WASHINGTON, D.C. – This December, Democratic Senator Jeff Merkley of Oregon introduced the “Level the Playing Field in Global Trade Act of 2013,” also co-sponsored by Democratic Senator Tammy Baldwin of Wisconsin. It proposes amendments to the 1930 Smoot-Hawley Tariff Act, attempting to hold foreign manufacturers accountable to the same higher standards to which American companies are held. In other words, foreign products cannot be cheap and push away more expensive American goods on the account of unsustainable and inhumane practices. Currently, a congressional committee is assigned to review and consider the bill before possibly sending it on to the House or Senate.
The Level the Playing Field in Global Trade Act would ensure that sub-standard wages, lack of workplace safety practices, and environmental degradations are properly accounted for as unfair subsidies by foreign countries when calculating American duties. It also rewards companies that meet high standards on a global basis in wages, workplace safety and environmental protection.
The proposed legislation comes at the end of a year which saw the collapse of the Rana Plaza in Bangladesh, killing over 1,100 textile mill workers who supplied apparel for 23 international brands. The bill is also a reaction to the fact that the global economy grew at an average rate of 3.3 percent per year between 1995 and 2007, yet annual American wage growth remained at less than three percent. Herein lies the crux of the problem: foreign manufacturers who get away with lower costs by not adhering to higher standards create a substantial negative effect on United States manufacturing and the U.S. economy.
In press releases by Merkley and Baldwin, it is pointed out that current American law and trade agreements prohibit “dumping” of products, where companies export products at prices below the cost of production or cheaper than they sell for in the home country and allow the U.S. to impose duties to make the sale price in America reflect what the true cost would be without cheating. The Level the Playing Field in Global Trade Act would, for the first time, recognize that egregious environmental and labor practices are a form of illegal subsidy that can be remedied by U.S. duties. It would also reward companies that adhere to high global standards by creating new trade and enforcement incentives.
Specifically, Merkley and Baldwin want to enhance the anti-dumping and countervailing duty laws in the Smoot-Hawley Tariff of 1930. This should not be confused with modern popular debates about global free trade.
At the time, the Smoot-Hawley Tariff had been criticized by some to be a form of protectionism that led to beggar-thy-neighbor policies amongst trade partners. The Smoot-Hawley Tariff Act indeed raised U.S. tariffs to historically high levels in the years leading up to World War II. In the midst of the Great Depression, the original bill meant to provide relief for American farmers by protecting them against foreign agricultural imports. It instead became a means for lobbyists to raise tariffs in all sectors of the economy.
It is argued that the 1930 Tariff led to a retaliation of increased duties on American exports by other foreign economies. For example, a month after the Smoot-Hawley Tariff was adopted, Spain raised duties on automobiles, tires, tubes and motion pictures – most of which were imported from the U.S. Nonetheless, opponents of this argument claim that protectionist pressures abroad were mounting well before Senator Smoot and Representative Hawley proposed their legislation. A number of countries either had adopted tariff increases or were inclined to do so before the 1930 Tariff Act was passed.
Several decades later, the formation of the likes of the General Agreement on Tariffs and Trade, the North American Free Trade Agreement and the World Trade Organization hold some hope for genuine trade liberalization–assuming laissez-faire economics would ensure sustainable human development along the way.
While the argument continues about whether or not the U.S. and other trading countries are practicing true free trade, or whether or not developing economies need a chance to have their own set of protectionist policies in place, albeit unsustainable, in order to become more industrialized – the bill proposed by Merkley and Baldwin would help ensure that goods imported into the U.S. fully reflect the real costs of paying an adequate living wage, uphold workplace safety standards, and maintain basic environmental protections. Such a policy compliments the ever increasing trend of informed consumers and active civil society who will not tolerate unsustainable practices sourced in the products they buy.
– Maria Caluag
Sources: GovTrak Office of Sen. Jeff Merkley The Economist NBER
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