Will Obama Slam the Door on Oregon's Export Economy?
By Mark Ellis
With the exception of Iraq, nowhere is the
difference between John McCain and Barack Obama more profound than on
economics, especially on the issue of global trade. As 2008’s interminable
primary season unfolded across a nation, which many feel has been adversely
affected by the realities of the global marketplace, those differences
came into striking relief.
The usual contextual duality applies. Unrepentant free traders claim
that U.S. citizens experience net economic gains as a result of our participation
in international trade. Voices on the other side proffer dire anecdotes
that demonstrate we are losing to competitor nations on an uneven playing
One hostage to the drama is the Columbia Free Trade agreement, which
President George Bush claims would help the U.S. economy and “advance
America's national security interests in a critical region. It will strengthen
a courageous ally in our hemisphere.”
Congressional Democrats, led by House Speaker Nancy Pelosi — with
the blessing of Hillary Clinton — have held up a vote on the deal,
stating that they must first take up separate legislation that would help
protect American workers who might lose their jobs.
Given the stark contrast in the positions of the two nominees, it may
behoove Oregon voters to ask what the upcoming election might portend
for trade policy in their home state.
One of the narratives deployed by Obama is that free trade agreements
have too often left Americans with the short end of the stick. In his
stump speeches, including one last May before 75,000 attendees at Waterfront
Park in Portland there are none-to-subtle references and rallying cries
about American jobs and products jeopardized by outsourcing, confiscatory
tariffs, sky-high trade deficits, and tax incentives for U.S. firms in
search of everything from cheap labor to eased environmental restrictions.
He’s too smart to utter freighted terms like protectionism, but
Obama voted no on the Central American Free Trade Agreement (CAFTA) and
wants to amend the North American Free Trade Agreement (NAFTA). “We
have the goods, services, skills, and innovation to compete anywhere in
the world,” he said, “but we need to get a handle on free
trade agreements that send American jobs overseas.”
Obama has some strange bedfellows on trade; one-time GOP candidate Ron
Paul has gotten traction appealing to a broad sense that America needs
to mind its own business with regard to sovereignty, trade deals and wars.
Pat Buchanan has been the dissenting GOP voice on free trade for decades,
and legions of left- and right-leaning independents want the U.S. to start
giving as good as it gets in terms of trade policy. Even the most ardent
global trade advocates agree that import/export imbalances and displacements
that may have been absorbable during the eras of American economic boom
times spell trouble in leaner, meaner times for individuals and companies
who do not adapt.
Enter John McCain, 2008’s unapologetic globalist. “Globalization
creates opportunity,” he has said. “We must reduce barriers
to free trade.”
His voting record on the issue — pro NAFTA, pro CAFTA down the
line — reads like a shopping list for multi-national concerns. “Every
time the U.S. went protectionist, we paid a heavy price,” he said.
That about sums up the Arizona senator’s position.
“A lot of these jobs aren’t coming back,” he told a
rally of supporters from Middle America.
One of Obama’s most receptive audiences has been the Oregon Democratic
Party. If his primary plurality is any indication, comparisons between
him and McCain on free trade or anything else might be moot. Even some
GOP strategists concede that whatever happens, the Beaver State will go
big for Barack.
But for Oregon voters of all political stripes, there’s a squeaky
wheel on the Obama bandwagon.
Trade and economic experts have called the protectionist tone deemed
politically expedient by Obama (and Clinton for that matter, who called
for a “time-out” on trade deals) spurious, counterproductive
and, at times, irresponsible. Investor’s Business Daily spoke for
an alarmed international marketplace when it editorialized in October
2007 that tinkering with existing free trade agreements would be disastrous
“and would create the perception that a treaty with America is not
really the gold standard anymore.”
American Enterprise Institute (AEI) Resident Scholar and high-profile
political analyst Michael Barone was reached for comment just as Hillary
Clinton was suspending her campaign. “The Democrats this year were
moved to take protectionist stands by the labor unions,” says the
U.S. News & World Report senior writer. “Yet almost half of
union members are public employees whose jobs are not threatened by foreign
Barone provided some historical perspective on Obama’s position:
“The last time a visibly more protectionist candidate was elected
president was in 1928, when Herbert Hoover beat Al Smith. Hoover did increase
trade barriers and raised taxes as well. We know how that turned out.”
