After Republican Mike Huckabee and Democrat Barack Obama won the Jan 3 Iowa presidential caucuses, the respected Reuters news service reported that as the primary election season unfolds, “anxiety about the state of the U.S. economy…is likely to influence voters’ view of the U.S. role in the global economy, say experts on trade and manufacturing.” The first expert Reuters reporter Nick Zieminski cited was Scott Paul, who asserted that “trade and globalization and anxiety about the future are top of mind for a lot of people.” Mr. Paul was identified as director of “the nonpartisan Alliance for American Manufacturing.”

Just a moment. The Alliance for American Manufacturing is not even close to being a neutral observer of the international trade scene. It’s a well-heeled Washington lobby group that is at the heart and soul of the American steel lobby, where bashing imports is a blood sport. The alliance’s main financial backers include Leo Gerard’s United Steelworkers of America, and the U.S. Steel Corporation. Scott Paul is a former trade lobbyist for the AFL-CIO, and was also the chief trade adviser to David Bonior, a former Michigan Democratic Congressman. Mr. Bonior was one of the most ardent advocates of trade protection in the House, and is now a top strategist in John Edwards’ presidential campaign. The USW has endorsed Mr. Edwards for president. The steelworkers’ political action committee has given 100 percent of the $199,000 it has donated to political candidates for this year’s elections to Democrats. U.S. Steel has given $94,628 to congressional candidates so far this year, according to the Center for Responsive Politics, 69 percent of which has gone to Democrats. In short, Mr. Paul’s alliance is “nonpartisan” much in the sense that Rush Limbaugh is nonpartisan. Mark another public relations accomplishment for the steel lobby at the expense of a gullible press.

Whether the steel lobby will accomplish its main policy policy goal of exploiting American anxiety about jobs to obtain a firm commitment from this year’s eventual winning presidential candidate to make a serious effort to roll back “unfair” import competition is another story. The last time that happened — eight years ago in the 2000 presidential race, when then vice-presidential candidate Richard Cheney won votes in the Ohio Valley by promising that, if elected, George W. Bush would adopt a protectionist agenda for steel — it didn’t work as promised. While President Bush did slap on 30% tariffs on imported steel in 2002, his steel plan ultimately collapsed in the face of protests from outraged American steel-consuming businesses, whose costs of importing essential raw materials shot up. Bush subsequently dropped the tariffs after they failed to withstand a legal challenge before a World Trade Organization dispute panel. So far this year, there has been a lot of protectionist rhetoric hurled around — but every candidate, with the exception of John Edwards, has also positioned himself or herself to move back to the mainstream center, if elected.

To understand why, take a closer look at the evolving economic fundamentals in the next two key primary states that turn out to be something less than the hotbeds of protectionism they are usually thought to be. In Michigan, where Republicans vote tomorrow, global sourcing, not protectionism, is the evolving Michigan economic model. On Saturday, Jan. 19 — when Republicans vote in South Carolina — five Chinese auto makers will be displaying their wares to Motown audiences at the North American Auto Show, along with the likes of Toyota, Hyundai, Honda, and BMW (which builds its sporty X6 Coupe in Spartanburg, S.C., where auto production is on the rise). And even South Carolina textile magnate Roger Milliken, one of the last true American economic nationalists left standing, hasn’t been able to escape becoming ensnared in global sourcing realities. When Americans buy tennis balls from major manufacturers like Wilson Sporting Goods, those balls may well have been made in China, with fabric supplied from a Milliken subsidiary in the United Kingdom. While the grassroots politics hasn’t yet caught up with the economics, a closer look at what’s going on suggests that that day is coming. To alter Bill Clinton’s famous slogan from the 1992 presidential race, It’s the economics, stupid!

Nowhere do the true economic fundamentals stand out more starkly than in Michigan, a state that has been bleeding jobs. Ironically, the job-loss problem that Republican Mitt Romney is now talking about originated more than four decades ago, thanks in part to weak executive leadership by his father, George Romney, who was president of American Motors Corp. from 1954 to 1962, before he was elected Michigan’s governor. Romney has boasted that if he is elected president, he would get Michigan “on the move again,” as his father had done. The historical record suggests that George Romney did help get Michigan moving — backwards.

Aging economic canaries

Candidate Romney stopped by a General Motors plant near Ypsilanti on Jan. 12, where he bemoaned the recent loss of 200 jobs. “What Michigan is experiencing, the whole nation will experience unless we fix what’s happening in Michigan and learn lessons here we can apply across the nation.” Mr. Romney likened Michigan to the economic “canary in the mine shaft.”

