The Spark

the Voice of
The Communist League of Revolutionary Workers–Internationalist

“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx

Trade Protectionism Is Not a Protection for the Workers

Nov 30, 1985

In the last 3 years there has been a recovery in production in this country. Yet, manufacturing jobs have hardly benefitted from the recovery. And by the latter part of 1985, the number of people employed in manufacturing began to fall. The unions have responded to this problem by making the question of the record trade deficit, and the influx of imported products, a major issue. Says the UAW in one of its recent publications, “Already imports have ravaged the American heartland... It’s not just the auto industry – though auto workers have been hard hit. But workers building agricultural implements, producing steel, television sets, and clothing all have watched their jobs disappear into the trade abyss...”

The unions have been sponsoring, along with the Democrats in Congress, a whole smorgasbord of trade legislation to restrict imports into the country. The UAW has been pushing the Trade Emergency and Export Protection Act, which seeks to impose a 25 per cent surcharge on imports from a series of countries, unless those countries cut their trade surpluses with the U.S. The garment and textile unions have been pushing the Textile and Apparel Enforcement Act, which seeks to limit textiles and clothing from about 20 countries to 25 to 40 per cent of present import levels. The United Steel Workers has supported import quotas in steel. Various unions have supported sweeping legislation for the executive branch to protect against and “crack down on unfair trade practices.”

These legislative efforts have been complemented by a very heavy propaganda and agitation made toward the rank and file workers. Unions have sponsored Buy America campaigns. They have organized large rallies, worker delegations for the purpose of lobbying Washington.

It is certainly true that the trade deficit has reached record levels over the past few years. In 1982, the trade deficit was 42 billion dollars. By 1984, it had skyrocketed to 123 billion dollars. In 1985, it is expected to be even higher, in the range of 140 to 150 billion dollars.

The unions claim that this trade deficit, with imports supposedly flooding into the country, is costing hundreds of thousands, even millions of jobs. The assumption is, that if imports were reduced, production in this country would be increased, thus saving the jobs for workers here.

This is a simple solution which assumes that the U.S. can decide to halt imports in this country without any consequences for other aspects of the economy. Of course, this is false. The trade deficit cannot be solved so simply because the trade deficit is not isolated from the problems of the rest of the world economy.

What Does the Trade Deficit Mean?

The world economy has been in a crisis for over 10 years, a crisis marked by stagnating production, and ever higher debts. The huge U.S. trade deficit is one consequence of that crisis, even one form that the crisis takes. It is, first of all, an expression of the fact that the present U.S. recovery from the 1981-82 recession was less weak than that of most of the countries in the rest of the world. The chronically high level of unemployment in this country is one indication of the limits of the recovery in this country. But the economies in most of the rest of the world are in worse shape.

As the U.S. economy grew, demand for imports into the U.S. also grew. But since there has not been corresponding economic growth in other countries, the market for U.S. exports has not grown. As a result, the trade gap has gotten bigger. The main problem has not been rising import levels. This is relatively normal during a period of recovery. The main problem of the trade deficit has been that U.S. exports have barely risen.

In the past, the U.S. had a big export market to the underdeveloped countries. But the underdeveloped countries, with few exceptions, are mired in depression. On top of this, they are weighed down by the crushing debt to Western banks. Foreign exchange, that used to pay for imports, now returns to Western banks in the form of interest payments.

Neither have the industrialized countries provided a growing market for U.S. exports. The growth rates of these economies have been generally much smaller than that of the U.S. Several have had hardly any economic growth at all. England, France and Canada still suffer from double digit unemployment rates. Even the stronger economies of West Germany and Japan are suffering under record-high unemployment. In fact, Japan with the highest exports to the U.S., has a domestic market which has expanded very little. Since 1982, Japan’s growth has been heavily based on its export markets, up last year by 18 per cent in volume, while domestic demand rose only 3.6 per cent. So, even in Japan, there is a relatively small market for U.S. exports.

The Contradiction of the High Dollar

The second reason for the U.S. trade deficit lies in the high exchange rate of the dollar which makes U.S. products more expensive abroad, and imports into this country cheaper. This strong dollar is the result of the U.S. policies, one of the means by which the U.S. was able to pull out of the 1981-82 recession.

High interest rates in this country attracted foreign capital seeking the highest rate of return. There was a massive infusion of capital which went to help cover the U.S. federal deficit and the growing private debt, while it also stimulated investment and production in this country. In other words, to the extent that this capital flow stimulated the economy, it also helped stimulate job growth.

But this infusion of capital had a negative side to it. The capital that came from other countries was not invested in those countries. The lack of capital became a drag on their economies; this was an important reason why their recoveries were either weak or non-existent and why there thus could be little room for U.S. exports. Moreover, the very high dollar exchange rate also made U.S. products more expensive and imports into the U.S. cheaper.

