Monday, August 10, 2009

Deviating from free-trade model

“See, I just don’t want to just reduce our dependence on foreign oil and then end up being dependent on foreign technologies. I don’t want to have to import a hybrid car – I want to build a hybrid car here. I don’t want to have to import a hybrid truck…

“I don’t want to have to import a windmill from someplace else – l want to build a windmill right here in Indiana…And that’s just the beginning.”
Thus, on August 5, did President Obama announce $2,400,000,000 in grants to develop “the next generation of fuel-efficient cars and trucks powered by the next generation of battery technologies – all made right here in the U.S. of A.”

About two-thirds of the $2,400,000,000 in grants are to be used to develop and produce advanced vehicle batteries. At present even U.S.-made hybrids, such as the Ford Fusion, depend on imported batteries, primarily from Asia.

While the President was in Indiana, Vice President Biden was in Michigan and Commerce Secretary Locke in Missouri to deliver the good news to two other hard hit areas that will share the stimulus money. “After too many years of economic growth fueled by speculation and short-term thinking,” Locke said, “these types of investment will help recapture the spirit of innovation that has always moved us forward.”

This stimulus money, while much needed and welcomed, will fall far short in regaining the manufacturing jobs lost in recent years. Michigan is estimated to gain up to 30,000 jobs in manufacturing batteries by 2020 if all goes well. But the state has lost some 250,000 industrial jobs since 2005.

Nationally, we Americans continue to consume way more than we produce here. The U.S. trade deficit ballooned by $37,300,000,000 in May. Canada alone added $600,000,000 to that deficit.

Canada is complaining that the “made-in-the-USA” special electric car grants to cities and states violate free trade principles and free trade pacts. But, according to the Financial Post, Canadian provinces have long-standing “buy provincial” policies that apply to their spending for infrastructure and procurement.

As a result, the Obama administration is apparently free to deviate from its free trade model under those circumstances. But it will still have to cope, sooner rather than later, with modernizing a global trade and investment system designed for the past century.

In pursuing that reform, a focus only on the narrow interests of the United States would not just be a world-class blunder; it would be a loser in a World Trade Organization that has 153 members, most from the developing world.

The current system poses problems for people everywhere. Two glaring examples are the protections it gives to the rights of cross-border investors and owners of intellectual property rights without balancing those global rights with corresponding global responsibilities.

Unions here and abroad have long demanded that trade agreements protect labor rights as it does the rights of capital. Had these demands been met (say) three decades ago, it would have made a difference in how globalization evolved. Now those demands, still valid, will have to be part of a package that takes into account the rights of people in the developing world in regard to issues such as foreign investment and intellectual property.

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