How would it turn out in 2008? Oregon is a net export state. Should any
existing agreements be fundamentally altered or new agreements blocked,
Oregon’s economy would surely suffer.
By the numbers
Oregon’s export economy is churning along in high gear and contributing
billions to local economies.
Perusal of United States Census/Department of Commerce (DOC) statistics
reveals that a healthy $2.6 billion flowed into the state economy in 2007
from our top export products. Seven of the top 14 of the state’s
total exports are highly technical products very much tied to the global
marketplace. Intel alone employs as many as 16,000 people in jobs directly
generated by participation in international markets.
In second place on the list is wheat, a commodity that speaks to the
wide-ranging breadth of Oregon exports and to the stake rural communities
have in international trade. Huge percentages of Oregon-grown wheat are
sold to countries such as China and India. Barley also shows in the top
two dozen, generating $114 million in 2007. Fertilizer and other crude
materials sold to foreign markets tallied a whopping $358 million that
same year, and 2007 census data show that Oregon’s miscellaneous
grain, seed and fruit sold to China brought home $74.8 million, a 34 percent
of total exports share increase over 2006. Of that increase, $56 million
was soybeans, a new export to China from Oregon.
Though Oregon recently saw an 18 percent decline in sales to the China
footwear market, such products yielded more than 113 million export dollars
in 2007, down from $137 million-plus in 2006.
Remember Oregon’s wood products industry? Wood sales to China racked
up an almost 15 percent of total exports increase between 2006 and 2007.
We’ve moved into value-added secondary wood products such as paper,
pulp, composites, veneers, and moldings, which totaled almost $108 million
in 2007 sales to China alone.
DOC census statistics show that Oregon’s cereal sales internationally
jumped from $1.1 billion to $1.7 billion dollars between 2005 and 2007.
For all the talk about outsourced manufacturing, Oregon heavyweights
like Gunderson Inc., Freightliner and Precision Castparts Corp. generate
billions in export dollars. Oregon saw a percentage share of total exports
increase of more than 50 percent in the markets for aircraft and spacecraft,
which includes parts and heavy-lift helicopters, another testament to
the diversity of Oregon’s for-export products. Oregon’s net
receipts from world plastic sales, for example, grew from $87 million
to $118 million in three years.
The export pie is expanding, and Oregon’s exports are following
suit. Contrary to blaming current U.S. economic woes on globalization,
many trade experts say that the health of the export market for Oregon
— indeed the entire nation — depends upon mitigating the current
economic downturn. Without these vibrant and expanding national export
marketplaces things would be a lot worse.
Who are we hurting?
In the conference room of his offices at Portland’s World Trade
Center, Scott Goddin is far from the sound and fury of the ongoing election,
and he is measured in his observations about the free trade hue and cry.
“Policy outcomes of protectionist pronouncements will be limited
by the legislative process,” says the director of the Portland office
of the U.S. Commerce Department’s Export Assistance Center, “due
to the fact that affected parties including Oregon and U.S. firms have
created their global business structure models under existing trade agreements.”
Goddin, who earned his master’s degree in international affairs
from Georgetown University, explains two mechanisms which reflect the
trade policy spectrum: Trade Promotion Authority (TPA) and Trade Adjustment
Assistance (TAA). TPA is a procedure adopted by Congress at the request
of President Richard Nixon in 1974 which allows for the consideration
of trade agreements without amendment as long as the president adheres
to certain timetables and other procedures. TAA is a program of adjustment
assistance to workers and firms in industries that have suffered from
competition with imports. Between these poles lie the challenges of implementing
sound trade policy. “It’s not about free trade,” says
Goddin, “but fair trade.”
