(07/25/05) Clyde Prestowitz quoted in the Los Angeles Times
BROWNSTEIN COMMENT: Economic Nationalists Raise Their Voices
Los Angeles Times
Copyright 2005 Los Angeles Times
July 25, 2005
BROWNSTEIN COMMENT: Economic Nationalists Raise Their Voices
By Ronald Brownstein
It's a sign of the times that the House Republican leadership believes
the only way to win approval of a free-trade agreement with Central
America this week is to first pass legislation bashing China for its
That legislative minuet is a clear indication the economic nationalists are back.
The economic nationalists were the politicians and policy analysts who
raised the loudest alarms about the commercial challenge posed by Japan
in the 1980s and early 1990s. They wrote books such as ``Japan in the
Passing Lane'' and ``Japan as Number One,'' warned of the
``deindustrialization of America'' and touted industrial policies to
promote more cooperation between business and government.
Former Rep. Dick Gephardt, D-Mo., was an economic nationalist. So was
Ross Perot. Clyde Prestowitz, a former trade official under President
Reagan, was a leading thinker among them. Labor-union presidents,
executives at manufacturing companies threatened by low-wage foreign
competition and members of Congress sympathetic to either filled in
For roughly the last dozen years, the economic nationalists have been
exiled to the edge of American politics. But, like the cicada, they
have returned, this time in the debate about the Central American Free
Trade Agreement and the noisy dispute over the bid from China's CNOOC
Ltd. to purchase Unocal Corp.
In the 1980s, the economic nationalists fed on anxiety that Japan was
eclipsing the United States as the world's dominant economy. Today,
they are drawing energy from concern about the loss of jobs to rising
economic powers such as China and India, as well as low-wage
competitors such as the six small nations included in the proposed
The common thread is that the economic nationalists, then and now,
insist the United States needs a more confrontational trade policy, and
a more activist government economic strategy, to promote and protect
high paying American jobs.
``A lot of these issues were raised in the 1980s, then we got really
lucky when Japan hit a bump in the 1990s,'' said Prestowitz, president
of the Economic Strategy Institute and author of ``Three Billion New
Capitalists,'' a compelling new book on the challenge from Asia. ``But
we haven't really addressed most of the issues that Japan posed in the
1980s and a lot of those things are coming back.''
The economic nationalists don't uniformly oppose future trade deals;
Prestowitz, for instance, supports CAFTA. Yet almost everyone in this
camp shares a fear that in the international economic competition,
America is ``falling dangerously behind,'' as Sen. John Kerry, D-Mass.,
the 2004 Democratic presidential nominee, put it as the Senate debated
CAFTA last month.
The economic nationalists also share a common agenda centered on
increasing federal funding for scientific research and education,
reducing the federal deficit and dependence on foreign oil, cutting
health-care costs for American employers, reforming education, and
pressuring China, which agreed to modestly revalue its currency last
week, to let the yuan appreciate further.
The convergence of the disputes over CAFTA and CNOOC have provided the
economic nationalists their biggest megaphone in years to press these
Fears about American decline dissipated in the 1990s as Japan's economy
stumbled and America's took off, especially in the Internet boom.
Although President Clinton's administration pushed to open the Japanese
market, his overall free-market orientation -- symbolized by his
support for the North American Free Trade Agreement -- reduced the
influence of the economic nationalists dubious of free trade.
As America's trade deficit steadily rose through Clinton's second term
and President Bush's first, free-trade skeptics in both parties
continued a drumbeat of concern. But they mostly retreated, as Congress
approved free-trade deals with countries such as Jordan and Australia,
and granted China permanent low-tariff access to the U.S. market.
After the Sept. 11 terrorist attacks, the economic nationalists faced
an even larger problem: their arguments about America's economic
security were almost entirely drowned out by the focus on the nation's
But in the 2004 presidential race, the wind shifted. While George W.
Bush staunchly defended free trade, all of the leading contenders for
the Democratic presidential nomination expressed far more skepticism
toward open markets than Clinton had.
The same drift has continued this year. CAFTA squeezed through the
Senate, 54-45. That's seven fewer votes than NAFTA won in 1993. In
1993, half of Senate Democrats voted for NAFTA. Less than one-fourth of
Senate Democrats supported CAFTA.
In the Senate, U.S. Trade Representative Rob Portman skillfully
negotiated for votes from Republicans worried about protecting U.S.
sugar growers and Democrats concerned about labor rights in Central
America. Yet the agreement faces a close vote in the House less because
of its practical impact than because it has become a symbol of economic
That's where the pending vote targeting China's trading practices fits
in. Free-trade advocates widely agree that China's rise has deepened
anxiety about competing with any low-wage economy, which hurts CAFTA.
``China just has a shadow on all trade things,'' says Bill Miller, the
top lobbyist and political strategist at the U.S. Chamber of Commerce.
The calculation is that if House Republicans can please anti-trade
interests by first casting a vote to whack China, more GOP lawmakers
would risk disappointing those interests by supporting CAFTA.
As legislative strategy, it's a brilliant idea. And it might work for
CAFTA. But it doesn't change the underlying dynamic. Amid a new wave of
global competition, concern about America's ability to generate good
jobs is cresting again -- and returning economic nationalism from the
periphery of the Washington debate.