The ‘Lou Dobbs Democrats’
Protectionism makes big gains in US
satisfaction internationally – not least in South Africa – that President George Bush’s star has waned dramatically in the United States.
This is obviously understandable, given the unpopularity of the Iraq war.
However, the focus here is economics. The particular question this week is on the possible implications for the global economy of the changing of the political order in the US.
For starters, there has of course clearly been a warm welcome for the Democrats’ taking control over both the US Senate and the House of Representatives.
It is further widely, and mostly happily, assumed that whoever runs for the Democrats in the 2008 presidential election will be able to win control of the White House against any Republican candidate.
Most importantly, the crucial residual assumption is that such a development in America must be “a good thing” for the rest of the world.
That could be. But, by definition, we will only know the truth or otherwise of that view some years down the line.
What concerns me, though, at this stage is a disturbing feature of the recent US congressional elections that I have not even seen featured in the SA media. Yet this is an issue of immense potential consequence for the world economy, and obviously therefore for SA.
It raises major doubts about the outlook both for world trade and for globalisation.
The issue relates to the economic views – more specifically, attitudes to the momentous free trade/protection debate – held by the 42 “freshmen” Democrats who have just become members of the House.
Many of them naturally came to office in seats previously held by Republicans.
The immediate and instinctive opinion was that their election success must mainly have been due to a backlash of sentiment against the war in Iraq.
But that assumption grossly simplistic.
Vitally, 39 of the 42 have spelled out a quite different perspective on the elections in a letter collectively addressed to the leadership of the Democrats.
This letter noted that “the issue of trade and the impact of the Republican administration’s policy” had been “critically important” in all their campaigns.
Critically, this confirms that both bluecollar and white-collar Americans are increasingly heeding the protectionist lobbies that tell them millions of jobs are being “sucked out” of the US and being transferred to, especially, Asia.
The 39 are dubbed by Edward Alden
is – a former Washington bureau chief of the Financial Times and current senior fellow at the US Council on Foreign Relations – “the Lou Dobbs Democrats”.
The name is taken from the long-time CNN financial anchorman who constantly rails at free trade, foreign outsourcing by US companies and illegal immigration.
Even every Dobbs, it would seem, has his day.
But Steven Roach, chief economist of Morgan Stanley, is profoundly concerned about the upsurge of demands across America for direct measures to curb Chinese exports to the US.
American free traders are trying to fight back against rising protectionist sentiment.
Some heavy-hitting members of Bill Clinton’s administration who are very much free trade supporters – they include both former Treasury Secretaries, Robert Rubin and Larry Summers – are directly tackling the 39.
But Clinton had hugely more Republican than Democrat support for his free trade initiatives.
Indeed, Clinton ultimately sold out to the protectionists, at the riot-wrecked meeting of the World Trade Organisation (WTO) in Seattle in 1999.
His betrayal of his beliefs resulted from his need for total backing from the Democratic Party bedrock, the largely protectionist trade unions, to fend off impeachment.
So while the Democrats may agree to some extension of Bush’s “fast track” authority on trade deals, this is likely to be for temporary political expedience only.
Some Democrats who want WTO sanctions against China for “unfair” labour practices, might think it best to ease up ahead of the 2008 election, so their party can continue to bask in global approval.
However, once John Edwards, arch-protectionist and failed vice-presidential candidate for the Democrats in 2004, gets formally stuck into the 2008 Democrat presidential race, the protectionist demands will be at the fore of that battle.
Watch Hillary Clinton, Barack Obama and the rest of the Democrat wannabees scuttle away from free trade then. Forget the Doha free trade talks.
I think... on the other hand. Hillary Clinton
Doha what? Free trade? John Edwards