When the Stimulus package included some “Buy America” language the world was outraged. Free Trade, Free Trade was the clear message. The omitted question is, “What do you mean by Free Trade?”
In my opinion, to have truly Free and Fair Trade, the definition must have two parts:
1. Goods and services can be traded across borders without government impediment; and
2. The producers of those goods are subject to the same or similar regulations.
As to item 1, everyone knows that our trading partners do not permit free trade in both directions. If the US produces a product or service that if imported into the country would make it difficult for local producers to compete, then tariffs or regulatory impediments to free trade are established. The US, of course, does this as well.
The big chasm lies in item 2. Regulations are imposed to level the playing field. A company that wants to reduce pollution cannot do so if its competitors will not impose upon themselves the costs associated with reducing pollution. In the not too distant past, the relevant competition was among US and European companies subject to the same or similar regulations. Now, the relevant competition includes China, Mexico, India and many other countries that have no such laws or very weak laws that are not enforced. The playing field is out of whack.
US manufacturers produce whatever goods we still produce in facilities that are as environmentally clean and as safe as any in the world. When a company manufactures products or services in another country, including Mexico, these costly regulatory requirements need not be met.
Should we impose our regulatory philosophy on others?
Should we loosen our regulations and endanger workers and the environment?
The answer is that if a company desires to sell its goods into the US, then that company should be required to respect at least the environment we all share, and the safety of the people making these products, to the same extent as their US competitors must.
No company is REQUIRED to sell its goods into the US. Therefore we are not imposing our regulatory standards on others. Selling goods into the US is a privilege.
Second, the US works diligently to protect human life. This includes plant safety and protection of the environment in which we live. We cannot reduce our standards. In fact, we desire to strengthen them, but cannot if doing so puts more of our companies out of business in the face of unregulated international trade.
How can we accomplish this?
No question that this is a difficult proposition.
First, several countries, such as those in Western Europe, Japan, Australia, etc. already have proven track records for respecting the environment and human life. Aside from battles over specifics products, any imports manufactured in those countries would experience no import impediment. This is free and fair trade.
A near-term date would be set for other foreign countries to bring their companies up to appropriate world standards in air and water pollution and in worker safety. When the country is ready, it will pay sufficient US inspectors to come to the country to review compliance by all companies in that country that desire to export goods to the US. These inspections will be annual until the country passes and proves compliance with internationally compliant worker safety and environmental laws.
Those companies that pass will have free trade access to US markets. Those that fail will be allowed to import but after paying a tax at a rate higher than the costs to come into compliance, or they can choose not to trade in US markets and avoid the tax. Then whenever their plant is cleared, they will be permitted to trade with the US. Set thresholds will be established for the foreseeable future, that all companies in the world will have to meet. A company could improve itself far into the future and be certified through that date. Then use that fact in its marketing.
Ideally all developed countries would band together to create and enforce these rules and they would apply to trade with any country that is part of the group. At least one part of the world trade playing field would be leveled, we would have freer and fairer trade, and we would not have to wait for the next Kyoto Accord to begin to reduce pollution.
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