined in trade agreements that are agreed to by all the parties to trade agreement.
STOKESAnd one of the problems is that almost every trade agreement has a different rule of origin, so it gets very, very confusing, and it's a way to get around rules basically.
FISHERWe only have a short time left, but I wanted to briefly get into the Trans Pacific Partnership. Cal, your organization supports this. Why is this important, what good will it do for us?
COHENI would say two things. First and foremost the rules of the International Trading System are important to all of us in the United States. We want rules that will allow access for what we produce in the United States. We are working through our government to get rules that will benefit workers and enterprises here in the United States. Second, I would say, and building on what Bruce said earlier, the agreement right now is being developed with eight other countries, but it has the potential for becoming the basis for an agreement for the entire Asia Pacific region which could include such countries as China, and it would be very good to have, whether it's Japan or China agreeing to the same set of rules of the road.
FISHERAnd Bruce Stokes, what are the prospects for that?
STOKESThe president would like to have this agreement done by December. I think there's almost no one except the president who thinks it actually can get done by December.
FISHERIt is an election year after all.
STOKESIt is an election year, however, and he's committed to this. I think that we do need to get it done sooner rather than later. I know the business community does not want this to drag on together because their past agreements were that negotiations drug on forever and it never got done, but one of the big issues is the Japanese might want to join, and that could slow things down, but it also would increase the potential benefits dramatically.
FISHERBruce Stokes is senior fellow for economics at the German Marshall Fund of the United States and contributing editor with National Journal. Cal Cohen is the president of the Emergency Committee for American Trade, a business lobby representing 50 top exporters. Thank you both for being with us. "The Kojo Nnamdi Show" is produced by Brendan Sweeney, Michael Martinez, Ingalisa Schrobsdorff and Tayla Burney, with help from Kathy Goldgeier and Elizabeth Weinstein. Diane Vogel is the managing producer. The engineer today is Tobey Schreiner. A.C. Valdez is on the phones. I'm Marc Fisher of The Washington Post sitting in for Kojo Nnamdi. Thanks so much for listening.
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