Thu, Mar 04, 2004 - Page 9 News List

US election gives protectionism new lease on life

REUTERS , WASHINGTON

Only in an election year would US politicians try to pin unemployment on India.

Not that the blame game stops there. Republicans and Democrats alike argue China has stolen US jobs, and unfair trade is a favorite target on the campaign trail, where protectionist sentiment appeals to jobless voters -- much to the dismay of cooler-headed economic policy-makers.

Democratic White House hopeful Senator John Kerry points the finger at "Benedict Arnold" executives who outsource jobs to countries where labor is cheaper, while rival Senator John Edwards castigates free trade agreements in general for hurting US workers.

Republicans, struggling to explain the loss of 2.2 million jobs since US President George W. Bush took office, joined Democrats in their rebuke of White House economic adviser Gregory Mankiw last month for suggesting outsourcing probably was "a plus for the economy in the long run."

The fury over Mankiw's open declaration of what many consider a core tenet of economics -- that a free flow of goods and services benefits consumers over time by lowering prices -- sent a ripple of self-censorship through political circles. This is not the year to muse about the benefits of free trade.

"These days it has become politically incorrect to say certain things -- even if everyone recognizes them to be correct," Dallas Federal Reserve president Robert McTeer said after the Mankiw fuss, likening the topic to the electrified "third rail" that kills unwary subway trespassers.

Even administration officials -- who have signed a raft of free trade deals since taking power -- are spooked, with one ducking trade-related interviews for fear, in the words of an aide, of "pulling a Mankiw."

The perfect storm of an impending election, sluggish jobs recovery and structural change -- in which workers are pushed out of dying industries to new or growing sectors -- has fueled the backlash against outsourcing, with mainstream media bringing multi-part investigative series on the issue into American living rooms.

"There's no question that this would not be as much of an issue if it was the first year of a presidential term instead of the last year," said Catherine Mann, an economist at the nonprofit, nonpartisan Institute for International Economics in Washington.

Moreover, with the shift of jobs offshore now affecting not just manufacturing workers but also white-collar, high-tech and service-sector employees, politicians of all stripes are calling for "fair trade" rather than "free trade."

While one anti-outsourcing bill -- a Republican amendment signed by Bush in January -- has so far been passed, the non-partisan National Foundation for Economic Policy (NEEP) has tracked more than 40 bills at the state and federal level aimed at preventing foreigners from winning government contracts.

NFEP executive director Stuart Anderson said legislative attempts to block the jobs shift will likely increase, if only because it is easier for politicians to blame foreigners for job losses than to explain the vagaries of productivity, structural changes and the business cycle.

"Whether you blame India or China or trade agreements, it's certainly convenient. It's a bumper sticker versus a paragraph," Anderson said. "But blaming people in other countries is a populist attempt for votes that sometimes can border on irresponsible."

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