After the recession ends, a new and chilling reality will dawn in America: For thousands of unemployed workers in autos and steel and other basic industrial sectors, the recession isn’t going to end. Those workers will never be called back to the plant. Faced with this prospect, the United Auto Workers began a legislative counteroffensive, which has become the subject of pious clucking among high-minded policymakers. For many years, the UAW was the progressive pillar of organized labor, the one union that usually took the high road.
Now, it seems, the UAW is playing down and dirty with the cherished principle of free trade. The action centers around H.R. 5133, a bill the union drafted last winter that would effectively blunt the influx of Japanese imports by requiring that cars sold in America be substantially made in America. Broadly dismissed at the time as a raw and even dangerous lunge toward protectionism that could rapidly lead to trade wars with our allies, the UAW’s legislation was given little chance for more than embarrassment in Congress. A drastic remedy proposed by a union in desperate circumstances.
The embattled union set about doing what labor lobbyists do best —– prowling congressional offices for support. Reluctant representatives began receiving batches of letters from the rank and file back home. Local union leaders came to call. If a congressman still hesitated, he might hear from the UAW’s political money man, reminding him of past and future campaign contributions.
Week by week, as unemployment spread across the nation, more legislators put aside their private misgivings and signed on. H.R. 5133, as one sponsor put it privately, is “a crappy bill,” one he hopes he will never have to vote for; but he may be stuck now. By the end of June, H.R. 5133 had collected 217 cosponsors in the House, virtually a majority, and sixteen in the Senate. Senator Edward M. Kennedy, long faithful to free trade, signed on early, perhaps mindful that this is an important labor issue that will be remembered by the UAW in the presidential politics of 1984. On the other extreme, Representative Delbert Latta, a retrograde Republican from Bowling Green, Ohio, also became a sponsor. Latta has a lot of auto workers in his district.
If UAW lobbyists can steer past various legislative obstacles, they hope for a floor vote, at least in the House, before the November elections. In which case, respectable objections may wilt in the presence of political imperatives. Representative Fortney H. Stark Jr., a Democrat from Oakland, California, who signed up when a GM plant closed in nearby Fremont, laying off 2,500 workers, neatly described the options: “I have a very simple measure. I walk through my district and count all the Japanese industrial executives. Then I walk through again and count the American auto executives. Then I count the members of the UAW. This way, I have no trouble deciding how to vote.”
Like the other major industrial unions, the UAW is hemorrhaging and fighting for its own survival. And H.R. 5133 is an extreme measure. In broad terms, it would compel foreign and domestic auto makers to operate factories in this country and employ American workers if they wish to sell their cars here. The more cars they sell, the greater the demand for “domestic content” in parts and labor, rising to a requirement of ninety percent for the best-selling models. Obviously, this plays hell with the principle of unfettered international commerce that our government has espoused since World War II.
But H.R. 5133 is also the glimmer of a good idea. Certainly such drastic legislation will not be enacted without substantial softening, but it provides the opening wedge for a fundamental debate that cannot be avoided in the Eighties. Crudely stated, the bill forces the politicians to decide if America will simply stand by and play the good-natured wimp in the name of free trade while a major portion of our industrial base and hundreds of thousands of our best manufacturing jobs are lost to Japan and other countries that do not play fair themselves.
The governing ethos of free trade has dominated both political parties for a generation. Too bad about the auto workers and the steelworkers and the others, the free traders say with a shrug, but on balance, free trade is a good thing for all of us. The wounded labor unions counter with an angry no, maintaining that America is playing the patsy by following old rules that no longer apply to the new realities. While our markets are relatively open to imports and our major multinationals are free to make their own investment decisions, every other major industrial nation plays a different game, controlling and subsidizing capital investments, protecting their basic industrial sectors from foreign dominance in one way or another. If the U.S. doesn’t start to play tough, it is going to lose millions of jobs in this decade, including the best-paying factory jobs that have helped so many working-class families attain middle-class status. In time, as Americans understand the ruinous consequences of this, more and more are going to side with labor. If Democrats or Republicans do not respond, then the next George Wallace will.
