ELKTON, Va.—This story ends down in America’s Deep South, with a report on how a $3.7 billion foreign investment in Alabama that will create thousands of American jobs has sparked vigorous complaints from the US steel industry and the Steelworkers union that it is “unfair.” But it begins quietly on another note here in this pretty little Virginia community (pop. 2,212) nestled in the Shenandoah Valley nearly 100 miles southwest of Washington, D.C. Together, the two otherwise unrelated parts of this article illustrate that while trade liberalization — especially when tariffs are slashed in so-called US Foreign Trade Zones — is clearly beneficial to the US economy, free trade remains politically controversial.
At first glance, Elkton hardly suggests a shining success story that illustrates the benefits of international trade. The deep economic recession has (alas) come to the Blue Ridge mountains; Elkton’s local Chevy Pontiac dealership closed last month, for instance. But business here seems to be great for Merck & Co., the pharmaceutical giant that produces vaccines and medicines in 31 plants in 25 countries. Merck’s sprawling Elkton factory consists of more than 80 buildings that are scattered throughout 1,330 acres out on Route 340 South, about a mile and a half from downtown. It may look nondescript, but this is one of the company’s most important manufacturing locations anywhere. (Just past the plant is a Deer Crossing sign that is riddled with bullet holes, a reminder that folks here in America’s Bible Belt take their guns seriously.)
Merck first set up shop in Elkton in 1941, and now employs some 700 people who make medicines aimed at treating all sorts of evils: HIV, river blindness, Parkinson’s Disease, high cholesterol, glaucoma, and simple pain. There is a $250 million expansion going on, which is expected to add 70 people, possibly many more, to Merck’s roughly $60 million Elkton payroll. The expansion will boost Merck’s production of Gardasil, a cervical cancer vaccine, and is already boosting the fortunes of a long list of workers — some local, others who have come from places like Greenville, South Carolina — who are engaged in the construction: electrical suppliers, painters, carpenters, and so on. If you are looking for a successful American manufacturing plant, this is it.
And if you are looking for an example of how slashing tariffs helps create American jobs by reducing unnecessary costs of production, come to Elkton. Merck pays no US tariffs on the imported raw materials it brings in here through a so-called Foreign Trade Zone. Merck depends upon its duty-free imported chemicals to make its medicines.
So why would Merck executives — the plant manager here in Elkton, Merck’s lobbyists in Washington, D.C., and even one of the company’s official spokeswoman in Merck’s New Jersey headquarters — refuse repeated requests to talk about their success story? If free trade works to enhance your company’s international competitiveness, why not spread the word?
Thirty six percent of American college grads could not name all three branches of the U.S. government, according to a survey that was released last November by the Intercollegiate Studies Institute. The grads also flunked their basic economics. Asked about the role of international trade in a nation’s economy, only 47.5 percent of the graduates answered correctly that trade leads to “an increase in a nation’s productivity.” Twenty percent of those respondents said that they believed that trade “decreases a nation’s economic growth in the long term.” Joe College “appears to be economically illiterate,” concluded the Wilmington, Delaware-based non-profit organization that has been measuring US political and economic literacy since 1953.
If the American public is increasingly economically illiterate, what about some of the nation’s most prominent journalists who report the news that Americans rely upon to form their opinions? Journalists like CNN’s Lou Dobbs, and Louis Uchitelle, a veteran reporter at the New York Times. Recently, both Lou’s passed along uncritically to their respective journalistic audiences some PR spin that is part of an ongoing Buy American campaign sponsored by the United Steelworkers of America. It is not surprising, of course, that Lou Dobbs was happy to pass along the union’s spin without really checking it out. Buy American is what the tub-thumping cable television anchor sees as his journalistic market niche (even though he majored in economics at Harvard). But when a senior reporter for the New York Times, one of the world’s great newspapers, soberly informs his readers that the insular-looking Steelworkers have long “endorsed” free trade, and have not really fought imports of steel in recent decades, that’s another matter. Saying that the Steelworkers are not advocates of protectionism is perhaps the journalistic equivalent of reporting that boxer Mike Tyson has always been known for his sweet disposition.
Had either Dobbs or Uchitelle done what journalists are supposed to do — be skeptical of PR spin, dig a little to get the broader context, and for business reporters especially, understand the basic economics — they would have discovered that the story’s broader context illustrated the benefits of trade and investment to the US economy, not just the perceived downside.
Here’s the story, first as reported by the New York Times and CNN, and then the missing context that undermines it.
The World Trade Organization’s general council quietly announced last week that its 153 member countries had agreed to hold a full ministerial conference at the WTO’s Geneva headquarters from Nov. 30 to Dec. 2. Mario Matus, Chile’s ambassador to the WTO, who chairs the general council, explained when the council met on May 26 that the WTO’s rules call for such ministerial meetings every two years, but that it had been nearly four years since the last formal ministerial meetings were held in Hong Kong in Nov/Dec. 2005. This will be a “regular” ministerial conference, Matus said. “I would like to stress the word ‘regular,’ as it has also become clear that this Conference is not intended to be a negotiating session — the DDA are on a separate track.” [DDA is the acronym for the so-called Doha Development Round of multilateral negotiations aimed at slashing tariffs and subsidies]
Talk about a looming PR disaster. Maybe Matus and other diplomats who are stationed in Geneva are naive enough to believe that WTO watchers will fall for the diplomatic doublespeak. Certainly, the hordes of journalists who will be swarming to Geneva to cover the ministerial meetings will be looking for only one piece of hard news: will the Doha negotiations succeed, or won’t they? After all, it was only last December that WTO Director-General Pascal Lamy announced that he would not call ministers to Geneva unless it appeared that a Doha deal was likely to be struck. Reporters have long memories for such contradictions. The Doha negotiations, which have dragged on since 2001, are by far, the most important business before the WTO — a fact that simply can’t be explained away by the general council. If the ministerial meetings conclude on Dec. 3 without convincing evidence of seriousness about successfully concluding the Doha negotiations, reporters will be filing stories asking questions like this: If the WTO’s members can’t find a way to make Doha work, why bother to meet?
Privately, some diplomatic insiders agree that the notion of holding a “regular” ministerial while the Doha negotiations are left hanging is risky business. “Our problem is, without real progress on Doha, it will look awkward,” says one key WTO diplomat. “It will look a little like navel gazing.”
But while some inside players who (understandably) ask not to be identified by name, say they are discouraged, others add that they believe that on Dec. 3, the ministers in Geneva could well be able to announce that the key deals to bring the Doha negotiations to a successful conclusion have been struck The idea is that, by lowering the expectations, space is being created for trade negotiators to reach understandings without the usual political posturing getting in the way. And for sure, there will be ample diplomatic opportunities between now and December to bridge the current gaps in the Doha process. Here’s the forthcoming diplomatic road map that reveals the agenda that could make Doha largely a done deal by the time of the ministerial meetings in Geneva.