The ‘Lou Dobbs Democrats’

Pro­tec­tion­ism makes big gains in US

Finweek English Edition - - Economic trends & analysis - BY HOWARD PREECE howardp@fin­week.co.za

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

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