Something must be done. The auto industry is in its thirty-ninth month of depression. Thirty major plants from California to New Jersey are closed. Approximately 250,000 auto workers have been laid off, and supplier firms, materials industries and dealerships have let go of twice that number. Right now, of course, the UAW bill provides the Democrats with an opportunity for election-year flimflam at the Republicans’ expense. If Reagan is forced to a veto, so much the better.
An uglier sentiment, tinged with racism, bubbles just beneath the surface: the growing resentment toward the Japanese. In Detroit, a union parking lot has a sign up that reads, Park your imports in Japan. More sophisticated critics are fed up with the fact that American taxpayers, in effect, pick up the tab for Japan’s national defense, protecting the sea lanes free of charge for our competitor. Even congressional offices are receiving nasty “anti-Jap” letters from high-tech engineers in Silicon Valley. California governor Jerry Brown put it this way: “In a sense, we are forming a colonial relationship with Japan. We ship her raw materials, she ships us finished goods.”
Representative Richard Ottinger of New York, the Democrat who first introduced the UAW bill, thinks that Japanese industrialists ought to get the message and respond now, rather than risk congressional action. “Nobody really wants to set up a protectionist world,” Ottinger said. “What we would like to do is use this as leverage to make sure a fair situation is worked out.”
The principal pressure is aimed at Toyota and Nissan. Toyota, the leading imported automobile in the U.S. market, has virtually no production here. Nissan, which makes Datsuns, is opening one truck assembly plant in Tennessee, but it will depend mostly on imported parts. No Japanese auto maker followed the lead of Volkswagen in making substantial investments in American production. The Volkswagen Rabbits now sold in America approach seventy percent domestic content. “They can’t tell us it can’t be done,” said the UAW’s chief lobbyist, Dick Warden, “because Volkswagen did it.”
The UAW’s domestic-content legislation, or some variation of it, would avoid the worst protectionist features of hard quotas or high tariffs. If Americans prefer Japanese cars because they are better cars, they can still buy them. If the Japanese are more efficient managers, they can transfer their productive efficiency to American factories. “Some portion of the $13 billion auto market that the Japanese have in the United States ought to be built here, instead of running the factories overtime in Japan,” said the UAW’s Don Stillman.
Toyotas and Datsuns are the political foil for H.R. 5133, but the UAW’s real target is closer to home – the American multinational corporations who make and sell cars around the world, particularly General Motors and Ford. Looking into the future, beyond the recession, the union sees a grim prospect in which U.S. companies, in search of cheaper labor and global efficiency, build more and more factories in other countries. This trend toward a “world car” is already under way, and the UAW predicts it will accelerate if the government doesn’t intervene. About 2.5 million engines and 1.7 million transmissions will be imported for American cars in each of the next few years. An independent survey estimates that the imported content of American cars, which is now less than five percent, could increase to thirty percent by 1985 and nearly forty percent by the end of the decade. Would you buy a J-car from Brazil? They are already here.
GM has been particularly brusque in its disregard for American workers. This spring, the UAW reluctantly agreed to a revised contract permitting a general cost-cutting campaign in GM plants – an agreement that barely won ratification because so many workers were skeptical of the company’s cries of distress. As if to prove them right, GM announced a generous new bonus plan for its executives the day the contract was signed. The plan was hastily modified to quell rebellion. A few weeks later, GM added further injury by announcing that it had just completed an agreement to import subcompacts similar to the Chevette from Japan. The company will buy as many as 200,000 a year from Isuzu Motors, in which GM owns more than a one-third interest. This was an ominous message to the union that similar deals would follow, and that the production jobs on small cars would thereafter be exported to foreign workers.
Inevitably, the American workers themselves are blamed. Their wages are too high and union work rules too inefficient, making the cost advantages of foreign production overwhelming by comparision. The UAW and other unions are trying to reform the inefficient work rules, but the wage differential between U.S. and foreign workers portends an unacceptable ultimatum: if Americans want to keep their jobs, they must accept less compensation for their labor. Trouble is, American workers don’t live in Brazil or Japan; they pay American prices. Thus, the global logic of economic efficiency is forcing a brutal reduction in the standard of living for millions here.