This is the contradictory outcome of the high U.S. dollar. On the one hand it attracts desperately needed foreign capital to finance the U.S. federal budget deficit and all the other debts of the shaky financial structure. On the other hand it aggravates a mushrooming trade gap.

The October agreement between the central banks of the U.S. and the other industrialized countries to intervene on the money markets to push down the exchange rate of the dollar is like playing Russian roulette with a fully loaded gun. If the dollar doesn’t decline enough and foreign capital continues to flow into the U.S., then chances are that the weight of the moribund foreign economies will eventually pull the U.S. economy down. This is the danger that the growing U.S. trade deficit represents. On the other hand, if the dollar does decline sufficiently to stem the growth in the trade deficit, it will also stem the flow of foreign capital; even reversing the flow of capital, causing it to flow out of the U.S. financial instruments. Then where will the money come from to fund the federal deficit? Either the budget deficit will have to be cut drastically – which will mean that a lot of props to the bourgeoisie will be done away with – and this could be the trigger for a new and deeper recession. Or else, the Federal Reserve will try to prop up the deficit, and also make credit plentiful – by once again printing money, since it has to come from somewhere – leading to a new wave of inflation... and eventually new difficulties for the American economy.

Protectionism or Greater Exploitation – a False Choice

In the face of this situation, which can only turn out badly, the unions stake out the position of one portion of the bourgeoisie. The unions propose protectionist legislation to stem imports and balance the trade deficit. But this would definitely not create jobs. It would be the reverse. Protectionist measures which started in this country would simply bring other countries to do the same thing. Protectionist barriers would go up all over the world. The U.S. would cut down on imports, but so would other countries as well. And this would bring about a world trade war that would lower the demand for manufactured goods all over the world, and deepen the economic crisis. It is precisely what the bourgeoisie in this country fears, although a section of it is pushing to have its particular industry protected by some kind of trade barriers. It is why the Reagan administration so opposes enacting protectionist legislation. Protectionism in a world dependent on foreign trade is a disaster. History has proven this.

The most famous example of the results of protectionism was the passage of the Smoot-Hawley Tariff Act of 1930, enacted at the onset of the Great Depression. Import duties were raised to 50 per cent. The measure provoked retaliation by 25 other countries. World trade declined precipitously. U.S. exports fell by almost 70 per cent in 2 years. The world depression deepened substantially. Unemployment was greater than ever on a world scale.

Under certain circumstances, the bourgeoisie may once again resort to protectionism. This may happen if the economic crisis deepens and competition among the capitalists for a shrinking market heats up on the world scale to the point that it can’t be controlled. But in that case, protectionist measures will be one weapon in an all-out war. There is a danger that the trade war won’t stop at that. It could burst out into another world war, just as the trade war of the 1930s became World War II.

Protectionism, in today’s world of highly developed international economic interdependence, is certainly not a protection for jobs.

Of course, the policy of those people today – like Reagan – who refuse protectionism does not offer more protection for the U.S. workers’ jobs either. Reagan’s policy lies in the direction of imposing more concessions on the working class, in order – supposedly – to stimulate production. Reagan says that the problem of the trade deficit is that U.S. industry is not competitive enough, that the U.S. workers are paid more than workers in other countries. According to this view, the U.S. workers have to become more productive in order for the U.S. to be able to compete in the overseas markets, as well as recapture U.S. markets from the imports. The implication is that more jobs will result.

In fact, all that Reagan does is give a rationale for what the bourgeoisie is doing today to increase its profits. The capitalists take advantage of the crisis, in which there are fewer jobs and greater competition for the available jobs, in order to pressure the workers still at work, to do more work for less money.

More Production Doesn’t Mean More Jobs

The result of such a policy can only be fewer – not more – workers, putting out more production. This, in fact, is what happened to industrial jobs as production increased coming out of the deep 1982 recession. According to the Federal Reserve census of industry, during the first 2 years of the recovery, production increased by 19 per cent. But employment in production increased by only 9 per cent. In 1985, while production was increasing slightly, the manufacturing companies managed, nonetheless, to slash one-half million jobs.

This loss of jobs in relation to production, the process which the bourgeoisie euphemistically calls “restructuring,” has been concentrated in basic industry. In the auto industry, the scene of fabulous profits over the past 3 years, there has been a recovery in production, a recovery in profits, but a much smaller recovery in production jobs. Thus, between 1982-83, while employment of production workers increased by only 11 per cent, production increased by 25 per cent. In the following year, production increased another 21 per cent, while only 16 per cent more production workers were brought back to work. The UAW estimates that, among the auto workers it represents, productivity increased 25 per cent in the 3 years of 1981-83.

