Yesterday, the New York Times printed an editorial that should make your head explode. The Times was complaining that Senate Republicans blocked the extension of the Generalized System of Preferences because of a conflict over imported sleeping bags between a company in Alabama and a rival in Kentucky.
"Why?" you may ask. "Why is it a good thing to grant preferential access to $20 billion worth of imports from developing countries when there are 42 million Americans who don't make enough money to put food on the table?"
It's a matter of "principle" the Times says.
Most Republican lawmakers claim they are pro-trade. Their principled position is evidently no match for parochialism and politics.So it's "parochial" to improve the lives of the American voters who put you in office? Apparently so, according to the Times.
The Generalized System of Preferences has been an effective foreign policy tool since the mid-1970s, premised on the sensible proposition that poor countries can prosper best from trade.Um, that's not really what happened.
Judith Stein, in her terrific new book "Pivotal Decade," explains how the Generalized System of Preferences, or GSP, got started. By the time of the recession of 1975, she writes,
...now Western banks financed steel mills in Brazil, shipyards in South Korea, and petrochemical plants in Mexxico. The new producers looked to the U.S. market to sell their wares. Many of these goods competed with America's pressed industries. Nevertheless, banks lobbied for Third World access to American markets because that was the only way to get repayment of their loans. The new lending policies thus created new conflicts between American finance and American manufacturing.Here's how the system (then called Generalized Special Preferences) worked: Developing countries would get duty-free access to the American market, but Americans couldn't demand duty-free access to the markets of developing countries. It didn't work out so well. Writes Stein,
...the AFL-CIO...considered GSP another tribute to multinational corporations. In many instances, the Third World exporters were U.S. corporations. ... The poorest countries had little to sell. Most of the benefits went to emerging industrial powers -- Hong Kong, Singapore, Korea, Taiwan, Brazil and Mexico.By the end of the decade, U.S. productivity was suffering, unemployment was higher than any other industrial nation and inflation was in the double digits. Stein points out that the percentage of GDP devoted to investment was 9 percent when 12 percent was needed to spur adequate economic growth. A good explanation for that is that U.S.-based multinational corporations were investing overseas rather than in at home.
That's what the New York Times considers "an effective foreign policy tool."
We'd cancel our subscription if we had one.
