HISTORY REPEATING ITSELF? ‘Free Trade’ Mistakes, Past and Present

Written by Chuck Gruenwald on June 20, 2015

Part of the interest in scale model-building is to re-create reality on a smaller scale, with as much detail as possible. Whether it is an architect’s model of a proposed building, a 1:18 scale diecast car, or a train layout that either ends up in a family’s basement, or crushed by some guy in a Godzilla costume, detail is important.

Around 2000-2001, Car and Driver magazine published a story about AutoArt, a company that specializes in selling Chinese-built, diecast models of various vehicles.

The story not only covered the effort that is needed to build highly-detailed models, but the working conditions of the employees as well.

From factories to coal mines, safety in Chinese workplaces isn’t perceived as a priority from the perspective of the outside world. In fact, Chinese-built goods have also developed a sorry reputation.

American manufacturers had spent a good part of the twentieth century learning how to make household goods that not only work and have long life expectancies, but were also safe in terms of operation and construction. Once the goods that Americans had taken for granted were affixed with “Made in China” stickers, everything that had been learned about making safe and dependable appliances, toys, pet food, etc. was seemingly forgotten.

And the explosion of those Chinese-made goods is the result of a free-trade agreement between the American and Chinese governments.

Whenever there is talk from Washington D.C. about a new free-trade bill, it is hard to not think about the sales pitches for free-trade with China, and the North American Free-Trade Agreement.

When the first Kentucky Fried Chicken opened in China in 1987, a news report at the time stated that a chicken dinner at that location was approximately the equivalent of two month’s pay for the average Chinese citizen.

Fast-forward to 1989, when then-President George H. W. Bush was advocating for a free-trade agreement with the Chinese government. Part of the argument in favor of trading with China was a new market for American-made goods. With the thought of the average Chinese citizen having to save two month’s pay for the luxury of eating one American fast-food dinner, it was impossible to comprehend just how that average Chinese citizen could afford an American-built product.

Quality and safety issues were not the only unintended consequence of this “good deal,” the U.S. is on the short end of a trade stick in terms of a trade deficit, taxes, and goods that are made in China that are subject to competition from counterfeiters.

Shortly after Chrysler started Jeep Cherokee production in China in the early nineties, counterfeit Cherokees were being produced as well. In fact, counterfeit automobiles are still available in China, with plans to import some to other international markets.

Going back to AutoArt, according to that Car and Driver article, the market with the steepest taxes on their products is China, since the materials used to build those models originates in the U.S.

Finally, there are ethical questions that haunt the free-trade deal with China.

While then-President Bush was cheering for this free trade agreement, the Chinese government had violently crushed a demonstration in Tiananmen Square on April 15th, 1989. Despite the images from a government using deadly force against its citizens who were doing nothing more than protesting government-created problems, Mr. Bush seemed oblivious to the carnage. In fact, there was a push to give China a “most-favored nation” trading status.

As a personal note, it was this in blinkers-wearing approach by the first Bush Administration in its dealing with China where I started to notice the difference between the free market, and crony capitalism.

Unfortunately, a trade agreement with China had been reached, and it wasn’t long after when cheap, Chinese-made products supplanted many goods built in the U.S. and other countries as well.

One of the arguments used to defend this transfer of manufacturing is that the American economy is “too evolved” to build what is now built in China.

It was during a computer class in 1999 that I had learned that computer chip production in the U.S. was non-existent, since the labor costs were too prohibitive. At no point in history has humanity been so dependent on technology. If the heart of that technology, computer hardware, is the product of other countries – some of whom may have adversarial tendencies toward us – is it possible to guarantee the stability and internal safety of those products that we now depend on?

Not too long after this deal with China was finalized, American politicians from both political parties were promoting the North American Free-Trade Agreement (NAFTA).

While the same excuses, er, arguments for NAFTA were the same as those with China, the end result was a pre-NAFTA trade surplus with Mexico that devolved into a trade deficit.

At face value, there is nothing wrong with the concept of free-trade. Unfortunately, American businesses are saddled with government bureaucracies that add unnecessary expenses to conducting routine business, as well as a corporate tax of thirty-five percent, which is the highest in the industrialized world.

With domestic restrictions, plus trading partners that place little emphasis on worker safety or high wages, it is hard to justify operating as a state-side entity.

What these two trade deals, as well as the Telecommunications Act of 1996 have in common, is that all three are the result of bi-partisan support.

With a new super-secret trade deal in the works, it is hard not to look at the results of the previous two, and not question the possible results of this one.

While Republicans had criticized Democrats for drafting the Affordable Care Act in total secrecy, it is the manner in which members of both parties are reluctant to release details of the Trans-Pacific Partnership (TPP) that transcends the ACA’s secrecy, and screams hypocrisy.

Career politicians gauge the success or failure of the American economy based on the economic status of their most prominent supporters; as long as those supporters are doing well, then America is doing well. This is another lesson learned from the first Bush Administration.

In 1992, George H.W. Bush refused to acknowledge the existence of that year’s recession, until he was politely confronted with the America outside of Washington in a subtle manner during what was supposed to be a casual conversation in a restaurant with “just some local guy”.

When then-President Bush asked that guy how things are going, the prop, er, fellow diner exclaimed that things weren’t going good. He also said that he couldn’t remember when the economy was as bad as it was then.

Just like with the last two major trade agreements, winners and losers have probably already been picked. And, there are supporters and critics from both parties. Based on past experience, the TPP may have its super-secret roots planted in cronyism, creating a good reason to watch how the 2016 presidential candidates support or criticize this bill.

If history repeats itself, American industries with heavy regulations, a minimum wage and high taxes have little to offer people who are confined to third-world living and working conditions, especially when those workers cannot afford the Chinese-assembled toy metal cars or chicken dinners that some Americans take for granted.

Image: https://www.flickr.com/photos/twicepix/5960775875/

Born in Chicago and raised in northwest suburban Cook County, Chuck Gruenwald developed an unfavorable opinion of machine politics quite early in life. In addition to cars, electronics, law enforcement, and politics, Chuck enjoys writing, and is also a horse racing fan. He has recently written op-eds for uncommonshow.com