That proverbial canary is getting a bit long in the teeth. Indeed, we are talking about a tough old bird, slow to learn. Here’s the history in a nutshell:

Time magazine reported on Sept 3, 1965 how a cavalcade of cars had rolled past an American Motors’ plant in Kenosha, Wis., protesting the firing of a union steward. The timing for UAW Local 72 was aimed to inflict serious economic pain on the corporation, as the strike came just before AMC’s 1966 models were to be rolled out. Eighteen thousand workers were sent home. The strike was basically about the future of the American auto industry, Time noted.

This paragraph from Time’s 46-year old story has a familiar ring today, as it explained what the UAW leaders were about: “They have strongly opposed American Motors’ efforts to improve work standards similar to those in other auto plants, have been particularly unhappy about a recent rash of short work weeks. American’s easy going work standards, which help make labor costs per Rambler higher than competitors’ cars, are a hangover from the days of George Romney, who let labor have its way as long as it did not impede the production of fast-selling cars. Now that American Motors’ sales and profits are down, however, the company can no longer afford to be inefficient, is demanding greater productivity from its workers.”

It turned out, Time added, that the short weeks on the assembly lines that the union was complaining about had been caused by the UAW’s own workers. The reason there was a shortage of auto bodies on the assembly lines was that too many of them had been rejected for shoddy workmanship and sent back for repairs. The union steward who was fired for refusing to let his men work overtime, had basically slowed down the process to get the auto bodies back to the assembly lines — which would have made those short work weeks unnecessary.

Fast forward to today, and anyone who wishes to understand the root causes of Michigan’s chronically under-performing auto industry has only to consult an excellent 196-page book published in 2006 by Michigan State University economist Charles Ballard. Michigan’s Economic Future dispassionately documents the root causes of Michigan’s economic woes: weak management in the auto industry, demands by the UAW for above-market wages that ultimately cost jobs because they were not based on economic competitive realities, and declining educational performances. “Michigan’s greatest asset is its people,” Mr. Ballard wrote, adding that the state’s educational attainment lags below the national average. While the professor does not offer any political advice, anyone who reads his book could find evidence to conclude that Michigan’s people have been badly served by their leaders in both industry and government, who have shifted the blame for the state’s declining economic performance on away from themselves and toward foreigners and “unfair” international trade.

Rather than face the historical facts-of-life square on, Mitt Romney — a former sophisticated player in global private-equity markets who knows better — currently is advertising his newly-discovered enthusiasm for “free and fair trade,” and a “level playing field,” the two most common codewords for protectionism. The former Massachusetts governor is also pandering for votes in Michigan’s Republican primary tomorrow by pretending that he is an anti-China nativist. “Today they sell us clothes and cameras, tomorrow cars and jumbo jets,” a Romney ad sneers.

Romney isn’t the only candidate in this year’s race who thinks that Michigan voters aren’t smart enough to be confronted with a sober analysis of economic fundamentals. But while all of the three leading Democratic candidates are even more eager to blame foreigners for American economic woes, none of them are campaigning in Michigan, as that state’s Jan. 26 Democratic primary was scheduled ahead of the schedule as required by the rules of the Democratic National Committee.

Meanwhile, while the politicians posture — with the exception of John McCain, who characteristically has bluntly told Michigan voters the good old days of guaranteed jobs in the auto industry aren’t coming back — the economics of globalization continue to move ahead of the politics.

Ford’s American-built F-150 trucks have 80% domestically-sourced parts — but so do Toyota’s Tundra trucks that are built in Indiana and Texas. GM makes Buick Enclaves in Michigan, with mainly domestic parts — but also makes Buicks in China through Shanghai GM Dong Yue Motors Co., Ltd. Ford has a joint venture in China called Changar Ford Mazda Automobile Co., Ltd., and Chrysler has a deal with Chery Automobile, of Wuhu.

(While the traditionally protectionist Detroit automakers have belatedly embraced globalization by now seeking to grow in Asian markets they had once ignored, they still haven’t totally abandoned their former protectionist habits. The Auto Trade Policy Council, the Washington lobby group for Chrysler, GM, and Ford, is not complaining that China’s currency is overvalued, for the obvious reason that Detroit’s business plans are focused on increased operations and sourcing from China. At the same time, the Big Three are busy blasting away at rival Japan for its own weak currency. At 118 yen to the dollar, the U.S. auto guys complain that Japanese autos have a $4,000 price advantage over American-made cars. The same Washington officials who should look the other way when it comes to questioning China’s yuan, in the view of the Detroit automakers, are being asked by the same automakers to press the Japanese to revalue their currency.)

Meanwhile, Toyota is challenging GM as the world’s largest automobile maker, and is busy making profits from its manufacturing operations in the U.S., where workers are paid in dollars, not yen. As the Jan 19 Republican primary in South Carolina looms, consider these two obscure economic facts that the politicians haven’t yet caught up with: Toyota sources transmission parts in North Carolina, and bearings in South Carolina, where global realities are also changing the economic landscape. Let’s take a closer look at South Carolina’s economic and political fundamentals.

