14362 EXTENSIONS OF REMARKS June 2, 1983 EXTENSIONS OF REMARKS PROTECTIONISM IS ESSENTIAL Agreement on Tariffs and Trade <GATT) tion-wages, working hours, regulations, FOR TRADING HARMONY estimate that at least a third of the trade in taxes-autonomously, provided they all under the protectionist umbrella. moved more or less in step. Common values, World steel, for exampk, 1-> vl.;u.1•4..: d into free trade unions, and the play of democrat­ HON. MARCY KAPTUR what amounts to three cartels-the Ameri­ ic politics led to similar, costly solutions to OF OHIO can, the European, and the Japanese-that the dilemmas posed by industrial capitalism. IN THE HOUSE OF REPRESENTATIVES coordinate among themselves through price Now, however, the quasi-market newcom­ and quantity agreements. ers have captured a fifth of the world's Thursday, June 2, 1983 F~fty developing countries, as well as manufacturing export markets, and they e Ms. KAPTUR. Mr. Speaker, in my Canada and Australia, manage automobile have become the price setters in a growing district, the Ninth District in Ohio, trade through "local content" rules-which range of activities. In these circmnstances, the unemployment rate in March 1983 require a specified portion of local produc­ adjustment becomes more generalized, tion as a condition of importing-while the rapid, and painful. In fact, it isn't even pos­ was 15.3 percent, up from the Febru­ Atlantic nations limit the number of cars sible. ary 1983 level of 13.9 percent. While that can be imported. Would we be able to "adjust" wages to an the economy may be improving na­ "Voluntary restrictions'" are also prolifer­ international standard? A classical law of ec­ tionwide, the economy in my district is ating in consumer goods. Power stations, onomics says that if both goods and indus­ definitely not. Thus, the message in jetliners, telecommunication, and most mili­ trial capital can move freely in the world we the following article, which appeared tary hardware are restricted via national get, in effect, a single world labor market, in the Toledo Blade, on May 29, 1983, procurement ("buy American") rules and even without a single worker crossing a is particularly meaningful for my con­ local-content deals. frontier. stituents. I commend this article to Atop of all this, we are seeing more But for as long ahead as we can see, the export-targeted industrial policies, export free international market "price" for the attention of my colleagues. subsidies, and restraint on imports via labor-given the tremendous labor surpluses PROTECTIONISM IS ESSENTIAL FOR TRADING safety and other regulations. in the world-is around a level of bare sub­ HARMONY Nevertheless, it remains fashionable to sistence. <By Wolfgang Hager> trumpet the free-trade ideal. The result is But no cut in real wages could go deep Like most people, I used to believe that not merely hypocrisy, a plentiful interna­ enough to make rich-country workers com­ free trade helped create prosperity and tional commodity with which we have all petitive again. These workers live in a high­ peace and that protectionism betrayed con­ learned to live rather nicely. cost economy requiring dollar wages 10 sumers to special interests while leading to The more serious consequence is that pro­ times as high as the Philippines merely to international conflict. tectionism is practiced in ways producing survive. I now believe protectionism is essential for minimum benefits to domestic industry, Free traders would argue that the dilem­ prosperity within nations and harmony maximum disruption in trade flows, and ma does not exist. Among Reaganites and among nations. Competition among firms is constant bickering among trading partners. "Atari" Democrats alike, there are some a good thing, but competition among soci· Without realizing the enormity of what who would abandon traditional manufac­ eties is dangerous. they are saying, otherwise sensible people in tured goods and concentrate on high-tech The problem with free trade is simple: effect are calling for slashing wages enough 1 activities. The world has an endless supply of subsist­ to compete with workers in a South Korea Implicitly, this is an argument for re-cre­ ence-wage labor, and we have learned how or Mexico, lowering health, pollution, and ating, at a higher level, the kind of techni­ to make both basic and sophisticated goods other protections to reduce business costs cal monopoly which the advanced nations in poor countries. and other similar measures. only recently enjoyed in virtually all manu­ Without trade barriers, rich countries are This would be tantamount to giving up, as facturing. In these sheltered, high-value in­ bound to suck in cheap imports from low­ dustries, the argument goes, high wages will wage countries, destroying the domestic in­ a society, the freedom and autonomy to pursue our basic values. In