Left's Trade Quandary

Howard Dean, leading contender for the Democratic presidential nomination, has gotten religion on the issue of trade. After a decade spent supporting the concept of unfettered world markets and endorsing such commercial initiatives as the North American Free Trade Agreement (NAFTA), the good doctor has belatedly joined hands with Dick Gephardt and Dennis Kucinich as a bona fide member of the "fair-trade" left. In so doing, he has aligned himself economically with the Democratic populist bloc and clearly set himself apart from the "free-trade" wing of the party, represented by candidates Kerry, Edwards, Lieberman and Clark.

Dean's formal breakaway took place on Oct. 16 at Georgetown University in Washington, when the former Vermont governor outlined a long-awaited comprehensive economic plan. His address dutifully touched all the usual bases required of a Democratic policy paper on economics -- concern for workers, criticism of corporations, defense of unions, advocacy of tax justice -- but the key elements, the ones that set Dean on a new path, honed in on the party's domestic fault line, trade policy, and widened its internal schism. He was attacked almost immediately by John Kerry, who accused him of protectionist apostasy.

Dean's Georgetown speech pointedly called for fair, not free, trade and lambasted multinational corporations that export employment to countries lacking strong labor and environmental standards; it demanded strict enforcement of such minimal worker protections as already exist in previously negotiated trade agreements and rejected any future federal initiatives encouraging US corporations to move overseas. Dean identified the flight to low-wage venues as the principal cause of lost American manufacturing employment and suggested a reorientation of US economic policy away from aiding multinationals and toward boosting smaller businesses that keep jobs in their communities. "This is not a question of being for or against trade," the ex-governor said. "The question is under what rules trade should be conducted, for whose benefit those rules should be drawn, and how those rules should be enforced."

Those words crystallize the choice faced by left-leaning Democratic politicians as we head into 2004. Should fair-trade progressives support, as some suggest, a withdrawal from international trading organizations and overtly adopt what free traders disparagingly describe as a "protectionist" position, focusing inward economically? Or, conversely, should they continue to advocate a trading economy, but (as Dean seems to imply) back reform of the world commercial system that would reorient it in a less corporate-dominated direction keeping the US within the existing trade framework, but changing the way the game is played?

Historical perspective tends to favor the reformers. To begin with, the current world trading regime was never intentionally designed to benefit multinational corporations (which barely existed at the time of its inception) or to oppress labor and the poor. Quite the reverse. The primary institutions governing trade since World War II, the International Monetary Fund (IMF), the World Bank, and the General Agreement on Tariffs and Trade (GATT), were all liberal creations arising out of the pragmatically idealistic ideas of British economist John Maynard Keynes and the American New Dealers.

The IMF and World Bank were products of the Bretton Woods (N.H.) economic conference of the soon-to-be victorious Allies in 1944; the GATT, which morphed into the World Trade Organization (WTO) in 1995, followed in 1947. The common purpose of all three was to avoid the financial warfare that had contributed to the recent global conflict, provide monetary aid to nations in economic distress, and facilitate beneficial trade and economic development worldwide. The aim was to collectively forge a fairer, more rational world economy.

The goal of these postwar institutions, in other words, was only secondarily and tangentially to benefit private capital; the ultimate objective was to ameliorate capitalism's harsh nature and steer it in a socially responsible direction. Furthermore, until roughly 1980, that objective was largely being met. It is only in the last 20 or so years, in conjunction with the rise of the multinationals, that international trade and its governing bodies have begun to cause more difficulties than they resolve, contributing to deindustrialization in the developed countries, environmental degradation and labor exploitation in the developing world, and a widening global income gap.

Two respected contemporary thinkers who have laid out the problem and proposed reformist solutions are Joseph E. Stiglitz (Globalization and its Discontents, 2002) and George Soros (The Crisis of Global Capitalism, 1998). Coming from different vantage points -- Stiglitz was an official with the World Bank during the Clinton years, and Soros is a renowned financier and philanthropist -- they have reached similar conclusions. It is a perverse change in ideology at the IMF, WTO, and World Bank, they argue, that has brought free trade and open markets into disrepute.

Stiglitz calls the change the "Washington Consensus;" Soros labels it "market fundamentalism." It is, in essence, economic laissez-faire on a global scale, and it became the dominant approach to international commercial relations during the Reagan-Thatcher era of the 1980s, when far-reaching alterations took place in the Bretton Woods style of governance. The IMF and the World Bank, previously Keynesian institutions conscious of the weaknesses of markets and willing to apply expansive, government-based remedies, committed themselves to deregulation, privatization, tight fiscal and monetary policies, severe loan conditionality, capital market decontrol, and labor flexibility -- in other words, "market supremacy," as Stiglitz puts it. The new focus was less the lifting up of impoverished Third World countries and more the protection of Western financial capital and multinational investments.

Stiglitz and Soros propose a number of fixes: more "transparency" and less secrecy in trade negotiations, greater democratic input into the selection of appointments to world economic bodies, increased regulations on footloose international capital, creation of an adequately funded public loan guarantee agency for debtor nations that would bypass private banks. Other reformers would doubtless offer other cures, but the key is reform, not isolationist withdrawal. What's required is a reassertion of the original mission of the postwar institutions that emerged from the Bretton Woods conference. There are hopeful signs that most of the fair trade Democratic left, including its recent convert Howard Dean, grasp this reality.

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

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