The wage argument against American labor is not nearly as persuasive as it used to be. U.S. auto workers are still the best paid anywhere, but the gap between the U.S. and other industrial nations, including Japan, is narrowing steadily. Overall, the American manufacturing worker is no longer the best paid in the world. In 1980, according to U.S. Bureau of Labor statistics, production workers in Germany, Belgium, the Netherlands and Sweden earned more, and those in France and Canada were close to parity. The governments in those countries, by the way, all provide substantially greater social benefits for their citizens – i.e., subsidized housing, family allowances, guaranteed health care – than American workers enjoy.
Who is to blame? Everyone and no one. The Detroit executives should properly be at the top of the list. All along, they were as complacent about inefficient production as the union, and more to the point, they profoundly misjudged the future of their own industry. If Detroit has listened to its critics (including UAW leaders), or even to the federal government, it would have been better prepared for the dramatic shift in buyer demand toward smaller and more efficient cars, which the Japanese and other importers answered effectively. The Washington politicians were complacent, too, particularly for not demanding fair play in international trade. For two decades, U.S. negotiators have sweetly preached free trade while the other guys kicked and gouged us at every opening. That was tolerable when American industries overwhelmed world markets. In that sense, no one is to blame. Free trade allowed our economic competitors to grow and innovate while America’s factories relied on the country’s natural advantages.
Now that system has to change —– and soon –— or domestic politics in America will witness an ugly rebellion in the next few years. The distant promise of high-tech industries will not help those who remain laid off. Neither will robots or any of the technological innovations intended to make American industry more efficient. We are talking about a fundamental restructuring of American employment, the kind that could sow political bitterness for a generation.
No one pretends that those economic trends can be repealed, but a decent respect for social order ought to compel the politicians to reexamine the premises of free trade and how it really operates in the world of multinationals. The gut question is this: Should global corporations based in the United States continue to move their capital investments –— and the jobs capital creates —– around the world, completely free of the social consequences for America? The Reagan administration, devoted to the “magic of the marketplace,” as the president calls it, is most unlikely to address that. Nor are the neoliberal Democrats who are already writing off autos and steel as “sunset” industries of the past. But any new economic agenda that claims to be progressive must start by confornting the multinationals and the damage they do in the name of efficiency.
In the simplest terms, this new agenda would challenge the definition of efficiency that has prevailed under the banner of free trade. A corporation draws up its own balance sheet for every investment decision —– comparing wages, taxes, transportation costs and so forth —– and decides that, all things considered, it would be more efficient to make axles in Japan or engines in Mexico or whatever. In theory, the bottom line is unassailable, because presumably everyone benefits from efficiency.
But the narrow balance sheets of corporate decision makers inevitably leave out costs that others must pay, such as the social and economic costs created by transporting capital away from established centers of industry, not to mention the intangible misery that’s caused. In narrow terms, one could probably calculate that it would be more efficient to close down the aging factories in Detroit and start over again in Brazil. Except someone would have to pay for the consequences. The same consumers who theoretically might benefit from cheaper cars from Brazil would bear an enormous burden via government taxation for the economic dislocation —– the lost value of public investments like roads and schools, the welfare costs of unemployment, shrinking tax revenues, the need to retrain and relocate dispossessed workers. In rough terms, this is what makes many global transactions by multinational corporations losers for Americans generally while the deals look like winners for the individual companies. In the long run, multinational reform must force them to consider these external costs in their calculations; otherwise, Americans are going to subsidize their own deindustrialization.
Such reform isn’t as radical as it sounds. Seventy-five years ago, when industrial workplaces routinely violated the health and safety of their workers, companies argued against the improvements imposed by government regulation on the grounds that these added to their production costs, raising prices and making them noncompetitive. The same objection was made when government began imposing environmental rules on corporations. In time, the corporate managers were compelled to accept that these so-called external costs of doing business must be included in their balance sheets, not pushed off on taxpayers. Now, a similar case must be developed: multinational corporations cannot transport jobs and factories around the world without bearing some responsibility for the ruin they leave behind.
The UAW has begun to make that case and is likely to find growing respect for its position. Political scientist Joel Rogers, among others, predicts that the simple banner of free trade must yield to a more complicated understanding of how the world really works and how Americans must defend their interests in it. The bill’s message to other nations, Rogers suggests, should go like this:
“We recognize the global market for cars, but we’re not going to tolerate investment decisions made on the basis of depressed wages in third-world countries and elsewhere. If you expect to get into the American market, then you are going to have to do some production in America.”