Dick Gephardt's Excellent Idea

As summer gives way to fall, American jobs continue to disappear, dropping away almost as quickly as the leaves that will shortly descend from the trees in my part of the country. The losses are across the board, affecting white-collar as well as blue-collar workers, but they are particularly bad in the manufacturing sector. There, the economy has been shedding jobs for 36 straight months; roughly 2.7 million positions have evaporated since 2000, the worst attrition since the recession of 1981-82.

The Bush administration deserves a good share of the responsibility for this state of affairs; it has neglected the economy (except to throw tax cuts at it), preferring instead to focus obsessively on foreign affairs. But there is plenty of blame to go around. America's private-sector companies have learned they can increase productivity with fewer workers by simply using technology to replace people; that's the destructive downside of the recent high-tech boom. More importantly, though, is the critical impact of economic globalization, a factor that has been insidiously eating away at American employment -- especially manufacturing employment -- for at least a decade, if not longer.

Globalization, with its accompanying trade deals, was advanced in official circles as an employment bonanza -- the North American Free Trade Agreement (NAFTA), for instance, was to have produced 200,000 new US jobs annually -- but the reality has been quite the reverse. At the end of last year, Public Citizen's Global Trade Watch concluded that trade agreements had eliminated 3 million domestic jobs since 1994, 1.7 million of them manufacturing positions. According to the Economic Policy Institute (EPI), NAFTA alone has been responsible for a net loss of 100,000 American jobs each year since it took effect in January 1994.

In terms of employment, if not enhanced living standards, the immediate beneficiary of NAFTA's assault on the American workplace was Mexico, whose low wages (a Wall Street Journal survey revealed) attracted some portion of the production of perhaps 40% of US manufacturers in the 1990s. Nevertheless, although it wasn't readily apparent at the time, Mexico's pro-NAFTA stance had led it into an economic fool's paradise. While Mexican wages remain much lower than ours -- Jeff Faux of EPI places the average compensation in the manufacturing maquiladoras along the Texas border at $1.22 per hour -- they are far from the lowest in the globalized world. Burgeoning China's newly industrialized peasants will work for a fraction of the Mexican wage, and it's there that Mexico's NAFTA-sponsored jobs are now heading.

Since China's entry into the World Trade Organization (WTO) in 2001, Mexico has been hemorrhaging manufacturing employment. Estimates are that in the past two years, the Mexican economy has lost 300 to 350 factories and as many as half a million blue-collar positions to its new low-wage rival. The northern state of Chihuahua, home to footloose American assembly plants that fled south a decade ago, saw 7% of its jobs depart for China in the first four months of this year alone. NAFTA had not ameliorated chronic Mexican poverty in any case; the wages it brought, too high to permit effective competition with China, were ironically never high enough to raise Mexico's struggling poor into the middle class.

The Mexican situation is a classic case of the infamous "race to the bottom" produced by unregulated free trade. Trade, as analysts like William Greider and Barry C. Lynn have duly noted, is actually a misnomer in such instances. What is transpiring is anything but normal commerce between nations; rather, it is multiple intra-firm exchanges, masquerading as trade, between multinational manufacturers (mostly American based) and their foreign affiliates, whereby components or raw materials are "exported" from parent companies to their branch plants overseas for low-cost manufacture and/or assembly, and then "imported" back to the parent firm for final processing and marketing.

The International Labor Organization (ILO), an agency of the United Nations, has definitively documented the extent of this pernicious process, which is a gross perversion of healthy cross-border commerce as commonly understood. In the mid-1990s, the ILO reports, one-quarter of all US exports and one-fifth of all US imports took the form of intra-firm trade. More to the point, nearly half (well over 40%) of the entire combined import-export trade of US-based multinational corporations, the prime engines of our modern economy, was intra-firm in nature.

Such internal corporate trade, which exists only to capitalize on cheap labor wherever it can be found, is increasingly the reason for America's loss of manufacturing jobs. To discourage it, rather than foster it under the misleading rubric of "free trade," should be a prime goal of US government policy. Enter US Rep. Richard Gephardt, candidate for the 2004 Democratic presidential nomination. The veteran Missouri congressman has lately attracted attention to his campaign through an imaginative approach to universal national health insurance, but it is his proposed cure for disappearing American jobs and worldwide labor exploitation that, win or lose, may be his most lasting contribution to the national dialogue.

Simply put, Gephardt would undertake as president to persuade the WTO to establish an international minimum wage, or IMW. The goal of the IMW would be the creation of a variable living wage in each member country sufficient to ensure proper health and sustenance, and to stimulate the growth of a middle class, thereby eliminating the proliferation of unfair competition from slave, sweatshop, and child labor around the world. Countries refusing to establish a reasonable wage standard for their people would be barred from WTO membership; those complying would be eligible for assistance in meeting base criteria in accordance with their stage of economic development.

The Gephardt plan would not be easy to put in place; it would face stiff resistance from development-hungry countries with shortsighted leaders, entrenched WTO bureaucrats wedded to unregulated markets, and profit-seeking global corporations on the prowl. But a committed White House could make it happen. In Dick Gephardt's words, "The IMW will eliminate the race to the bottom by building a floor -- a standard of decency below which no company which seeks the benefits of the global trade system may go." It's a noble and visionary concept. More than that, it just might work to save American jobs.

Wayne O'Leary is a writer in Orono, Maine.

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