Protectionism, southern style

Guns, God, and the Ten Commandments can still get one elected, at least to state office, in South Carolina. Republican Mike Huckabee is seeking evangelical recruits in insular-looking upstate rural areas to sign onto “God’s Army,” where presumably there are some protectionist platoons. In South Carolina, protectionism is a bipartisan tradition. Republican Sen. Lindsey Graham (a McCain supporter) has worked successfully to persuade the Bush administration to threaten to slap on anti-dumping tariffs on imports of clothing from Vietnam. Lindsey also co-chairs the Senate Manufacturing Caucus with Hillary Clinton, which basically blames foreigners for stealing American jobs. When the two senators launched their caucus on June 14, 2005, they declared that “we cannot remain confident in our economic or national security if we become a country dependent on (sic) our other nations to provide our goods.”

John Edwards, who was born in South Carolina, is running as a favorite son of the old textile lobby. Edwards, the son of a mill worker with a limited education, escaped the fate of a hard life in the mills by going to college and law school. He must know that if South Carolina workers want to better themselves, they should not be encouraged to believe they can avoid education by seeking lifetime job security in mills that no longer exist. Edwards must know that it makes no economic sense at all to believe that high tariffs on clothing can somehow return South Carolina to its former status as the t-shirt capital of the world. But rather than challenging voters to find the strength to move on, Mr. Edwards rails against Wall Street and foreigners (while raking in the big bucks in campaign contributions from Goldman Sachs and other Wall Street denizens).

But while politicians like John Edwards remain rooted in a populist past, both the politics and economics are changing in South Carolina. Republican Sen. Jim DeMint was elected on a platform that embraced globalization. The senator has now allied himself with South Carolina farmers, who refuse to join the Republican Party’s current wave of immigrant bashing, because the farmers need immigrants to pick the crops. Reading the South Carolina newspapers these days doesn’t turn up much evidence that trade is even a major issue in the 2008 presidential race. And meanwhile, the American apparel industry has adjusted to globalization and has moved offshore, while the likes of BMW have moved in. The once mighty textile lobby is a shadow of its former self. “Favorite son” John Edwards, still lagging behind his rivals, has yet to prove that his protectionist message will catch on when South Carolina Democrats vote on Jan. 26.

For many years, textile magnate Roger Milliken vowed that his company would not use its its overseas operations as export platforms to America. But at Milliken & Co., the times are changing.

Milliken & Co. not only makes fabric in the UK for tennis balls that major manufacturers like Wilson make all over the world, but Milliken fabric in Mexico goes into air bags for autos by component manufacturers who source globally. Milliken also makes fabric for clothing that is manufactured in China and many other overseas locations — clothing that can be found in U.S. retail outlets like Wal-Mart and Nordstrom’s. Milliken also manufacturers carpets in China. Milliken & Co. remains a world-class manufacturer because it has gradually been embracing global economic realities, however reluctantly. What better sign could there be that the days of the U.S. textile lobby are numbered?

Of course, there remains a large gap between emerging economic realities and current politics. Thanks mainly to the members of Congress who remain tied to the agendas of the steel and textile lobbies, the abilities of any American president to exercise real leadership in bringing the World Trade Organization’s ongoing Doha Round to a successful conclusion are limited. Hillary Clinton has even said that she questions whether the tried-and-true classical free-trade economic model is relevant to the 21st century. Barack Obama is also running as a skeptic of globalization. Still, both Ms. Clinton and Mr. Obama have also left themselves some maneuvering room, suggesting that, if elected, they might anticipate governing from the center, as American presidents since FDR and JFK have traditionally done. And in tomorrow’s Republican primary in Michigan, Mitt Romney may be trying to cash in on anti-Chinese sentiment, but is not calling for higher tariffs to roll back imports. And both the Detroit News and the Detroit Free Press have endorsed John McCain, who hasn’t tried to disguise his free-trade core belief, and who also took Michigan in the 2000 presidential primary.

If protectionism were as potent a force in national politics as its advocates assert, Richard Gephardt would have already been elected president. And given George W. Bush’s unhappy experience when he made a campaign pledge eight years ago to roll back steel imports, this year’s leading candidates for their party’s nomination for president all seem to recognize at some level, whether they say so explicitly or not, that the health of the U.S. economy is dependent upon advancing globalization, not in trying to dismantle it. If it’s lamentable that perhaps 20-30% of the undereducated American public don’t get globalization, the fact remains that the majority does. Anxiety about job losses doesn’t automatically mean that the next president of the United States will throw up the kind of trade barriers that the United Steelworkers of America and their corporate allies in the Stand Up for Steel lobby like U.S. Steel want.