The steel industry has closed down more than 16 per cent of its capacity since 1977, and with this there has been a tremendous cutback in jobs. However, from the trough of the 1981-82 recession, production in the industry increased by almost 30 per cent. One would think that more production would have brought back more jobs. But this was not the case. In this period, the number of production jobs actually continued to fall by 10 per cent. So the steel companies managed to increase production with fewer workers doing the work than during the depths of the last recession.

Today, those left working are working for less. According to the Bureau of Labor Statistics, in 1973, production workers in this country averaged a weekly wage of $198.35 in constant 1977 dollars. In 1984, wages stood at $174.85 a week, in 1977 dollars. This is almost 12 per cent less than in 1973. Moreover, this wage is before taxes. Given the fact that inflation pushed wages up into higher tax brackets, tax brackets that were not adjusted for inflation, workers are paying a higher proportion of their wages to taxes. So their real, net earnings are even lower than the 12 per cent reduction.

The capitalists slash away at the workers’ standard of living. They create high unemployment and a decrease in wages. This results in a contraction of the domestic market, which means that a large part of the population, the working class, has much less money to buy consumer goods. This in turn puts a further downward pressure on production – and jobs, and it leads to a further aggravation of the crisis.

So the working class is suffering higher unemployment – even when the capitalists increase production. This flies in the face of what the unions say the workers can get out of this system. The unions have always claimed that when the companies do well, when production and profits increase, the workers share in the benefits. But the companies have been demonstrating that this is a cruel delusion, that what counts is force, the relationship of forces between the capitalists and workers. And the capitalists are prepared to fight to take what they can from the workers. So with higher production, instead of more jobs, the companies are shoving through greater speed-up and higher overtime. There is no doubt that if the workers continue not to fight, production could increase, and the bosses could do immeasurably better; while there will be still higher unemployment, a still lower standard of living, and still worse working conditions.

The Unions’ Alignment with the Democrats

The capitalists don’t have a solution to the crisis of their own system. Faced with the crisis, a crisis that they cannot control, their solution is simply to protect their profits by making the working class pay. The unions’ solutions – aligning themselves with one of the two bourgeois parties, the Democrats, and supporting a legislative program of protectionism – cannot be a solution for the workers.

The protectionism that the unions advocate today feeds into the capitalists’ policy. To ever growing problems that the workers face, the unions give false solutions. They avoid the real questions for the workers, that is: what is the relationship of forces between the workers and the capitalists; how can the workers force the bourgeoisie to give back part of their profits.

By avoiding this fight today, by advocating protectionism, the unions also feed into the capitalists’ future policies. They prepare the workers to accept that they should compete against other workers, by making them believe that it is other workers who are taking their jobs. One example of where this propaganda can lead was the murder of Vincent Chin, a person of Oriental descent, clubbed to death by a foreman from an auto plant in Detroit, because the foreman thought that Chin was Japanese: he said that Chin’s people were taking American jobs. Ultimately, this policy of the unions prepares the workers to accept to go to war. Instead of organizing the workers to fight against their boss, their oppressor, the unions are preparing them to fight race wars in this country and wars against workers in other countries.

The Need for a Class Struggle Policy

The UAW wrote recently that unemployment is caused by “a system that is rewarding countries that squeeze their workers the most.”

It’s true that this whole crisis, and the misery that it is causing, is due to the functioning of the capitalist system, to the capitalists’ right, under this system, to invest where they want, where it is most profitable. However, unions like the UAW gloss over the complete contradiction in interests between workers and the bourgeoisie. In fact, in blatant contradiction to what it says about the system, the UAW says that in order to protect the workers’ jobs the workers should depend on the capitalists’ politicians to pass some legislation, to set up a few obstacles within the capitalists’ system, to their own investment policies.

The UAW calls for a national industrial policy. In using such a vague term, the UAW allows some liberal Democrats to put themselves forward as the champion of a policy which could resolve the crisis. But the truth is that in order to get the society out of the crisis, an economic policy controlled by the whole society would be necessary. A real national industrial policy means planning, wherein investment is not a question of how much profit it brings a class of exploiters, wherein it is a question of allocating the social wealth in order to serve the social need. Such planning can come about only after a complete change of this society, that is, the overthrow of capitalism.

In the short term, the only solution for the workers is to fight against the capitalists. The workers can prevent the capitalists from making them the only victim of the crisis. The workers can force the capitalists to give back some of their profits, even if this doesn’t resolve the crisis. In the long-term, the only logical solution is for the workers to expropriate the capitalists, to take the capitalists’ money, their control over production and investment; for the workers to decide where investment should be made. The workers have to decide what has to be produced, where and who should do the job. In other words, if the workers are going to protect themselves, they are going to have to break with the system and reorganize production themselves. But in order to do that, the workers need a policy that recognizes that the workers cannot expect that any conciliation is possible with the bourgeoisie; a policy that recognizes that only through the class struggle can the working class expect to protect its own interests.