A debate on protectionism
IF the Democratic and Republic campaigns have given any indication so far, the economy and security would be the main issues in the November general elections. When Republicans talked about security, Democrats converted it into a matter of economy. McCain stood solidly behind President George Bush on Iraq saying that troops had to remain there until they “come home with honour”. Democrats turned it around to demand withdrawal of troops questioning expenditures worth billions of dollars in Iraq when people back home have no jobs.
Similarly, when Democrats talked about renegotiating NAFTA, McCain turned around to point out how it would affect US-Canada collaboration on terror, especially in Afghanistan.
Amidst this debate, there are concerns about the future of companies outsourcing jobs to Asian countries like India and East Europe, about the sanctity of international trade agreements like NAFTA and about the future of US’ laissez faire economic model.
“Historically, in the ’70s and ’80s, both Democrats and Republicans were in favour of free trade. We are, however, seeing this new trend towards protectionism on both the Right and the Left,” said Professor Michael Brandl from the McCombs School of Business at the University of Texas at Austin.
Clinton was sounding ominous: “We have got an economy, which is not working for America...Does anyone care about hardworking people of Ohio?”
“We think the terms of NAFTA have to be altered to strengthen environmental and labour protections,” said Obama.
McCain countered them: “I don’t believe in protectionism. I have seen from our history our security being damaged by protectionism and isolationism.”
Brandl, however, felt that even McCain would be under tremendous pressure in the run up to November Presidential election as there was a “great deal of anger on the conservative side” and the conservatives, like Democratic candidates, favoured increased government’s role in economy.
Some people felt that Clinton and Obama were only playing to the gallery in Ohio, which has lost 2,00,000 jobs in manufacturing sector in the past seven years. “I don’t see outsourcing becoming a national bogey. Issues like healthcare and education will dominate the debate at the national level,” said Jim Henson, Director, Texas Politics Project.
Shama Gamkhar, Associate Professor at the Lyndon B Johnson School of Public Affairs, University of Texas at Austin, however, felt that the issue of outsourcing was not a mere electoral rhetoric. “This issue is not limited to Texas. Manufacturing advantage of the US has shifted to developing countries hitting domestic jobs. Unemployment is especially acute in Ohio. At the same time the US economy is undergoing a bad patch,” said Gamkhar, a Delhi School of Economics alumni.
“Stopping tax reliefs to companies outsourcing jobs should not worry people in India simply because, even if it happens—and I have doubts about the US Congress approving it—it does not mean closure for such companies because tax portion of any company’s cost in US is not substantial when compared to other factors like, say, labour cost,” said Gamkhar.