China

Converts for CAFTA?

Bush sells free trade among the unbelievers

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Charlotte—Give the White House credit for finding one of the few places on Earth where people are more concerned about trade policy than about Karl Rove's phone records for George Bush to pitch the Central American Free Trade Agreement. Unfortunately, a North Carolina mill town is precisely the kind of place that remains highly suspicious of trade liberalization and deeply anxious about America's ability to compete freely in global marketplace.

Stowe Mills in Belmont, across by the muddy Catawba River from the bustling banking center of Charlotte, was not even the administration's first choice for the event. Initial plans called for Bush to visit the Greensboro area, partly in hopes of turning Rep. Howard Coble (R-N.C.) around on CAFTA. But when Coble made it clear he was not about to support the agreement, in part because he sees the face of his dear, departed mother every time he walks into a textile mill, the fallback was a visit to Rep. Sue Myrick's district. Myrick (R-N.C.) is the lone member of the state's House contingent to support CAFTA. The dearth of support reflects the widespread belief that overseas competition is to blame for the loss of textile jobs in the state. Since 1994 the Charlotte area alone has seen 23,000 textile jobs melt away.

So with the deck stacked against him, how did Bush do? In terms of making a clear case for the benefits of trade, remarkably well. Were the passage of CAFTA simply a matter of debating points, Bush took home the trophy.

Bush honed in the fact that the 44 million-strong Central American market, once free of tariffs on U.S. goods, could prove very lucrative. He noted that U.S. exports currently face significant tariffs on items ranging from heavy equipment to textiles to farm products. Pork, for example, faces a 47 percent tariff. Or as Bush told the crowd: "You grow a lot of hogs here. And you're good at it; you're really good at it. And you grow more than we eat."

With North Carolina a top pork exporting state, that was an important rhetorical point for the president to make.

Bush also directly confronted the Chinese issue. What does China have to do with CAFTA? Everything, in the minds of many North Carolinians convinced that China is America's direct competitor for furniture, textiles, electronics, you name it. Anxiety about Chinese competition spills over to all trade debate as part of a psychological transference process underpinned by the certitude that wily China will somehow turn any American trade liberalization anywhere to China's wily, unfair advantage.

However, Bush blunted the China fear by pitching CAFTA as a way to tie Central American markets to the U.S. and keep the Chinese at bay. CAFTA would also help strengthen the middle classes of U.S. trading partners in the region, helping to stabilize them politically. These arguments, which frame trade more as a security issue rather than an economic issue, seem to have a great deal of traction with workers in the manufacturing sector who seek reassurance about their place in the world as much as a steady paycheck.

In fact, if Bush really wanted to connect with his audience, he should have expanded on the quick observation that more jobs in a prosperous Central America means fewer people looking to "sneak across the border." North Carolina, like many states in the Southeast, is fairly obsessed with illegal immigration from Mexico and points south.

But what is it that has made the economic benefits of free trade such a tough sell in so many places? In addition to the security angle, it could be that the occasional presidential fly-by extolling the virtues of free trade just does not match the nearly daily drumbeat of large sacks of cash hitting the ground from state and local interests bent on providing business incentives.

While the president argues that agreements like CAFTA let economic resources move freely and efficiently to everyone's benefit, state and local officials scurry around "managing" the flow of jobs and prosperity to communities. This is a huge policy disconnect. North Carolina, for example, recently handed Dell at least $280 million to build a computer plant a short drive up I-85 from Bush's CAFTA rally. If government can manage what amounts to domestic trade among the states so well, why not manage foreign trade as well, with similar incentives to businesses to keep jobs in the U.S.?

The answer is you could, if you wanted a high tax, low-productivity, low-innovation economy, i.e. a fundamentally un-American economy. This is the bedrock pro-freedom argument that Bush did not really make in Belmont and cannot be made often enough.

"Look," the president could say, "I don't know if there will be textile jobs in North Carolina or Georgia or anywhere in America in 10 years with or without CAFTA. But I do know that CAFTA and barrier-free trade promote change and competition in the world. And America changes really, really well."

That line of argument may or may not move the House to back CAFTA, but it has the virtue of being true.