Goddin understands that certain trade practices, such as product dumping,
ineffective labor or environmental laws, and domestic-centric tax structures
are a concern inasmuch as they can lead to an unfair trade advantage for
countries with no such constraints. Among the solutions the U.S. can incorporate
into our trade agreements are “integrated labor and environmental
standards and stronger protections for labor.” Another measure to
level the playing field, says Goddin, “is more effective international
trade policy enforcement mechanisms, currently being sought through the
U.S. government and the WTO.”
Goddin advocates investment in workforce development, training programs,
re-education, living-wage provisions, and the availability of affordable,
portable healthcare as means to easing transitional suffering. “But
when talk turns to reviewing and possibly changing successful trade agreements,”
he says, “we have to ask, ‘Who are we hurting?’”
“The fix is not Oregon-centric,” he stresses, “but
we have the diversified and globalized agriculture and industrial base
to enable us to contribute to a meaningful discussion.”
He mentions Oregon’s prominent congressional representation on
the issue: Sens. Ron Wyden and Gordon Smith, who sit on the Senate Finance
Committee, Subcommittee on Trade, and Congressman Earl Blumenauer, who
sits on the House Ways and Means Committee, Subcommittee on Trade. Like
McCain and Obama, two of Oregon’s trade policy triumvirate, Smith
and Blumenauer, will face the electoral gauntlet in November. Both are
favored to keep those seats.
Goddin understands that the climate may be right for a dose of global
trade fear-mongering, but he’s not buying any of it. When the brutal
2007 layoffs at Roseburg’s Dell Call Center come up, he’s
sympathetic, but says, “Even if the call centers don’t come
back, we have to ask, what new jobs we can bring in?”
Goddin wasn’t deliberately channeling John McCain with that statement,
but the similarity in sentiments is inescapable. It is a message borne
out by partisan and officially neutral trade experts alike: We can’t
turn our backs on global trade opportunities.
“Democrat candidates in recent history have talked up trade policy
nationalism in primary campaigns and then swung back to a more internationalist
line after they were elected,” says international trade expert and
AEI Resident Scholar Claude Barfield, whose comments came just as McCain
and new nominee Obama engaged in an economic dust-up. Barfield remembered
how Bill Clinton criticized Bush 41 on NAFTA, then worked to get it passed,
and later signed it. “Obama has painted himself into a narrower
corner with his protectionist stance, and it may be harder for him to
pivot for the general election,” says Barfield.
“It’s interesting,” he continues, “that while
Democrats have accused Bush 43 of acting unilaterally on Iraq, a protectionist
unilateralism is just what Barack Obama is threatening.”
Closer to home, Tammy Dennee of the Oregon Wheat Growers Association
weighed in with definitive stats that show 85-90 percent of Oregon wheat
is destined for export each year. Wheat is the number one bulk crop shipped
from the Port of Portland. Japan, Thailand and the Philippines, among
other countries, depend on Pacific Northwest wheat.
“The numbers speak for themselves,” says Dennee.
“Nothing happens in a vacuum,” says Pacific Northwest International
Trade Association Executive Director Doug Badger. “Whether the U.S.
decides to sit out the Doha Round or suspend negotiating bilateral trade
agreements, the rest of the world will go on without us.
“Not negotiating further market access agreements would particularly
hurt the Northwest, which is the gateway to Asia,” says Badger,
a Portland-based consultant who also sits on the Export Council of Oregon.
The chorus against de-liberalized trade concluded with Philip Levy, Claude
Barfield’s trade policy colleague at AEI. “Blocking the Colombia
and South Korea free trade agreements and stirring up resentment of NAFTA
will do nothing to bring jobs back to Michigan or Ohio,” says the
Stanford University Ph.D. in economics. “Some of Senator Obama’s
proposals, such as the Patriot Tax plan, would directly undercut the kind
of international investment that supports American exports.”
Levy flatly countered the notion of tweaking our trade agreements, saying,
“The United States has attracted investment from around the world
in part because of its policy of open engagement. Shaking these pillars
of the U.S. economy could threaten real harm.”
Perhaps nowhere would that economic shaking cause more harm than here,
where day in and day out the ships leave port with Oregon products aboard.
BrainstormNW - July 2008