Clinton Still Using Free Trade Rhetoric

Beijing kicked its trade offensive into high gear while Bill Clinton was in the White House, but looking the other way. And, while Hillary Clinton has been pushed into spinning some of her views during the current campaign, it does not seem that she has truly broken with the past to devise new policies to deal with the economic rivalries that have done so much damage to the U.S. economy and now jeopardizes national security as well.

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By William R. Hawkins | July 25, 2016

Meeting
2016 G20 Trade Ministers Meeting in Shanghai, China July 9, 2016. Photo: Reuters/Aly Song

Hillary Clinton’s June 21 speech in Ohio drew more attention than usual because she had promised to attack Donald Trump’s record as a businessman. The effort, however, fell flat as there was nothing new in her remarks. Even with the liberal media amplifying her every word, it is hard to persuade the public that a career politician knows more about economics than someone who has built a world-spanning commercial empire that has made him a billionaire many times over.

Of more interest was Clinton’s presentation of her own views on economic policy made in contrast to Trump’s, especially on international trade. Under pressure from both Trump on the Right and Sen. Bernie Sanders on the Left, Clinton has tried to back away from her earlier support for “free trade” while a Senator and as Secretary of State. She has joined Trump and Sanders in opposing the Trans-Pacific Partnership (TPP) agreement signed by President Barack Obama. In Ohio, she called for TPP to be renegotiated. Her spin is that TPP was still only a work-in-progress when she was Secretary. The final document was concluded after she left office and is not as good as she had hoped. Fair enough, but most of the trade rhetoric in her speech was a rehash of arguments made by her husband when he was president twenty years ago signing the North American Free Trade Agreement (NAFTA) and creating the World Trade Organization (WTO).

For example, she said “There’s a difference between getting tough on trade, and recklessly starting trade wars. The last time we opted for Trump-style isolationism, it made the Great Depression longer and more painful.” This is exactly how Vice President Al Gore started his debate with Ross Perot in 1992. The claim that protecting the U.S. industrial base is “isolationist” has been a central theme of Free Traders for decades, yet nothing could be further from the truth. America became the world’s greatest manufacturing power at the dawn of the 20th century behind high tariffs. By World War I, the U.S. had more production capacity than Germany, England and France combined. Even coming out of the Great Depression, the U.S. became the “arsenal of democracy” and used its economic strength to defeat the Axis and create the American Century. Wealth is the basis for global leadership; it is weakness that compels isolationism.

Clinton should read some intellectual history, or the website of the libertarian Cato Institute to find the real connection between “free trade” and isolationism in the ideology of classical liberalism. The British Radical Richard Cobden, for example, claimed that commerce was “the grand panacea” and that under its influence “the motive for large and mighty empires, for gigantic armies and great fleets would die away.” The French economist Frederic Bastiat argued that “Free trade means harmony of interests and peace between nations” and Thomas Paine listed among his revolutionary proposals that all warships be converted into merchant vessels. These sentiments were uttered roughly two centuries ago, and have been proven wrong time and again. But they are still used and explain why “free trade” remains more popular with the base of the Democratic Party than with the base of the GOP. The Left favors isolationism in the name of peace.

In her speech, Clinton said, “when China dumps cheap steel in our markets or unfairly manipulates its currency, we need to respond forcefully.” She was supporting, without saying so explicitly, President Obama’s recent decision to impose prohibitive 236% tariffs on imports of corrosion-resistant steel from China, India, Italy, South Korea, and Taiwan. Due to the economic slowdown, there is a global surplus in steel capacity. Every country is trying to make others “adjust” downward by dumping their surpluses overseas to force rivals out of business. The U.S. must resist this onslaught, which has pushed the American steel industry back near the low point it reached during the recession in 2009. So Obama’s actions are justified.

Unfortunately, President Obama is not willing to tackle the much larger issue of currency manipulation, which candidate Clinton mentioned. But would a second President Clinton do what the first President Clinton would not do any more than Obama has done: actually proclaim Beijing a currency manipulator and take action? Congress requires the Secretary of the Treasury to make regular assessments of currency manipulation. And while the Treasury has reported adverse exchange rate policies by China and others, it has not taken the formal step of moving from evidence to conviction since that would call for what critics would undoubtedly call a “trade war.” This is what Clinton has charged against Trump’s call for a 35% countervailing tariff against Chinese goods that benefit from Beijing’s undervalued currency (a value is set by the regime, not the market).

Yet, Sen. Sherrod Brown (D-OH), whom Clinton cited favorably in her speech and who was on her short list of possible running mates, holds the same views as Trump regarding China. One of Brown’s strongest arguments against TPP is that “It lacks enforceable currency standards and will undermine the North American auto supply chain’s companies and workers.” Brown has called on Congress to force the Treasury to condemn Beijing so countervailing duties can be imposed.

Earlier this month, Brown and Sen. James Sessions (R-AL), a top advisor to Trump, led a bipartisan group of Senators in warning the European Union (EU) against granting China “market economy” status, a change that would weaken the EU’s antidumping laws and set a precedent for the U.S. to do the same. A one-party dictatorship that sets its exchange rate by fiat and has state-owned firms dominating its industrial and trading sectors is clearly not a “market economy” where business can be conducted on anything like a normal basis.

The Beijing regime has been waging a trade war with the rest of the world since the Communists took power. It is a key part of its strategy to catch up with the West and shift the global balance of power in its direction. Its leaders know history. Policies that favor domestic producers; building capacity and creating jobs, are not the tactics of isolation, but of victory.

Clinton cannot bring herself to join Trump, Brown and so many others in both parties to confront the Chinese threat that has already cost America millions of jobs. It has also created a more aggressive Beijing regime, about which Clinton expressed concern while Secretary of State. Yet, that threat has largely been “made in America” as “free trade” has allowed $2 trillion to flow from the U.S. to China during the last decade of trade deficits; money that has enriched and empowered the Communist regime. “Free trade” has also allowed American corporations to transfer technology to Chinese “partners.” This knowledge has flowed through government entities to enhance Beijing’s military strength, which is aimed at the United States. China has again proven Cobden wrong. It is the gains from commerce that support “gigantic armies and great fleets.”

Beijing kicked its trade offensive into high gear while Bill Clinton was in the White House, but looking the other way. And, while Hillary Clinton has been pushed into spinning some of her views during the current campaign, it does not seem that she has truly broken with the past to devise new policies to deal with the economic rivalries that have done so much damage to the U.S. economy and now jeopardizes national security as well.


William R. Hawkins, a former economics professor and Congressional staffer, is a consultant specializing in international economics and national security issues. He is a contributor to SFPPR News & Analysis.