The capture of Walter Mondale
On the surface, the protectionist policies that presidential candidate Walter Mondale is espousing appear to serve some legitimate public goals. Consider his support for domestic-content legislation (DCL), which requires that all autos sold in the United States contain a certain percentage of American labor and American-made parts (in some bills as high as 90 percent). Mr. Mondale has portrayed DCL as a jobs program that also enhances US national security.
Beyond DCL, Mondale has used a similar rationale in crafting his new industrial policy, which is to ''match export subsidy for export subsidy.'' To Mondale, the unfair trade practices of our foreign competitors must be met with retaliation. Only if the US cultivates its own corporate warriors will it be able to do battle with the ''Japan Inc.'s'' of the world. Any other course - particularly a blind faith in free trade - will leave our nation jobless and, by destroying our factories, our defenses weak.
From this perspective, the protectionist planks in Mondale's campaign platform appear to further public-interest goals long associated with the liberal Democratic tradition: providing jobs, promoting fairness, and defending the nation's borders. Despite these compelling arguments, an equally persuasive case can be made that Mondale has merely been captured by a coterie of powerful special interests out to feather - or protect, as the case may be - their own nests.
For one, there is Mondale's well-publicized support from organized labor, in particular the protectionist-minded AFL-CIO. In fact, a large bloc of the AFL-CIO's membership is drawn precisely from those import-beleaguered industries like autos, steel, machine tools, and rubber which stand to gain most from protectionism. On the other hand, antiprotectionist, export-dependent unions in the AFL-CIO (such as the International Longshoremen's Association) constitute a small minority, whereas many workers in the export-dependent, high-tech sectors are simply not unionized. Nor are farmers represented, a group that provides the largest entry in the US export roster.
A second clue to Mondale's capture is provided by his pre-presidential campaign view of protectionism. For example, as the junior senator from Minnesota - a state heavily dependent on foreign trade in farm goods and high technology - Mondale rarely uttered a peep on the issue and, when he did, he sounded more like Adam Smith than the godfather of American protectionism, Alexander Hamilton.
Mondale's ''conversion'' to the protectionist faith, coupled with his smokestack industry support, must raise serious questions about the private-interest motives behind his public-interest rhetoric. But the strongest case for Mondale's capture - or, more charitably, his totally blind ideology - is that his protectionist policies will work counter to their stated goals.
Although protectionism may create jobs in some industries, these gains will be largely, or perhaps completely, offset by a reduction of jobs in other industries because of protectionism's ripple effects. At greatest risk: the 5 million Americans working in our export sector. Farmers would be similarly hurt.
How about protectionism, then, as an instrument to promote fairness? Here one must ask what is fair about forcing the average consumer to pick up the protectionist tab. A dizzying array of tariffs, quotas, voluntary export restraints, and other nontariff barriers on everything from steel, textiles, and shoes to motorbikes and machine tools already cost consumers over $50 billion a year. And given that the average American's income is $19,000 while that of an auto worker is $24,000, a protectionist policy like DCL would further skew, rather than make more fair, America's income distribution.
Nor do the national-security arguments for protectionism stand up. Such arguments rest on the presumption that import competition will shrink our defense-related industries to the point where they would be too small to support our defense needs. There is, however, little evidence to suggest this is true. More to the point, a persuasive case can be made that import competition would actually strengthen our defense. Without the protectionist umbrella, our strategic industries would be forced to operate at lowest cost, engage in more research and development, and modernize at a faster pace to stay one step ahead of the competition.
But even if protectionism conveys some national-security benefits, they must be weighed against protectionism's national-security costs. The nature of these costs is illustrated by a previous era of protectionism and subsequent global trade war sparked by the Smoot-Hawley tariffs of 1930. These tariffs, which drove the average rate on dutiable imports to over 50 percent, pushed the world economy into the Great Depression, for in retaliation to the American tariff 26 other major trading nations erected their own restrictions.
Another global trade war would be disastrous to the economies of the developed industrial democracies. In equal danger are the developing nations, heavily in debt and dependent on trade both for growth and foreign exchange to pay off their debts - a lion's share of which is held by American banks.
If Walter Mondale has been captured by his smoke-stack industry constituents, then the case against protectionism will fall on deaf ears. If elected, he will push protectionist measures through Congress, big labor will be rewarded with a multibillion-dollar windfall, and US consumers, together with farmers and workers in export-dependent industries, will pick up the tab. If, however, Mondale truly wants to pursue the liberal vision of creating jobs, alleviating economic hardship, promoting fairness, and protecting our borders, he must abandon protectionism in favor of more enlightened public policies.
To create jobs, Mondale must campaign for the continued liberalization of trade that was begun by his own party after World War II and carried out with great success under the General Agreement on Tariffs and Trade. To promote fairness abroad, Mondale should support this same GATT mechanism - and not a retaliatory protectionism - to police the unfair trade practices of our foreign partners. That in turn means that he must insist that several loopholes in the GATT be closed.
The first allows a variety of nontariff barriers, such as orderly market agreements and voluntary export restraints, to flourish. Second, the GATT's authority must be extended to restricting the use of export subsidies, prohibitive quality standards, and other neomercantilist devices to promote exports or protect import industries.
To promote fairness at home, Mondale must embrace an industrial policy that effectively mitigates the individual and community hardships that tough import competition sometimes entails without penalizing workers in other industries and regions.
Finally, Mondale must realistically appraise the national-defense arguments that have typically been voiced in the protectionist debate over the ''de-industrialization of America.''
The real choice is not between preserving strategic smokestack industries or relying on high-tech wonderlands. Rather, it is between a protected but inefficient, declining, and vulnerable industrial base and a more innovative and powerful industrial sector that, under the spur of import competition, invests in the rapid technological developments that prosperously merge the two worlds.