fact, free trade continue to be paid, while the whole econo­ dustries that used to make those products. probably would lead to dramatic economic my enjoys the benefits of cheaper imports. Unrestricted trade eventually would de­ disruption and would create large numbers The argument is wrongheaded. Markets stroy the economies of all the high-wage, of econmnically useless people. It might for bioengineered pharmaceuticals, semicon­ developed countries. take a police state to enforce it. ductors, or satellites will provide new jobs, What we really need is not free trade How can such dire consequences flow but not nearly enough for the people <which we don't have anyway) but a better from an arrangement which, by common thrown out of work in the older industries. "managed" trade system. consent, contributed so much to prosperity America, western Europe, and Japan, In particular, we ought to stop waiting since World War II? What is so different which are rushing into the same high-tech until a domestic industry is on its knees now? niches in the international division of labor, before signaling others who are building up One answer is that for the first time in are only likely to end up with expensive an export capacity that the market won't be modern history, standard manufactured overcapacity. The move to high-tech may be there for them. goods are being produced everywhere on the desirable in itself, but it is no solution to the We also ought to start recognizing that globe-and, importantly, in nations such as trade dilemma. protectionism and trade expansion are quite Japan, South Korea, and Mexico with cen­ In the meantime, the goods people buy compatible. Witness the 1970s: Protection­ trally guided economies. This would not will remain stubbornly banal: carpets and ism grew and world trade in manufactured matter much if these quasi-market econo­ golf clubs, TV sets, and can openers. The goods tripled. mies were still small relative to the older in­ way these items are produced is increasingly The reality is that, in one way or another, dustrial countries; the benefit to consumers high-tech, too. at least 75 percent of the free world's trade of cheap imports would outweigh adjust­ But if the final consumer goods are not is already "protected" or "managed," mean­ ment costs. made in the country, this entire superstruc­ ing that it is subject to quotas, export subsi­ Indeed, this arrangement caused no signif­ ture of sophisticated "inputs" into the pro­ dies, barter arrangements, and a long list of icant problems for 25 years after World War duction process-including the much-vaunt­ other direct government restrictions. II. Only the old industrial countries were ca­ ed services-will weaken as well. Foreign This has long been true for raw materials pable of producing modern industrial goods. producers will simply turn to closer suppli­ and food, which account for half of world The exception was textiles, which from 1962 ers of these goods and services. trade, and services like shipping, which ac­ on were governed by an international pro­ Moreover, it is an unconsciously racist count for 12 percent. tectionist regime, now called the Multifiber mistake to believe that it is the natural It is also increasingly true for manufac­ Arrangement. order of things for brown people to make tured goods, the sector involved in most The joint monopoly of the Atlantic coun­ simple things, such as shirts or toys, while trade disputes. Officials of the Genera! tries allowed them to set the cost of produc- the highly skilled work force of the ad- e This "bullet" symbol identifies statements or insertions which are not spoken by the Member on the floor. June 2, 1983 EXTENSIONS OF REMARKS 14363 vanced countries makes complicated things, and panic protectionism later. This would to name Lita DiVita as our monthly recipi­ such as machines or computers. make it easier for Japan to adjust its invest­ ent of the Raymond McDonald Community In fact, with the state-of-the-art capital ment strategies and it would provide greater Achievement Award. equipment now available to them, the best incentives for American firms to engage in Her early years were spent in the section workers in the Third World, who make up risky investments at home. of Chicago called "Little Italy." She grad­ its industrial work force, can easily outper­ The same applies to developing countries. uated from Pickard Elementary and Harri­ form the least educated persons in advanced The World Bank and others who urge an in­ son High Schools and furthered her educa­ countries who are their competitors. creasing number of countries to follow an tion at Crane College majoring in psycholo­ On top of this, advances in production export-led growth strategy are giving cruel gy. Her family includes her husband, Fosco, technology, notably automation, are rapidly and irresponsible advice.